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MH0030
1 2 5 9420477
R EV: April 30, 2015
FRA NK T. R O THA E RME L
MIC HA EL MCK AY
Facebook, Inc.
April 15, 2015. Sheryl Sandberg, Facebooks chief operating officer (COO) and second in command,
was paging through the latest iteration of the companys first quarter earnings report in preparation
for the earnings announcement to be held a week later. She was impressed again at the strong growth,
and it was not lost on her that the revenue numbers staring up at her represented incredible effort
on her teams part to not only monetize the Facebook user base, but even more so to convince Chief
Executive Officer (CEO) Mark Zuckerberg that monetization of his creation was critical to the future of
the company. Indeed, she recalled times when the subject of the companys bottom line could not even
be raised with the young company head without an ensuing discussion about the ideals of building the
best product and user experience in connecting every person on the planet.
However, Sandberg had since set her sights on a much bigger target: dominance in the digital advertising space. Traditionally the realm of Google, Sandberg knew all too well how efficient the Google
machine was at generating ad revenue in both the display ad and search ad space, particularly since
she came to Facebook in 2008 after six years as Googles vice president of global online sales and operations. And she knew all too well what it would take to topple them from their perch as the leader in
online advertising; after all, she was at the helm of Googles AdSense and AdWords programs when it
scaled from a unit of just 300 staff to one of over 4,000 employees.
Sandberg had learned hard lessons from Facebooks sluggish response to the advent of mobility, and
she suspected that Google was in the process of repeating Facebooks mistakes and that the companys
grip on the market was slipping.
However, Google was dominant not least because it had a strong presence in both search advertising and display advertising. Facebook, by contrast, had only its display ad revenue to fall back on. Yet
Sandberg knew that the key to becoming the dominant player in digital advertising was not in where
Facebook played, but how. The companys meteoric growth in mobile advertising was an indication that
if she could somehow sustain the results that mobile was generating, then Google would be up for the
taking. . . especially if they were slow to react to the changing landscape of mobile advertising. Regaining
her focus, she continued to read over the earnings report intent on looking for any possible insight as to
how Facebook might further its gains in mobile advertising.
Professor Frank T. Rothaermel and Research Associate Michael McKay prepared this case from public sources. The authors are indebted to Professor
Marne Arthaud-Day and Research Associate Seth Taylor for contributions to an earlier version of this case. This case is developed for the purpose
of class discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or inefficient management. All
opinions expressed, and all errors and omissions, are entirely the authors. by Rothaermel and McKay, 2015.
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See Exhibit 2 for more information about Facebooks revenue and profitability growth. Year-on-year
double-digit growth in monthly active users and annual revenue has been the norm since 2009. See
Exhibit 3 for more comprehensive financial data.
In 2014, the company generated 92 percent of its revenue through third-party advertising services
and collected the rest through social gaming fees charged to platform developers; this was up from 84
percent in 2012 and 89 percent in 2013. Significantly, in the fourth quarter of 2014, 69 percent of revenues
were generated from mobile advertising alone.10 Facebooks worldwide ad revenues are predicted to
rise to $18.19 billion in 2016 (see Exhibit 4), with mobile projected to constitute 75 percent of that total.11
ARPU has become the go-to metric for how well a company like Facebook is capturing value from
its user base, particularly in North Americas well-developed advertisement industry. Facebook places
significant focus on ARPU as a tool for assessing its ability to monetize its users, and the growth of the
companys ARPU over the last five years illustrates Facebooks growing ability to monetize its user
base. However, the company is still far behind the likes of Google: In 2014, Facebook had an ARPU
of approximately $9 (by December 2014; see Exhibit 5), whereas Googles ARPU was approximately
$45.12
Facebook has ambitious plans for the future. Zuckerberg has stated that while the company is currently serving greater than 1.3 billion MAUs, he wants to connect everyone in the world, even if it
means that Facebook has to spend billions of dollars over the next decade making this happen.13
Its success in penetrating different countries, however, has varied. In most of North America, South
America, Asia, and Europe, Facebook reaches anywhere from 40 to 60 percent of Internet users (see
Exhibit 6).14 Notable exceptions are Germany, South Korea, and Japan where penetration rates are less
than 35 percent. In Germany, users are quite concerned about data privacy, and culturally tend to use
the Internet as a source of information and passive communication rather than active self-expression.
This sentiment, however, is slowly changing.15, 16 Similarly, culture also underpins low penetration in
Japan and South Korea: Self-promotion and boasting are discouraged, which is thought to be a primary
reason for the lack of uptake across all social media in these geographies.17 In Russia, Facebook battles
VKontakte for dominance, and in China, Facebook is currently blocked by the government. This ban
leaves a gap in the companys social network. Facebooks equivalent in China is Renren, a network
with roughly 200 million users.
NEWS FEED
Released in September 2006, News Feed quickly became a core feature of Facebook. It is at the heart
of a users homepage and provides regular updates of friends posts, photos, events, group memberships, and so on. The priority of items displayed in the News Feed is based on a complex algorithm.
Several factors, such as the number of friend comments on an item, who posted the original item, and
the actual content, play a critical part in the priority ranking.18 The success of the logic behind News
Feed has kept users engaged and has contributed to the immense popularity of the site. Zuckerberg
claims that News Feed answers the question, Whats going on in the world around you?19
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TIMELINE
An updated version of the profile page, called Timeline, was launched in September 2011. It allows
each user to paint a complete life story on his or her profile. Users can select what information to share
and with whom to share it. Milestones older than 2004 (Facebooks launch year) are now easily represented on a graphical display. Inspiration for this product came when its creator, Sam Lessin, viewed
a hard copy of his profile stretched across the office.20 According to Zuckerberg, Timeline answers the
question, Who is this person?21
GRAPH SEARCH
Zuckerberg calls the network of connections between people the social graph. Facebook, as a product,
is an attempt to map the global social graph in the form of a massive database. Graph Search is a search
bar that hovers at the top of every Facebook page. In addition to acting as a title for the content of that
page, Graph Search also allows users to search for people, places, photos, and interests in their portion
of the social graph. Zuckerberg stated that Graph Search is meant to help people discover and make
new connections, whereas the previous two pillars helped people maintain their connections.22 Later
releases of the tool will include information from Open Graph (described in the following Creating
Value for Developers section) and allow users to search Facebook posts. It is also expected to migrate
to Facebook mobile.
Facebook has taken a giant step into Googles territory with the release of Graph Search. The years that
Facebook spent attracting users and their personal information have come together to give Facebook
an edge over Googles user database. In fact, in anticipation of such a move by Facebook, Google
launched its own social networking tool, Google+ in 2011. So far, Google+ has made little headway
against Facebooks massive head start in the social network space.23 Facebook search capabilities will
also directly compete with other social-based information services like Yelp, LinkedIn, and Amazon.
com in the areas of finding restaurants and shops, making business connections, and buying goods.24
MESSAGES
Included with the initial launch of Facebook, messaging has remained a core feature of the social
networking site. Today, Facebooks messaging products include e-mail (i.e., users can opt to utilize
a free@facebook.com e-mail address), chat, and text messaging. Since November 2010, users have
seamlessly accessed all three products in one integrated location. A separate mobile application (app)
called Messenger was launched in November 2012. This app allows users to quickly message with their
Facebook friends and supports image attachment and audio messages.
