3. GAFA Companies
3.3 Facebook
Image 3.4 Apple’s revenues in 2016. [23]
This strategy was replicated with App Store in iPhone – and after iPod touch and iPad - from 2008: app developers can create and license to Apple their creation and Apple provide the platform for them to reach the consumers. App developers can retain the 70 per cent of the revenues while Apple, without paying for the creations of the apps, enjoys big part of the successful ones. The integration of hardware and software kept one being pursued also with iPad, Apple TV. [29]
The other strength point of Apple’s strategy is the luxury brand pricing combined with a low-cost production. Apple’s manufacturing and assembling is done mostly in China and shipped in distribution centers all around the world. The company achieved the goal by a strong marketing strategy, focused on consumer experience: owning an Apple device is part of the consumers’
lifestyle, that feel special and exclusive because not everyone can afford paying a premium price for the Apple experience. This “scarcity” is what make Apple’s luxury brand so different and makes the customer feel unique. Success in luxury is due to a particular attention on design, every detail is cured and the presentation is extraordinary, and to the simplicity of use of Apple’s devices, that create a sort of dependence into the customers. [18]
3.3 Facebook
created the page on February 4, 2004 making it possible only for Harvard students to be members and only four days after more than 650 students subscribed. It became immediately viral in the university and also between the ex-students and in within three weeks it had more than 6,000 users.
Soon Zuckerberg was asked to extend the service to other universities and the website became popular, until in the middle of 2004 was incorporated. In September, Facebook added new features:
the wall - in which everyone could write something that could be seen from everyone visiting your profile - and the groups – all the users could create one for every reason. Zuckerberg and his team moved to Palo Alto, California renting a facility where working and managing the website. On November 30, after only 10 months, Thefacebook reached one million users.
Image 3.5 Thefacebook. [33]
Lots of investors started contacting Zuckerberg in order to invest or acquire Thefacebook – but he had no intention to sell - until he agreed to the investment of Peter Thiel, who put $500,000 dollars in the company for owning the 10,2% of it, and to Accel that invested $12,7 million with a deal that valued Facebook $98 million dollars. With this last agreement, Thefacebook had enough money for keep on growing and improving. In the summer of 2005 Zuckerberg and his team acquired the Internet domain Facebook.com in order to change the name of Thefacebook into Facebook: in the autumn of the same year, 85 percent of American students had an account and the 60 per cent used it daily basis and Facebook reached 5 million users. In the same period Zuckerberg decided to leave Harvard university to dedicate entirely to the company. With the beginning of 2006 Facebook ceased to be only a university phenomenon and started to be available for everyone up thirteen years old. Users usually clicked 230 million pages from Facebook ads, and this was the main source of revenue of the company. In 2007 Facebook had spread in all the world and more than a half of the users were not Americans and on October Microsoft bought a 1,6% share for $240 million, giving Facebook a total value of 15 billion dollars. Facebook ads were the most effective ones since were based on the individuals interests and behavior: users were autonomously providing data about themselves to the company, that was able to use it in order to show ads about what could most attract their attention. Thanks to this, Facebook’s main source of revenue kept on being advertising, and the advertising industry was more and more relying on Facebook: in 2009 Facebook showed 53,000 million of ads, the 14% of all the virtual advertising. Facebook kept on spreading in the world and reached 350 million users in 2009, growing at a rhythm of 1 million users per day. [32]
2012 was an important year: Facebook acquired Instagram for $1 billion and in February the company came public and the IPO raised $161 million. In 2014 Facebook bought WhatsApp for
Image 3.6 Time spent on Facebook, Instagram and Whatsapp par day, December 2016. [18]
3.3.2 Business strategy
Facebook’s strategy comprehends the focus on user experience and the growth by monetization of users’ data. It started in college communities, where it was easier to spread since for younger people relationships and social life are more important and from the beginning its purpose was to give people a way to connect with each other in a sort of parallel dimension. Facebook offer the possibility to create a network of friends, showing them your virtual life and looking into theirs:
Zuckeberg understood the people’s need to be appreciated, to interact with other people to feel accepted. Everyone is looking for attention, with Facebook – and Instagram – people can achieve it, posting photos or stories about their life, sometimes creating an online alter-ego with a life they want to narrate to their friends’ network.
The social network rapidly spread being available for free for everyone, the only thing it asks in return is users’ data. The data is used to get revenues by selling it to advertisers. Facebook is able to register a detailed portrait of its users analyzing their “Like” clicks, their posts, and friend network.
As we can see from Image 3.3, Facebook’s revenues are almost all coming from advertising.
Image 3.7 Facebook’s revenues in 2016. [23]
With the acquisition of Instagram and Whatsapp, the amount of data Facebook is collecting about its users raised exponentially. Facebook is always finding more ways to expand its audience to collect and monetize data: its recent introduction of Marketplace – where you can sell or buy stuff to and from other users – aims at increasing the users’ experience, directly competing with eBay features.