Business Unusual

Facebook - the most disruptive business this century

Facebook is 12 years old and arguably the most disruptive influence in the fields of media distribution, advertising, social networking and instant messaging. It has taken and is able to create a new industry in virtual reality and even internet access.

Given the profound impact, the commercial success and the current expectations for future profit and growth, Facebook stands out as the most successful company of the new millennium.

The network currently has 1.5 billion active users.

It might seem like the site has been around for longer than you think, but the World experienced the sub-prime crash in 2008 before the world had the chance to use a like button (2009).

It was launched as a digital replacement for a real world book that contained the pictures of 1st year dormitory students at university, hence the name The Facebook. The “the” was later dropped. It had 1 million users within 10 months but only opened to the world in 2006. Using that timeline the business will only be 10 years old in September this year.

In 2012 the company acquired Instagram for $1 billion and in 2014 it acquired WhatsApp for $19 billion. It also bought Oculus for $2 billion.

It listed in May 2012 for $38, earning it super unicorn status with a value of over $100 billion. (unicorns in the tech start-up world are business with more than $1 billion)

Facebook the disruptor

Media consumption: As traditional news media have moved online from print, radio and TV they have sought to find the best way to attract clicks to their sites. Website promotion, search and online ads all play a role but for most the best driver of traffic is Facebook, not surprising considering over 60% of those on Facebook say they use it for getting news.

Advertising: The bulk of Facebook's revenue comes from advertising and in 2015 it earned over $17 billion. While the global ad spend is about $570 billion, the share of digital ads is second only to TV with about 40%, while desktop and mobile ads account for about 25% and Facebook takes about 11% of the digital share. This has been accomplished in just 10 years since the site was opened to everyone in 2006. Radio as a commercial medium is almost 100 years old and is only second to digital for annual growth, yet in 2015 revenue for all radio was estimated at $18 billion.

Photography: Facebook has over 250 billion photos with about 350 million loaded per day. Its Instagram platform adds another 50 million per day. Instagram growth in users and posts and engagement is set to establish it as the most popular photo sharing destination on the web.

Instant Messaging: besides the Facebook and Instagram posts, Facebook also operates a fully fledged messaging platform called Messenger with about a billion posts per day. They also own WhatsApp which has almost a billion users and processes 30 billion messages per day.

Video: While a new feature on the site, it is being heavily promoted and has seen a massive increase in the number of views in the last year increasing from 4 billion views per day to 8 billion (Facebook counts a view as 3 seconds and with auto-play it does not mean that all those views are of the full view). The site also allows for the upload and views of 360 videos. See more on that below.

Disruptions to come

Internet.org: Facebook would like to connect more people to the internet and to its services. It created Internet.org with some big tech partners to build and provide access to the network infrastructure to provide access to those not currently on the internet. It is available in South Africa as an app called Free Basics via Cell C and does not use data to use. While the intention has been welcomed and it has been shown that Facebook is an enabler for adding to economic activity for those active on the platform, it has been criticised for being selective about what a user has access to which is counter to the principal of net neutrality. A significant setback for the service was the decision in India to block the service for violating its net neutrality laws earlier this month.

Oculus: Video is growing fast and the option to make the viewing immersive has seen lots of new hardware and software for viewing videos in 360 view. The likely leading driver of that will be be the Oculus products which are being launched as a stand alone products for delivery in July.

Search: Facebook allows for users to search the platform for people, stories and pages including results about trending stories. There are reported 1.5 trillion searches per day. Given how well the adding paid for search results has worked for Google, it seems likely that Facebook will do the same.

Facebook appears to have understood the ever changing expectations and competition to its core services and sought to make strategic acquisitions to keep up with those changes.

Not all of its efforts have succeeded but with a share price almost 3 times the value of the IPO in 2012, it will take a really amazing product to topple it off the top of the social heap.

Credit: Google Finance


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