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GROUPS
Facebook Groups provide users with an online space to discuss common interests. Examples of
Groups include family, sports teams, and church groups. Launched in September 2004, the feature
allows users to control the content they sharefor example, pictures, calendars, and commentsvia
customizable privacy settings.
EVENTS
The Event feature lets users create an event, invite other Facebook users to the event, and track
RSVPs for the event. An event can include a map location for the address and a host for the event who
is also a Facebook user. In addition, guests can communicate with each other on the event page. A new
version of Facebook Events was launched in May 2010. This upgrade made it easier for users to create
events from their homepage while adding more details about an event.
PLACES
Launched in August 2010, Places is a Facebook mobile feature that lets users share their physical
location with other users by checking in. Users can tag other Facebook users who are with them as
well and, if their Facebook friends have visited the same location and left comments about their experience, users can see that information.
NOTIFICATIONS
Introduced in May 2009, Facebook Notifications are visual alerts that signal users to activity on their
page or within their social graph. Separate notifications appear for friend requests, messages, and general activity. Notifications accumulate and are displayed as numbers within red notification bubbles
located on the Facebook page.
FRIENDS LISTS
Launched in December 2007, Friends Lists added another layer to the News Feed algorithm. Users
can use Friends Lists to create Smart lists or Friends and Acquaintances lists to ensure that content
from specific friends is given the highest priority on their homepage. Friends Lists was updated in
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September 2011 to compete with circles on Google+, which some considered superior to Facebooks
solution.26 Lists, like Googles circles, help users focus on content that they are immediately interested
in reviewing, eliminating the need to wade through mundane updates from those to whom they arent
as closely connected. This feature also provides users with a way to share information privately.27
PAGES
Also launched in late 2007, Facebook Pages allow any individual or group (e.g., celebrities, public
figures, businesses, colleges, or organizations) to create a public profile page in order to interact with
the Facebook community. When users like a page, they automatically sign up for content published
through that page; this content is then posted to the users News Feeds. Pages operate similarly to the
model of Facebook competitor Twitter in that the owner of a Facebook Page need not approve likes
from users (unlike a friendship between individual Facebook users, which requires dual acceptance).
Through effective use of pages, an owner can increase his or her exposure by taking advantage of the
algorithms associated with the News Feed. By 2015, there were more than 50 million Facebook Pages,
including ones for most Fortune 500 companies, a large number of public and private universities, and
many national and local celebrities.28
VIDEO CALLING
In the summer of 2011, Facebook partnered with Skype (which had been purchased by Microsoft in
May 2011) to form Video Calling, a feature intended to compete directly with the Hangouts feature on
Google+. Video Calling enabled users to call friends for free directly from Facebook after installing the
Skype plug-in.
SUBSCRIBE
September 2011 brought another new feature to Facebook: Subscribe, which promotes the further
customization of the Facebook experience. The Subscribe feature gives users the option to tailor what
they pull into their News Feed, allowing them to turn on or off comments, photos, life events, or games
from individual Facebook friends. In addition, a user can subscribe to articles authored by his or her
favorite journalists from sites such as CNN, USA Today, The Wall Street Journal, and Forbes. From then
on, any time a favorite journalist authors an article, it is posted to the Facebook users News Feed.
GIFTS
The Facebook Gifts feature was rolled out in December 2012 as a way to capitalize on ecommerce
beyond the cut that Facebook takes from game developers on the Facebook platform. Users can visit a
friends Timeline, click Give Gift, select a gift, insert a message, and send a physical gift to that friend.
Currently, this feature is only available in the United States, but Facebook plans to expand it to other
countries.
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billion-dollar business in six months? To Bosworth, ads did not sound like fun, but persisted on the
idea and soon generated a spreadsheet of ad-related, money-making ideas that morphed into the manifesto that formed the basis of a project dubbed Prioritization by Zuckerberg.40
Meanwhile, concerns about Facebook stock deepened in late 2012 as investors prepared for the
release of a large portion of public shares scheduled to hit the market in November. Zuckerberg and
other company executives had indicated on September 5, 2012, that they would not sell more shares
than were necessary to cover their tax liabilities. This measure was taken as a statement of faith in the
companys future. Facebook also sought to protect its stock prices by buying back 101 million shares
before the lockup periods expired and more shares become available for sale.41 In an interview with
Michael Arrington at TechCrunchs Disrupt conference on September 11, 2012, Zuckerberg publicly
confessed to feeling disappointed in Facebooks stock performance and conceded that it wasnt good
for company morale. Even so, Zuckerberg reassured shareholders, employees remained motivated by
their desire to [build] stuff they are proud of.42 In addition, he issued formal responses to rumors,
denying development of a Facebook phone and hinting at future work with search engines.
More important, he revealed the strategic focus for Facebooks future: mobile devices. After admitting that Facebook had made a mistake in its early mobile strategy by focusing development on HTML5,
Zuckerberg said the company would concentrate on native applications for mobile devices going forward. While there was no mention of immediate opportunities in the mobile market, Zuckerberg did
explain how the task of monetizing Facebook mobile products was up to the product development
teams.
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that many users were highly frustrated with the companys mobile offerings and often resorted to the
more tedious mobile web browser to access the platform. It also complicated the companys ad business: there was no easy way for the company to sideline ads on the small screen of a mobile device the
way the company did on the desktop platform. Worse still, while efforts to sell older desktop-based ads
yielded ever decreasing return as users embraced mobile devices, Facebook had no mobile ads to sell.45
One of Facebooks first moves was to explore the use of ads in the News Feed, prime real estate on
the user interface and where the social-networking sites 1.3 billion members spend most of their time.
