Facebook Product Teardown

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Facebook Product Teardown

You will dive deep into the customers, products, platforms, services and sectors that Facebook is focused on dominating.

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In this training, you will

Experience the resilience and discipline required to truly understand your competition.
A deep understanding of Facebook's Product Suite and Service Offerings.
Learn how you need to radically diversify your business’ customers, plans, products, platforms and sectors to emulate Facebook’s success.
Learn more than you ever wanted to know about Facebook.
Have a new respect for Facebook’s strategy and its breadth.

Skills that will be explored

Key Metrics

Market Cap

$452.86B

PE Ratio

28.92

EPS

5.39

FY’ 17 Revenue

$40.65 Billion

YOY Growth

47%

Advertising Revenue

$39.94

YOY Growth

49%

Retrieved March 27, 2018 from Yahoo Finance and Facebook 10-K

Leadership

Mark Zuckerber

CEO

Sheryl Sandberg,

COO

David Wehner

CFO

Mike Schreopfer

CTO

Chris Cox

CPO

Essential Reading to Understand Facebook:

Articles

Books

The Facebook Effect: The Inside Story of the Company That Is Connecting the World: David Kirkpatrick: 9781439102121: Amazon.com: Books

Timeline of Facebook Products vs Valuation

Growth

Revenue Growth

Facebook’s quarterly revenue reached 5 billion USD in 2017 (Statista chart shows growth 2010-2017 in the US and Canada)
In Q3 of 2017, Facebook reported a 47% YOY change in revenue.
A chart of Facebook’s revenue growth by source from 2012-2016 reveals that much of its growth is spurred by mobile advertising
Facebook nears ad-only business model: “The social network is more dependent than ever on the cyclical ad market, even as its rival Google finds new revenue streams in hardware and software.”
As of 2017, Facebook comprises 39.1% of total digital display ad revenues in the US and is projected to reach 43.7% by 2019.
Facebook has been getting higher prices for its ads, slowing the growth in the number of ads seen in the news feed.
Instagram’s net mobile advertising revenue is a significant percentage of Facebook’s total mobile advertising revenue: “In 2018, Instagram is projected to account for 27.8 percent of Facebook’s net mobile advertising revenues in the United States and for 18 percent of global mobile ad revenues.”

Customer Growth

As of Q3 of 2017, Facebook had over 2 billion monthly active users worldwide and was easily the most popular social networking site.
- This number of monthly active users (MAUs) represent a 16% year-over-year increase.
- As of Q3, daily active users (DAU) accounted for 66 percent of monthly active users. (1.37 billion active users, a 16% year-over-year increase)
- Even as of February 2016, each active Facebook use was connected to every other user by an average of three and a half other people.
Facebook’s mobile traffic has grown significantly.: “There are 1.15 billion mobile daily active users (Mobile DAU) for December 2016, an increase of 23 percent year-over-year.”
The number of Instagram users in 2017 was 85.5 million and is projected to grow to 118.1 million by 2021
Facebook’s growth rate in 2017 was 2.6% and is projected to drop to 1.7% by 2020
Customer growth may be slowing, but advertising revenue could more than offset this decline.: “…as Facebook and its platforms (Whatsapp, Instagram) now have close to 60% penetration among internet users, average revenue per user for the company could decline as new users were mostly added from international markets, which have lower monetization rates.”

Valuation

What caused the increase in X’s valuation over the last 5 years?
Facebook exceeded $500 billion in market value in July of 2017, worth less than only Microsoft, Apple, and Alphabet.
Facebook has shown steady growth in valuation since 2006.
For the most part, Facebook stock looks attractive for 2018
- Facebook stock shows large growth
- Morningstar values Facebook at 34.2 price/earnings
However, as of the beginning of 2018, some believe that Facebook stock is in trouble, particularly due to data management
- NASDAQ reported that Facebook was losing ground after announcing news feed changes.
- Due to this announcement, Facebook had one of its worst week in months. “CEO Mark Zuckerberg wrote that the feed will soon start prioritizing “meaningful social interactions” instead of “relevant content.” In other words, posts from friends and family will appear much for frequently than news items from now on… Facebook Inc shares closed at $179.37 on Friday, down $8.40 (-4.47%). Year-to-date, FB has gained 1.65%, versus a 4.14% rise in the benchmark S&P 500 index during the same period.”
- However, this strategic move could actually be positive for investors: “Analysts are concerned the changes will impact ad revenue… [they] assume that Facebook users were visiting the site mainly to see new publisher content and communications from businesses. Remember, Facebook initially rose to prominence due to family and friend interactions … not publisher content. So, while direct publisher and business revenue may falter a bit, ad revenue shouldn’t be impacted all that much. In fact, this move could bring more users back to Facebook.”
Instagram has played a significant role in Facebook’s increase in valuation
Other reasons for increase in valuation?