The idea was purportedly conceived by Zuckerberg himself shortly before the May 2012 IPO, after
being presented with mock ups of ads for the companys iPad app that appeared to be marooned to
the side of the News Feed. The next move by the company was to develop ads for incorporation into
the News Feed that were not intrinsically tied to likes by the user. Testing by the company over the
next several months revealed that adding these nonsocial ads improved the users perception of
Facebooks ad quality. This was initially perceived as breaking from Facebooks traditional focus on
word-of-mouth based pitches, but the data suggested that resistance to veering from this traditional
focus was hurting the companys business. The final step in the companys transformation to becoming
mobile- and ad-centric involved yet another sea change. Zuckerberg had long resisted any sacrifices
related to user experience; however, the companys vice president of product was allowed to sacrifice
user experience as an acceptable trade-off towards generating higher ad revenue with the caveat that
Facebook be improved elsewhere to more than offset the anticipated decline in usage. Initial testing
highlighted that while more ads reduced user activity by 2 percent, overall engagement (a broad gauge
of user activity) increase by a much larger percentage.46
The changes also manifested in Facebook as an organization. In early 2012, less than two-down engineers were working on the companys mobile platform, whereas the focus on mobile increased that to
hundreds.47 But more importantly, the intensified focus on advertising, which was long ignored and
deemed less important than photos and status updates posted by users, generated a much-welcomed
surge in revenue. Corporate giants Samsung, Proctor & Gamble, Microsoft, AT&T, and Amazon are
the five largest individual brands advertising Facebook.48 While these represent the companys single biggest marketing clients, they are certainly not Facebooks largest media-buying clients. Instead,
Facebook instituted an ecosystem of media buyers that bundle together large corporate ad budgets
called Preferred Marketing Developers. The ecosystem underwent an overhaul in October 2014 to
become the Facebook Marketing Partner program, which involved morhping the ecosystem into a
more objective-focus entity. The program also places partner companies into one of nine categories
according to any given partners marketing aims.49 As of 2014, the company generated 92 percent of
its revenue through advertising services. In the United States, growth in mobile ad revenue has been
spectacular: year over year growth in 2013 was 315 percent, 118 percent in 2014, and is anticipated to be
approximately 40 percent in 2015.50 By the end of December 2014, 69 percent of company-wide revenues
were generated from mobile advertising alone.51 Facebooks worldwide ad revenues are anticipated to
reach $18.19 billion in 2016 (see Exhibit 4), with mobile projected to constitute 75 percent of that total.52
The success of advertising has renewed shareholder confidence in the company as evidenced by the
companys share price (see Exhibit 7). On July 31 2013, a little more than one year after going public,
Facebooks stock price again reached the IPO price of $38 and in so doing recouped the losses it suffered in the second half of 2012 when the share price hit an all-time low of $17.73 (September 4, 2012).53
Since then, the price has more than doubled, reaching a high of $83.42 in the first quarter of 2015.
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attracted by TV, traditionally the prime focus of advertisers (see Exhibit 9). Similarly, the global mobile
advertising market is expected to grow to $166 billion by 2018, at which point it will account for almost
a quarter of total media ad spend, and 66 percent of digital ad spend.61 Currently, Facebooks mobile
app is one of the most popular downloads; Facebook boasts 1.19 billion mobile MAUs. However, the
mobile path has an added challenge in that greater mobile use generally reduces ads per user, given the
smaller screen size of mobile devices.62
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Payments. Finally, Payments create an infrastructure for developers to receive funds for the purchase of their virtual and digital goods. This well-established, safe, and secure system has streamlined
the transactions between users and third-party developers.66 Currently, fees collected from Facebook
Payments almost exclusively come from the purchase of virtual goods used in social games; however, the company highlights that only a relatively small percentage of users have transacted with
Payments.67
RECENT DEVELOPMENTS
Facebooks initial response to the advent of mobile and the companys focus on advertising have
been instrumental in turning the post-IPO fortunes of the company around. However, the company
has been proactive in developing products that can help bolster its current position in online advertising and paid search. Importantly, the company continues to actively respond to the rapidly changing
dynamics of consumer habits and the technology industry; behavior that is in contrast to the inertia
that characterized Facebooks pre-IPO reaction to the mobile shift.
In early 2014, the company began testing the delivery of online advertising directly to apps operating beyond its immediate social network. Similar to Googles AdSense, a network that delivers ads
across numerous third-party sites, Facebooks ad network is geared towards creating a similar network
specific to a mobile interface. Thus, the company aims to target ads on outside mobile apps in the same
way if does within its own mobile app. In addition to affording the company an effective way in which
to spread ads across smartphones and tablets and further its reach, it also improves the relevance of
ads in a mobile context and gives third-party app developers an additional and more effective way of
generating revenue.68 The testing culminated in the company launching its Audience Network product
in October 2014. The product is highly reliant on the Facebook user login, which allows marketers to
track people across multiple devices and understand user behavior while allowing advertisers to circumvent the use of ad blockers.69
In September 2014, Facebook formally launched its new Atlas advertising platform. A re-engineered
platform of the Atlas Adviser Suite business that Facebook acquired from Microsoft, the product aims
to help marketers understand which Facebook users have seen, interacted with or acted upon ads
both on the Facebook platform and on third-party apps and websites. It also equips marketers with a
demand-side platform or bidder tool, an automated ad-buying functionality allowing marketers
to buy ads that target Facebook users as they navigate around the web. This extends the reach, relevance, and engagement of advertisers and marketers using the Facebook ad platform with the added
benefit of generating data that helps to inform and measure ad campaigns. Atlas marks a move away
from the typical means through which marketers target and track ads by moving away from cookies
which are often inaccurate, unreliable, and ineffective in a mobile setting. By linking user ad interaction
to their Facebook accounts, the company can help marketers circumvent these issues. Indeed, in light of
this capability and the value of the login across devices in the case of the Audience Network product,
a Facebook ID is considered to be a marketers holy grail given that it is persistent and high fidelity
for a consumer.70
Facebook is also making a push in video ads via an aggressive approach aimed to gain ground
quickly in a space traditionally dominated by Googles YouTube. The company has made a concerted
effort to place more video into News Feed, and work with premium advertisers on high-end, broadcast-like spots that are now available on its Premium Video Ads platform. The company has also made
videos difficult to ignore by incorporating auto-play videos that begin playing in a users feed with
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no click or interaction required. As a result of the approach, the amount of video in users News Feed
has more than tripled in the last year, and as of November 2014, 95 million users in the United States
watched video from desktops, representing 44 percent year-on-year growth.71 The opportunity for
Facebook is significant: digital video advertising in the United States is expected to reach $7.77 billion,
marking an increase of nearly 34 percent relative to 2014. By 2019, the market is anticipated to be worth
$14.38 billion.72 Currently, Facebook does not break out revenue from video advertising, but analysts
speculate 2015 revenue to be anywhere from $700 million to $3.3 billion, and they add that video has
the potential to become big business for Facebook.
Also in February 2015, Facebook launched Product Ads, a service that allows marketers to show
users a portion or all of their product catalogs. Advertisers had been able to do this prior to the launch;
however, doing so was complicated and few retailers made use of the service. The new service automates the process and helps advertisers to tailor ads to increase relevance, before allowing posting
to News Feed, which was not possible before. The product is also amenable to the Facebook mobile
platform, which is deemed as critical for retailers: not only is it easier for marketers to targeting users,
it is purportedly more targeted on mobile. As a result, advertisers are viewing Product Ads as a means
to access a meaningful source of demand.73
In addition to augmenting advertising capabilities, Facebook has also augmented its core consumerfacing products through acquisition. On April 9, 2012, Facebook acquired Instagram for $1 billion,
at the time the largest deal ever for Facebook. Instagram, a photo-sharing service for iPhones and
Android phones, was founded in October 2010 and quickly became a leader in online photo sharing.
By March 2012, CEO Kevin Systrom announced that registered Instagram users had nearly doubled to
27 million, up from 15 million just three month prior.74 By 2014, U.S. users topped 64 million, and it is
anticipated that this number will top 100 million by 2018. Faster-than-expected growth in 2014 actually
propelled Instagram passed Twitter to become the second largest social network behind parent network Facebook. Given Twitters stagnating user growth, this gap is set to widen. A primary reason for
this stellar growth lies in the simplicity of the app that has stayed true to its core missiondelivering
beautiful imagery and videoswhile other services, such as Snapchat, have loaded on lots of new features.75 For its part, Facebook retained Instagram as a separate business unit post-acquisition, while
tapping into its talent and innovation to benefit the parent company, a likely contributor to Instagrams
continued dedication to its core mission and subsequent success.
Zuckerberg saw the acquisition as a milestone for the company and said, We dont plan on doing
many more of these, if any at all.76 Photo sharing, which is one of Facebooks core features, has been a
vital element in the companys success and efforts to drive user engagement. By acquiring Instagram,
Facebook eliminated a potential competitor and gained access to the talent that created the robust
Instagram app for iPhone and Android.
The acquisition of mobile messaging service WhatsApp that was announced in February 2014 proved
to be an exception for Zuckerberg. WhatsApp is a text-based messaging service that functions over the
Internet. While Facebook already has its own Messenger service, which is used by users to communicate with each other, WhatsApp complements this service by enabling users who are not connected
on social media to communicate cost effectively. Facebook closed the deal in October 2014, ultimately
paying $22 billion for the service in exchange for $10.2 million in sales, according to a regulatory filing.
However, this seemingly hefty price tag overshadows the exceptional growth that WhatsApp has experienced in terms of users and the potential it has to become a core revenue generator for Facebook.77
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The service, as of late 2014, had 450 million active users; a level of activity that was reached faster
than any other company in history. It is estimated that more than 1 million people have installed the
app, and DAUs of the service has climbed to 72 percent of its user base. Astonishingly, WhatsApp has
managed to establish and support a reliable service (99.9 percent uptime) on this scale with only 32
engineers and one developer, which is unheard of in the industry. The service is also highly focused on
offering a pure messaging experience (just as Instagram is dedicated to its core mission), and WhatsApp
founders lived by the mantra of No Ads! No Games! No Gimmicks! Finally, WhatsApp is yet to spend
any money on marketing and user acquisition, and rather markets itself through a strong emotional
connection with its user base and satisfying customers.78 It remains to be seen if Zuckerberg can monetize the service without violating the founders mantra of staying away from advertising. Certainly, he
appears to be in no rush to do so until the service reaches 1 billion users. Said Zuckerberg, The right
strategy is to focus on connecting the people before aggressively turning them into businesses.
Current Competitors
Facebooks social network platform together with its evolution into a platform for marketers and
advertisers has placed the company in competition with some notable players. However, with the
company generating the vast majority of its revenue from advertsing, and given its push into video
advertising and advertising via third-party apps and websites, Google is undeoubtedly Facebooks
biggest rival.
GOOGLE
Founded in 1998 as a provider of Internet search results, Google has become a leader in cloud computing and advertising, particularly since its highly successful IPO in 2004. A major driver of revenue
for Google, as with Facebook, is online advertising. In the large $50 billion U.S. online advertising
market, Google holds a commanding lead over its competitors. It currently has a 38.4 percent share
of the market by revenue, with Facebook, Microsoft and Yahoo trailing with 10.4, 5.7 and 5.0 percent
respectively. Through 2017, however, Google is set to relinquish some of their market share primarily
to Facebook, and to a lesser extent Twitter (see Exhibit 10). Notably, Googles YouTube is a primary
driver of Googles dominance in the online ad market, and by 2017 it is forecast to account for almost
14 percent of the companys net ad revenue.79
Not surprisingly, Google dominates the search ad domain, commanding 71.4 percent ($16.43 billion) of the total market revenue ($23.02 billion) from search ads in 2014. In 2015, it is expected that the
company will derive almost 84 percent of its aggregate digital ad earnings from search ad revenue. The
company is also strong in terms of mobile search, claiming over two-thirds of the total mobile search
ad market. As a result, approximately 47 percent of Googles overall search ad revenue is expected to
come from mobile in 2015. Further, as of 2016, it is anticipated that mobile will for the first time drive
more revenue (nearly 60 percent) for the company than will desktop.80 However, Google has a weaker
grip on the overall mobile space for several reasons:81
1. Real Estate: Fewer ads on mobile means declining click volume, and in search advertising in a
mobile context, the valuable space at the top of a page of search hits is highly limited. Consequently,
fewer ads are able to be placed at the top of a search, resulting in reduced click volume. Social media
by contrast, has, in theory, infinite space as feeds/timelines can be swiped down repeatedly.
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2. With such infinite scrolling, companies like Facebook, Twitter, etc. are able to embed ads within
the content that the users are accessing. Google, by contrast, does not have any such native
display footing. It is for this reason that uploading a video to Facebook is more appealing than
uploading it to YouTube.
3. Google has relatively nascent audience targeting tools within its mobile platform, which makes
advertisers seeking to exploit mobile look elsewheresuch as Facebooks Audience Networkto
place ads.
4. Apps are fragmenting the attention of users, such that apps essentially cut into the market share of
Google given that advertisers have alternative ways of reaching users. In the case of Facebook and
even Yahoo, companies own multiple apps, each of which have built-in search functionalities and
each of which thus take users away from Google.
5. Google is still trying to compete with Twitter, Apples iAd, and Yahoo Gemini to win over app
developers. In particular, they are some way behind in offering ads for app marketers.
6. Google is yet to fully demonstrate to advertisers that their mobile campaigns result in more
conversion activity beyond the last click in a mobile search context. Until this is demonstrated, ad
prices will remain low.
7. Google continues to neglect reporting separately its mobile performance, in contrast to the likes
of Twitter, Facebook, and Yahoo. This makes it challenging for advertisers to gauge how effective
mobile ads on Google are, and it raises the concern that if Google had a good mobile story to tell,
it would be telling it in a fashion similar to its competitors.
In digital display, however, Google is playing second fiddle to Facebook. In 2015, Google is expected
to capture 13 percent of the U.S. digital display market ($27.05 billion in total), compared to fully one
quarter of the market captured by Facebook. While revenues from digital display ads are projected to
increase slightly, bolstered by YouTubes ad platform, the companys large Display Network and higher
AdSense revenue, Google will continue to lose share in the market through 2017. By contrast, Facebook
is set to assume almost 27 percent of the market by this point in time, generating over $10 billion in revenue. Exhibit 11 summarizes market share dynamics for Facebook and its competitors.82 Importantly
for Google, this revenue will be fueled in part by Facebooks News Feed video ads, as well as their
AdSense equivalent Atlas. Indeed, Google has not been clear with how it intends to respond to the latest products that Facebook has released which are aimed squarely at competing with the company. A
primary example of this is the technology behind Facebooks Audience Network product. Google has
the capability to create a similar product, but it was Facebook who has first-mover advantage. Google,
in response, unveiled a tool that allows marketers to identify when an ad delivered on one platform
resulted in a purchase on another, but stops short of being able to effectively do cross-device targeting
the way Facebook does.83 This may also help to explain Googles comparatively poor performance in
mobile digital display, where the company is again a distant second to Facebook, capturing only 11.8
percent of the market relative to Facebooks 36.7 percent in 2014.84
For Facebook, however, one potential area of competition is Google+. Google + has several improved
and additional features over Facebook. Google + circles allow users to organize the people they are
connected to and give them better control over their privacy settings. Hangouts is a video chat feature
that allows up to 10 friends to communicate through videoconferencing. The integration of Google+
with YouTube and the image organizer and viewer, Picasa, allows for improved video and photo sharing. Whats more, the third-party developer platform associated with Google+ (which is similar to
Facebooks developer platform) is completely free, while Facebook charges a 30 percent commission.