Acquisitions

Instagram (2012)

Facebook reached an agreement to buy Instagram in April of 2012, and in September posted an article welcoming Instagram to the Facebook family.
By 2016, Instagram had proved to be “one of the smartest acquisitions ever in consumer tech.” In 2016, Credit Suisse analysts estimate[d] that Instagram brought in $570 million in revenue in the first quarter of 2016, which is nearly 10% of Facebook’s overall projected revenue for the period.”
“[Kevin Systrom, CEO of the photo-sharing app Instagram] are future-proofing Facebook, in the process proving Zuckerberg’s purchase was one of the five best deals of the Internet era. Forbes estimates that Instagram, if broken out, is now worth somewhere between $25 billion and $50 billion.”

Investments

Miscellaneous Investments

FB terms of service https://www.facebook.com/terms.php
Data policy https://www.facebook.com/about/privacy/
Government secret requests for data https://www.cnbc.com/2017/12/18/facebook-transparency-report-says-more-secret-u-s-requests-in-2017.html
Social network or DMP? https://www.digitaldoughnut.com/articles/2017/august/facebook-s-identity-crisis;-social-platform-or-dmp
Facebook and Google…https://www.bloomberg.com/news/articles/2017-09-11/forget-equifax-facebook-and-google-have-the-data-that-should-worry-you
Comparative analysis of big data management http://ieeexplore.ieee.org/document/7724456/?reload=true
Facebook data center FAQ http://www.datacenterknowledge.com/data-center-faqs/facebook-data-center-faq
Local selling model https://newsroom.fb.com/news/2017/12/moving-to-a-local-selling-model/
Information operations update https://newsroom.fb.com/news/2017/09/information-operations-update/

Management of Data

What data does X collect from the customer? What rights and permissions do customers give to X in terms of managing their data?

FB terms of service https://www.facebook.com/terms.php
Data policy https://www.facebook.com/about/privacy/
Government secret requests for data https://www.cnbc.com/2017/12/18/facebook-transparency-report-says-more-secret-u-s-requests-in-2017.html
Social network or DMP? https://www.digitaldoughnut.com/articles/2017/august/facebook-s-identity-crisis;-social-platform-or-dmp
Facebook and Google…https://www.bloomberg.com/news/articles/2017-09-11/forget-equifax-facebook-and-google-have-the-data-that-should-worry-you
Comparative analysis of big data management http://ieeexplore.ieee.org/document/7724456/?reload=true
Facebook data center FAQ http://www.datacenterknowledge.com/data-center-faqs/facebook-data-center-faq
Local selling model https://newsroom.fb.com/news/2017/12/moving-to-a-local-selling-model/
Information operations update https://newsroom.fb.com/news/2017/09/information-operations-update/

Hardware

Inside Facebook’s hardware lab https://code.facebook.com/posts/561611824036387/inside-facebook-s-hardware-labs-moving-faster-with-more-collaboration/
Area “404” hardware lab https://techcrunch.com/2016/08/03/facebook-area-404/
Building 8 announcement https://www.facebook.com/zuck/posts/10102777889538891
Hardware in data centers https://code.facebook.com/posts/392743124493876/2017-year-in-review-data-centers/
‘Aloha’ video chat device http://www.businessinsider.com/facebooks-andrew-bosworth-to-lead-oculus-building-8-aloha-video-chat-device-details-2017-8
Echo show competitor https://www.inc.com/business-insider/portal-facebook-hardware-device-video-chat-spring-amazon-echo-show-competitor.html
Voice speaker and video chat device https://www.theverge.com/circuitbreaker/2017/8/1/16076492/facebook-voice-speaker-video-chat-device-rumor
“Facebook said to be working on a video chat device” https://www.bloomberg.com/news/articles/2017-08-01/facebook-is-said-to-work-on-video-chat-device-in-hardware-push
4 hardware devices https://www.thestreet.com/slideshow/14097706/1/4-futuristic-hardware-devices-that-facebook-has-been-quitely-developing.html

Product Usage

Facebook product usage https://www.statista.com/statistics/703896/facebook-services-and-products-usage-in-us/

Facebook product usage frequency https://www.statista.com/statistics/703901/facebook-services-and-products-usage-frequency-in-us/

Messenger

Messenger https://messenger.fb.com/
Messenger reaches 500 million https://newsroom.fb.com/news/2014/11/messenger-reaches-500-million-2/
Messenger for Kids https://newsroom.fb.com/news/2017/12/introducing-messenger-kids-a-new-app-for-families-to-connect/
High Resolution Photos in Messenger https://newsroom.fb.com/news/2017/11/making-visual-messaging-even-better-introducing-high-resolution-photos-in-messenger/
Messenger/Video chat https://newsroom.fb.com/news/2017/06/messenger-just-added-more-fun-to-your-video-chats/
Video calling in Messenger Introduced https://newsroom.fb.com/news/2015/04/introducing-video-calling-in-messenger/
Group video chat in messenger https://newsroom.fb.com/news/2016/12/introducing-group-video-chat-in-messenger/