This incentive could drive developers away from Facebook and to the Google+ platform, which would
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parallel Googles initiative of driving iPhone developers to the Android operating system through
more attractive developer commissions. Overall, Google+ has encouraged millions of users to establish
Google accounts and (thanks to a controversial change to Googles privacy policy) facilitates the connection of Googles various services, from search to maps to Gmail. As a result, it allowed the company
to track logged-in users, which is important to advertisers, assisting Google to level the playing field
with Facebook.85
Yet, Google+ lacks Facebooks installed base of users as of late 2014. Google+ had 343 million active
users August 2014, up from 150 million in June 2012.86 This is a fraction of the 1.39 billion active users
Facebook reports. Still, Google has seen a boost in click-through rates on some display ads of anywhere from 2 percent to 15 percent due to the additional user information provided by its social media
product.87
Googles drive for Internet dominance and social strategy includes a suite of products and services
(e.g., Chrome, Google.com, Picasa photo software, YouTube, Translate, Analytics, AdWords, and others). Rather than focusing on any single product, what matters most to Google is how much time users
spend within the Google ecosystem once logged in to their account.88 Now that all of these products
and services are linked to Google+, Google will be able to paint a more complete picture of each of its
users. Such fine-grained data will be vital in Googles push to become the dominant online presence
delivering customized advertising.
TWITTER
Launched in July 2006, Twitter has become an extremely popular free micro-blogging and social networking service. Twitter gives users the ability to communicate with friends and family via text-based
posts in real time. Users submit a tweet, which is limited to 140 characters in length, to their profile
page. A subscriber to the users page (known as a follower) then receives the tweet automatically.
Unlike Facebook, which requires the dual acceptance of friend requests, Twitter stimulates interaction
between complete strangers because users dont need to approve who follows them.
Individuals, organizations, and companies have quickly realized the benefit of this type of interaction: the ability to reach an unlimited, yet targeted, audience. TV channels such as CNN, MSNBC,
and ESPN now use Twitter as part of their broadcasts. And celebrities, athletes, and politicians have
accepted the technology as well; 75 percent of NBA players, 82 percent of U.S. Congress members,
and 85 percent of U.S. Senators are active Twitter users.89 Former vice president of product, Jason
Goldman, attributes Twitters appeal to the fact that it delivers interesting, relevant timelines . . .
about the people and places that matter to you. Giving people better information about the world
around them and the things they care about has become the cornerstone of the product offering.90
Even though mainstream adoption has quickly become a reality, Twitter is still growing its business
model. Notably, growth is at a healthy clip: Twitters total ad revenue in 2014 was $830 million, up 91
percent over the $430 million ad revenue generated in 2013. Forecasts point to further healthy growth
for 2015, with revenues expected to breach the $1 billion mark to $1.34 billion, over 62 percent growth
from 2014. Substantially all of this revenue is generated from digital display advertising, which represents 3.7 percent of the total display revenue generated in the U.S. market. By 2017, this is expected to
reach $2.54 billion or 6.8 percent of the market, which is the fastest growth rate among its peers over
the same time period (see Exhibit 10). With respect to mobile, the company is a juggernaut. It has the
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highest share of mobile ad revenues among the total digital ad revenues of its competitors: 90 percent
of earnings are derived from mobile ad placements (see Exhibit 11). By 2017, it is expected that mobile
revenues will nearly double from 2015, from $1.19 billion to $ 2.29 billion.
This growth is fueled by the companys recent deal with Google.91 Twitter struck a deal in February
2015 to monetize its logged-out audience by partnering with Google to have tweets made visible in
Google search results. In this way, Twitter is hoping to draw more people to its site to counteract the
platforms slow user growth, which has troubled the company and its investors. Indeed, in the fourth
quarter of 2014, Twitters user growth fell below that of Facebook for the first time ever.92 The benefits
will be mutual: Twitter will have the opportunity to convert and possibly monetize logged-out users,
and Google can generate enhanced search results inclusive of real-time tweets and broader content,
while aiding to keep users in their ecosystem longer. However, the deal does not involve advertising
revenue, suggesting that Twitter will receive data-licensing revenue.93 The implications of this deal for
Googles own Google+ platform is yet to play out, although analysts believe it to be yet another indication of the company treating it more so as a platform than a product.94
In sum and for the time being, Twitter generates only a fraction of the ad revenue and user interest
of Facebook. As of December 2014, Twitter had over 288 million MAUs, and users represented a 12.2
percent share of social network users worldwide in 2014.95, 96 By comparison, Facebook has 1.39 billion MAUs, and user penetration as a percentage of social network users is 60.7 percent.97 However,
as Twitter continues to grow, particularly in the mobile space, the chance of users spending more time
with it communicating with friends and family will grow as well. Professor Tim Loughran of Notre
Dame summed it up as follows: Facebook is in the business of communication. Anybody who can
facilitate a more precise or quicker communication should be perceived as a threat to Facebook.98
MICROSOFT
Even though it owns a 10 percent equity stake in Facebook (which it bought in 2007 for $240 million), Microsoft remains a Facebook competitor across several market segments. Similar to Google,
Microsoft commands a large percentage of advertising revenue and both online and offline user interaction. Microsoft offers a fleet of products and services that competes directly with Facebook. Windows
Mobile, the Xbox 360, the Bing search engine, and MSN (a portal to news, sports, games, shopping, and
videos) all drive traffic away from Facebook and Google. In 2014 alone, Microsoft accounted for 5.7 percent of U.S. online advertising revenue and was projected to remain third behind Google and Facebook
over the next several years (see Exhibit 10). The key driver of digital ad revenue for Microsoft is its
digital search ad revenue. Second behind Google, the company is set to derive $2.84 billion from search
advertising on its Bing search engine in 2015, representing 86 percent of its digital ad dollars and 11.1
percent of the U.S. search space. By contrast, Microsofts display ad revenue is on the decline. By 2017,
it is expected to hold only 1.2 percent of the overall display ad market, down from 1.7 percent in 2015.99
In addition to the Microsoft investment in Facebook, Facebook and Microsoft have formed a strategic partnership that enables the two companies to compete directly with Google on several fronts. As
far back as 2006 and predating the investment, Microsoft sold banner ads on Facebook in the United
States. In light of the subsequent 2007 investment, this arrangement was extended, giving Microsoft the
rights to split banner ad revenue on Facebook outside of the United States. This agreement dissolved in
2010, when Facebook removed Microsofts banner ads and replaced them with keyword search results
generated using Microsofts Bing search engine. This afforded Microsoft a means by which to improve
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the breadth and depth of its social search data, and Bing ultimately became the default search engine
within Facebook. This partnership allows both Microsoft and Facebook to compete squarely with
Google+ and Google.com search results. Moreover, Bing search queries conducted within Facebook are
not directly accessible to Google for further data analysis. However, as of December 2014, the partnership based on the Bing search engine ended when Facebook decided to completely remove the Bing
search results. While Facebooks action does not bode well for the Bing search engine, it is by no means
indicative of a strained partnership. On the contrary, Microsoft made a deal with Facebook in 2013 to
gain insights into its social graph. In December 2014, Facebook added the ability for users to search for
specific posts and content within graph search, and it is presumed that Microsoft is privy to data and
insights generated from this functionality.100
In May 2011, Microsoft purchased Skype for $8.5 billion and soon after partnered with Facebook to
challenge Google+s videoconferencing capabilities.101 At the time of the deal, Zuckerberg said, We
have a really good relationship with Microsoft. Now that Skype is owned by Microsoft, that gives
us the sense of stability that its going to be with a company we can trustthat we know we have a
longstanding relationship with.102 The truth of this statement seemed evident in May 2012, when
Microsoft sold $550 million worth of patents and licenses to Facebook.103
Where to Next?
As Sandberg wrapped up her review of the earnings report and noted down of some of the key areas
she anticipated analysts to zero in on, she leaned back in her chair and gazed out of her corner office
window, taking a deep breath. She had a gut feeling that the company was on the right track in its
pursuit of dominance in mobile advertising. Between the launch of the Facebook Audience Network,
Atlas and its push into video, the company was carving out a substantial presence in mobile display
advertising and she suspected that its market leadership would continue in the short term. But how
could her team translate this into a sustained leadership that could topple Google as the market leader
in digital advertising?
She was sure that the mobility revolution had not fully played out, and that Facebook had learned
the hard way about how quickly a company can fall behind if it is not proactive about product development. The pressure always feel on finding ways to leverage data in new and interesting ways,to target
users, and to increase click-throughs; Sandberg knew her team and the growing number of Facebook
engineers would need to engage end-users with never-seen-before experiences that lend well to advertising. Not to mention, there was the increasing need to develop cross-platform solutions to capture
user and marketer attention across multiple channels. Sandberg knew the current product offerings
for advertisers were a good start in terms of the companys mobile plans, but how could they be made
even better, so as to challenge Googles dominance? Would improvements be possible without significantly sacrificing user experience? And then, of course, Facebook could not afford to take its eyes off
of the startup sceneone innovation is all it takes to break the mold and create new types of advertisingsomething Sandberg knew all too well when it came to Instagram and WhatsApp.104 What was
on the horizon that could help Facebook bolster its mobile objectives? Would Facebook be in a position
to invest in or even acquire any exciting startups? With the pace that the industry was moving at, there
would be no time to waste.
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US & Canada
ROW
Asia
1,600
1,400
1,200
1,000
800
600
400
200
0
Q4
2009
Q1
Q2
Q3
2010
Q4
Q1 Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4 Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
Q4
2014
(continued)
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EXHIBIT 1 (continued)
US & Canada
ROW
Asia
1,600
1,400
1,200
1,000
800
600
400
200
0
Q4
2009
Q1
Q2
Q3
2010
Q4
Q1 Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4 Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
Q4
2014
(continued)
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EXHIBIT 1 (continued)
Q1
Q2
Q3
2010
Q4
Q1 Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4 Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
Q4
2014
(continued)
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EXHIBIT 1 (continued)
800
700
600
500
400
300
200
100
0
Q1
Q2
Q3
2012
Q4
Q1
Q2 Q3
2013
Q4
Q1
Q2
Q3
Q4
2014
Source: Authors depiction of data in Facebooks SEC 10-K filing, filed on January 29 2015.
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EXHIBIT 2 Facebook Revenues, Segmented into Advertising (Red) and Payments & Fees (Blue),
20102014 (in $ millions)
$3,800
$3,600
$3,400
$3,200
$3,000
$2,800
$2,600
$2,400
$2,200
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
Q4
2010
Q1
Q2
2011
Q3
Q4
Q1 Q2
Q3
2012
Q4
Q1
Q2
Q3
Q4 Q1
2013
Q2
Q3
Q4
2014
Source: Authors depiction of data in Facebooks SEC 10-K filing, filed on January 29 2015.
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EXHIBIT 3 Facebook Financial Data, 20102014 (in $ millions, except EPS data)
Fiscal Year
2010
2011
2012
2013
2014
1,785
3,908
9,626
11,449
11,199
Receivables (total)
373
547
1,170
1,160
1,678
Inventories (total)
574
1,475
2,391
2,882
3,967
246
450
882
1,260
1,817
Assets (total)
2,990
6,331
15,103
17,895
40,184
29
63
65
87
176
Long-term debt
367
398
1,991
237
119
Liabilities (total)
828
1,432
3,348
2,425
4,088
2,162
4,899
11,755
15,470
36,096
Sales (net)
1,974
3,711
5,089
7,872
12,466
354
537
720
756
945
449
1,095
3,187
3,193
5,297
Income taxes
402
695
441
1,254
1,970
606
1,000
53
1,500
2,940
606
1,000
53
1,500
2,940
0.28
0.47
0.02
0.62
1.12
0.28
0.47
0.02
0.60
1.10
Source: Compustat.
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from August 2016 to January 2017.
$800
$700
696.4
$600
$500
$400
356.9
343.2
211.7
186.3
169.4
163.7
162.5
155.3
IBM
$200
Intel
223.9
Samsung Electronics
$300
$100
Amazon
Oracle
Alibaba
Microsoft
Apple
$0
Source: Authors depiction of data from Facebook Closes on 1 Billion Mobile Users Worldwide, eMarketer, January 21, 2015.
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from August 2016 to January 2017.
$10
$9
US & Canada
$8
$7
$6
$5
$4
Europe
$3
$2
Asia
ROW
$1
$0
Q4
2010
Q1
Q2
2011
Q3
Q4
Q1 Q2
Q3
2012
Q4
Q1
Q2
Q3
Q4 Q1
Q2
2013
Q3
Q4
2014
Source: Authors depiction of data in Facebooks SEC 10-K filing, filed on January 29 2015.