Facebook Video

Facebook Video launches in 2007
Sharing VR https://newsroom.fb.com/news/2017/07/live-from-facebook-spaces
Captions for FB live https://newsroom.fb.com/news/2017/06/making-facebook-live-more-accessible-with-closed-captions
FB 360 VR https://newsroom.fb.com/news/2017/03/introducing-facebook-360-for-gear-vr/
New ways to watch FB vide https://newsroom.fb.com/news/2017/02/new-ways-to-watch-facebook-video/
FB video on TV https://newsroom.fb.com/news/2016/10/a-new-way-to-watch-videos-from-facebook-on-your-tv/
Share and discover live video https://newsroom.fb.com/news/2016/04/introducing-new-ways-to-create-share-and-discover-live-video-on-facebook/
Live Video for Profiles https://newsroom.fb.com/news/2015/12/introducing-live-video-and-collages/
Facebook Watch a Hit? Study Finds 40% of Users Tune In to Video Weekly: http://variety.com/2018/digital/news/facebook-watch-usage-survey-morgan-stanley-1202669471/

Facebook Camera

Facebook Camera, a mobile app for photo sharing, launched in 2012
- The Camera effects platform is announced in 2017
As of April 2017, Facebook has 68.9 million unique video viewers who accessed the site via desktop in the U.S.
Facebook is the third most popular online video property(as of June 2017), ranking behind Google and ahead of Yahoo
Video on Instagram is launched in 2013.
Hyperlapse, a new app from Instagram to capture high-quality time lapse videos, is introduced in 2014.

Facebook Music Efforts

Facebook trialing music video (May 2016) http://www.thedrum.com/news/2016/05/16/facebook-trialling-music-video-product-rival-youtube
Global music strategy (Jan 2017) https://www.billboard.com/articles/business/7669971/facebook-hires-youtubes-tamara-hrivnak-to-lead-global-music-strategy
Comprehensive music strategy (March 2017) https://www.musicbusinessworldwide.com/facebook-set-to-challenge-spotify-with-comprehensive-music-strategy/
Facebook looks for music deals (Feb 2017) http://fortune.com/2017/02/14/facebook-music-deals/
Music rights (Sept 2017) https://www.bloomberg.com/news/articles/2017-09-05/facebook-said-to-offer-hundreds-of-millions-for-music-rights
Upload song permission https://www.theverge.com/2017/9/5/16256844/facebook-video-music-publishers-rights-youtube-competition
Music deal/video effort http://www.businessinsider.com/facebooks-deal-with-universal-music-challenges-youtube-2017-12
Real steps into music business (Dec 2017) https://www.recode.net/2017/12/21/16806512/facebook-universal-music-streaming-video-instagram

Digital Text

News Feed

News feed https://newsroom.fb.com/news/2016/06/building-a-better-news-feed-for-you/
Facebook’s big news feed change https://www.nytimes.com/2018/01/11/technology/facebook-news-feed.html?action=click&contentCollection=Technology&module=RelatedCoverage&region=Marginalia&pgtype=article
Tracing news feed algorithm http://www.adweek.com/digital/facebook-news-feed-algorithm-change-background/
External publishers are being deprioritized in the latest Facebook algorithm update.

Branded Content

https://www.facebook.com/facebookmedia/get-started/branded-content

Paper

Paper: Stories from Facebook https://newsroom.fb.com/news/2014/01/introducing-paper-stories-from-facebook-2/

Instant Articles

Articles https://newsroom.fb.com/news/2015/05/instant-articles-a-faster-reading-experience-on-facebook/

Instant article monetization: Publishers using Facebook’s Instant Articles can now show more ads
They added that publishers using Instant Articles are now receiving a total of more than $1 million per day via Facebook Audience Network, and RPMs (revenue per thousand impressions) from Audience Network in Instant Articles are up more than 50 percent over the past six months.
Adoption
- In April, Forbes, Hearst, The New York Times and others, including The Guardian, backed out of Instant Articles. Meanwhile, other major media organizations like Bloomberg, The WSJ, ESPN, CBS News, NPR, Financial Times and VICE News have been holdouts, running little to no content in Facebook’s format, it’s been reported.
- There are now more than 10,000 publishers worldwide using the format — a figure that’s up 25 percent over the last six months. A third of all clicks to articles on Facebook are now to Instant Articles, Facebook also notes. And, in aggregate, Instant Articles deliver 20 percent to 50 percent more traffic, as compared with the mobile web. Publishers using Facebook’s Instant Articles can now show more ads
Facebook sent 25 percent less traffic to publishers this year [2017], while Google increased its traffic by 17 percent, according to
Instant Articles, meanwhile, has fallen out of the conversation as Facebook increasingly prioritizes video over text articles in its news feed.