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2014
2015
2016
2017
2018
Indonesia
69.00%
69.90%
72.50%
75.60%
78.00%
78.30%
Mexico
65.60%
67.30%
70.00%
73.30%
75.30%
77.50%
Brazil
61.70%
66.90%
69.50%
72.60%
75.00%
75.30%
Argentina
65.00%
67.00%
68.00%
70.00%
71.00%
72.00%
Canada
62.00%
63.00%
64.00%
64.60%
65.20%
65.70%
Australia
59.40%
60.80%
62.10%
62.70%
63.30%
63.40%
Netherlands
61.30%
61.70%
62.10%
62.30%
62.40%
62.50%
Sweden
59.00%
61.30%
61.90%
62.20%
62.50%
62.80%
United Kingdom*
59.90%
61.10%
61.40%
61.70%
61.60%
61.50%
Norway
59.90%
60.30%
61.10%
61.80%
62.60%
63.30%
U.S.*
60.00%
60.10%
60.30%
60.70%
61.20%
61.70%
Finland
56.40%
58.60%
59.30%
60.10%
60.60%
61.40%
Denmark
55.00%
56.90%
57.70%
58.10%
58.90%
59.60%
Spain
52.60%
54.00%
56.40%
58.10%
59.20%
60.20%
Italy
49.20%
51.30%
53.40%
54.50%
56.30%
58.00%
India
45.50%
45.60%
48.50%
52.00%
55.00%
57.00%
France
43.80%
45.00%
46.40%
47.20%
47.90%
48.60%
Germany
35.30%
36.50%
38.00%
39.50%
41.10%
42.70%
South Korea
30.40%
31.20%
32.00%
32.70%
33.10%
33.60%
Japan
25.30%
26.00%
26.70%
27.20%
27.80%
28.30%
Russia
18.00%
19.00%
20.00%
21.00%
22.00%
23.00%
Source: Facebook User Penetration Worldwide, by Country, 20132018, eMarketer, December 15, 2014. Estimates are based
on the analysis of survey and traffic data from research firms and regulatory agencies; Facebook company releases; historical trends; Internet and mobile adoption trends; and country-specific demographic and socioeconomic factors.
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EXHIBIT 7 Relative performance of Facebooks Stock Price versus the NASDAQ 100 Index through
April 7, 2015
200%
Facebook Inc.
150%
100%
NASDAQ-100 Index
50%
0%
-50%
5/17/2012
11/17/2012
5/17/2013
11/17/2013
5/17/2014
11/17/2014
5/17/2015
Source: Bloomberg Data, April 7, 2015. The percentage change for each Facebook and the NASDAQ 100 Index are relative to
the first day when both were trading (NASDAQ 100 Index began trading December 18, 1998).
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MARK ZUCKERBERG
Founder Mark Zuckerberg (nicknamed Zuck) remains the chief executive officer (CEO) and chairman of Facebook, despite
the fact that many founders of successful technology startups are asked by venture capitalists to turn over the reins to
more experienced, professional managers. Compelled by the companys vision to connect the world by building a great user
experience, Zuckerberg wont see his ambitions sidelined by an outsider motivated primarily by increasing shareholder
value. Facebook is the obvious fusion of Zuckerbergs academic passions in psychology and computer science at Harvard.
The website collects data to map out human relationships and social connectivity, which Zuckerberg refers to as a social
graph. Taken together, it is a social graph that has mapped one-tenth of the world population in less than seven years.
In the early days, Facebook operated directly under Zuckerberg, who coded much of the original site and then managed the
engineering teams in the next phase. As Facebook grew out of its start-up phase, however, some industry observers began to
argue that the company was maturing faster than Zuckerberg was as its CEO. At times, Zuckerbergs inexperience and casual
appearance have received criticism. On several occasions, Zuckerberg has worn flip-flops and hoodies to meetings with other
executives. With his habit of arriving late to work and staying into the middle of the night, even his work schedule hearkens
back to college habits. He received more negative press over comments he made in a speech in 2007, when he stated that
young people are just smarter. 1 In recent years, it seems that Zuckerberg has actively sought to improve his public image
and culled his brashness and activities. He even hired a public speech coach, former president Bill Clintons speech adviser.
Even as Zuckerberg has adapted to his role as a business leader, the way the company has tried to juggle user privacy and
the monetization during his tenure has opened him up to additional criticism. In December 2007, Facebook launched a
new advertising mechanism called Beacon. The feature was designed to track users activity across all of the websites they
visited and share their activity with friends via their Facebook account. Its release prompted condemnation from users and
privacy groups alike. A similar situation occurred in 2009, when the company released new privacy controls that, under
the new settings, made public some messages originally thought to be private. Addressing privacy concerns effectively
remains in the front of Zuckerbergs mind as he considers ways to monetize Facebooks prime audience, mobile users.2
More recently, Zuckerbergs ability to manage the company in light of its 2012 IPO was put in question after
the companys rocky start to life as a publicly traded company. It was speculated that Zuckerberg, as an
entrepreneur at heart, was wary of the capital marketssuspicions that motivated him to keep the company
private for much longer than the likes of Google or Amazon. Once public, he appeared to be unable to inspire
confidence in investors that the companys business model would propel the company forward.3
SHERYL SANDBERG
Sheryl Sandberg joined Facebook as chief operating officer (COO) in 2008, following a six-year stint as Googles vice president
of global online sales and operations. In that capacity, she worked with Googles AdSense and AdWords programs; a unit that
began with a staff of 300 but grew to 4,000, or about one-quarter of Googles work force, under Sandbergs leadership.4 Eric
Schmidt, Googles CEO at the time, considered her a superstar, but tensions grew between the companies after her departure,
partly because Sandberg recruited Google executives and employees to work for Facebook.5 Sheryl Sandberg attended Harvard
for both her undergraduate (economics) and graduate (MBA) degrees. She worked at McKinsey & Company and as chief of staff
for Lawrence Summers at the U.S. Department of Treasury prior to working at Google.6 Time magazine considers her one of the
100 Most Influential People in the World, and Fortune places Sandberg as one of the 50 Most Powerful Women in Business.
Sheryl Sandberg is a vocal advocate for women in leadership. Her TED talk entitled Why We Have Too Few
Women Leaders has some three million views,7 and her book Lean In is a bestseller. In both, Sandberg speaks
about the low number of female leaders in todays society and how to overcome this situation.8
As COO and Zuckerbergs second in command at Facebook, Sandberg focuses on operations, revenue, and international
reach. She was also tapped for her sales, business development, public policy, and communications prowess. Given
Zuckerbergs public relations challenges, many consider Sandberg the professional face of Facebook.9 Zuckerberg sought
(continued)
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EXHIBIT 8 (continued)
out Sandberg amid a shakeup of his executive team. He was looking for someone who would be comfortable serving as his
No. 2 within the company, allowing him to maintain a tight rein on Facebooks activities. To some extent, the leadership
dynamic between the CEO and his COO can be explained in simple terms: Zuckerberg brings in the users, while Sandberg
brings in the money. The dynamic between the two is respected within both Facebook and its board of directors.
Sandberg has been able to attract high-profile advertisers by showing them how targeted their ads can be when theyre
hooked into a network as intimately familiar with its users as Facebook is. She has also stepped up in unexpected areas when
needed, such as when she completed a round of funding for Facebook when its chief financial officer (CFO) left suddenly.10
Sandberg is known for her ability to form teams and break deadlocks, bringing an analytics perspective and authentic
communication to bear on the issues. In this way, Sandberg has been a key figure in reshaping Facebooks business model.
She is now working hard to help Zuckerberg find a viable business model that will monetize the companys mobile users.11
DAVID EBERSMAN
After the departure of Facebooks chief financial officer (CFO) Gideon Yu in 2009, the company sought a
CFO with public company experience that could help it prepare to go public in the next few years.12 The
search turned up David Ebersman, who was in his 15th year as CFO at the biotech company Genentech Inc.
Prior to working at Genentech, Ebersman, who received an undergraduate degree in economics from Brown
University, held positions with Oppenheimer & Co. Inc. and the U.S. Department of Treasury.13
Ebersman was indispensable to the launch of Facebooks IPO on May 18, 2012, working closely with advisers from the
institutions underwriting the offering, particularly those at J. P. Morgan. The SEC and the media criticized Ebersman for
his decision to raise the number of shares offered in Facebooks IPO three days before Zuckerberg rang the NASDAQ
bell, even going so far as to blame this decision for the stagnant stock price on the day the IPO was issued.14
Sources: 1 Facebook CEO seeks help as site grows upGoogle veteran to be Zuckerbergs no. 2, The Wall Street Journal, March 5, 2008, http://
on.wsj.com/TBMcIs.
Ibid.
Vardi, N. (2012), Mark Zuckerbergs Big Facebook Mistake, Forbes, July 27.
Helft, M. (2010), Mark Zuckerbergs most valuable friend, The New York Times, October 2, http://nyti.ms/1aiOvsN.
Ibid.
Person of the Year: Mark Zuckerberg, Time magazine, December 15, 2010.
http://www.ted.com/talks/sheryl_sandberg_why_we_have_too_few_women_leaders.html.
Sandberg, S. (2010), Why we have too few women leaders, TEDWomen, December.
The acceptable face of Facebook, The Economist, July 21, 2011, http://econ.st/VDqBi8.
12
Facebook seeks a new finance chief as Yu leaves, The Wall Street Journal, April 1, 2009, http://on.wsj.com/1jska.
13
Facebook hires finance chief, The Wall Street Journal, June 30, 2009, http://on.wsj.com/4vQ9Fa.
14
Inside fumbled Facebook offering, The Wall Street Journal, May 23, 2012, http://on.wsj.com/JEVdyb.
30
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from August 2016 to January 2017.
200%
150%
TV
Digital
100%
50%
0%
-50%
Outdoor
Radio
2013
2014
2015
2016
2017
2018
Source: Authors depiction of data in eMarketers report Total Media Ad Spending Worldwide, by Media and Format,
20132018.
31
This document is authorized for use only by Fabiana Martin in ANALISIS DEL ENTORNO 2016-1 taught by Adriana Mart?nez Mart?nez, Universidad Nacional Autonoma de Mexico UNAM
from August 2016 to January 2017.
EXHIBIT 10 Net U.S. Digital Ad Revenue by Company, as a Percentage of the Total Market,
20132017 (in percent)
45
40
35
Google
30
25
20
15
10
Microsoft
Yahoo
Twitter
5
0
2013
2014
2015
2016
2017
Source: Authors depiction of data in eMarketers report U.S. Ad Spending: Q1 2015 Complete Forecast.
32
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from August 2016 to January 2017.
2013
2014
2016
2015
2017
80
70
60
50
40
30
20
10
0
Google
Microsoft
Yahoo
IAC
Yelp
(continued)
33
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from August 2016 to January 2017.
EXHIBIT 11 (continued)
2013
2014
2016
2015
2017
30
25
20
15
10
5
0
Facebook
Yahoo
AOL
(continued)
34
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from August 2016 to January 2017.
EXHIBIT 11 (continued)
Search Desktop
Search Mobile
Display Desktop
Display Mobile
70
60
50
40
30
20
10
0
2013
2014
2015
2016
2017
(continued)
35
This document is authorized for use only by Fabiana Martin in ANALISIS DEL ENTORNO 2016-1 taught by Adriana Mart?nez Mart?nez, Universidad Nacional Autonoma de Mexico UNAM
from August 2016 to January 2017.
EXHIBIT 11 (continued)
100
90
80
70
60
50
40
30
20
10
0
2013
2014
2015
2016
2017
Source: Authors depiction of selected data in U.S. Ad Spending: Q1 2015 Complete Forecast, eMarketer, March 24, 2015.
36
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from August 2016 to January 2017.
Endnotes
1 Marvin, G. (2014), 7 Challenges Facing Google with the Rise of Native Mobile Advertising, Marketing Land,
December 22.
2 The Social Network [Film], 2010.
3 Facebook IPO filing puts high value on social network, USA Today, February 2, 2012, http://usat.ly/y5z8UK.
4 A brief history of Facebook, The Guardian, July 24, 2007, http://bit.ly/AHNfU.
5 Facebook IPO filing puts high value on social network.
6 Facebook Form S-1 registration statement, SEC, May 16, 2012, http://Lusa.gov/LJb1NN.
7 Ibid.
8 Facebook, Inc. 10-K Annual Report, filed 01/29/2015.
9 Ibid.
10 Ibid.
11 Facebook Closes in on 1 Billion Mobile Users Worldwide, eMarketer, January 21, 2015.
12 Garner, P. (2015), Overview of Facebooks 4Q14 earnings and business developments, Market Realist,
February 11.
13 Harrup, A. (2014), Facebooks Zuckerberg Says WhatsApp Could Reach Three Billion Users, The Wall Street
Journal, September 5.
14 Facebook User Penetration Worldwide, by Country, 20132018, eMarketer, December 15, 2014.
15 Floating Facebook: The value of friendship, The Economist, February 4, 2012, http://econ.st/yq7kQa.
16 Coleman, A. (2014), What Germany Can Teach the Rest of Europe AboutTwitter, Forbes, July 10.
17 Washenko, A. (2015), How Social Media Behaviors Differ Across Asia Pacific, Sprout Social, January 21.
18 Facebook overview, Facebook, http://bit.ly/GMr0Lq.
19 Graph search event video, FacebookNewsroom, January 15, 2013, http://bit.ly/14mMqrL.
20 Facebook overview.
21 Graph search event video.
22 Ibid.
23 Facebook on collision course with Google on web searches, The Wall Street Journal, January 16, 2013, http://
on.wsj.com/14mMZBT.
24 Ibid.
25 Facebook overview.
26 Ibid.
27 Facebook to organize friends into lists, The Wall Street Journal, September 13, 2011, http://bit.ly/Vltapl.
28 Facebook Statistics; http://www.statisticbrain.com/facebook-statistics/.
29 Facebook sets historic IPO, The Wall Street Journal, February 2, 2012, http://on.wsj.com/xcZO7h.
37
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from August 2016 to January 2017.
30 Facebook prices IPO at record value, The Wall Street Journal, May 17, 2012, http://on.wsj.com/J0D5tn.
31 SEC could seek NASDAQ upgrading, The Wall Street Journal, June 29, 2012, http://on.wsj.com/NHWO36.
32 Facebook IPO hasnt hit NASDAQ volumes, The Wall Street Journal, June 29, 2012, http://bit.ly/ViCGcx.
33 Analysts hit the tepid button on Facebook, The Wall Street Journal, June 28, 2012, http://on.wsj.com/
LB2NcX.
34 Ibid.
35 Google edges closer to Facebook as U.S. display advertising becomes two-horse race.
36 Analysts hit the tepid button on Facebook.
37 SEC could seek NASDAQ upgrading, The Wall Street Journal, June 29, 2012, http://on.wsj.com/NHWO36.
38 Stock traders to Mark Zuckerberg: Do you hear us now? Forbes, July 31, 2012, http://onforb.es/PkPafk.
39 Rusli, E. (2014), Profitable Learning Curve for Facebook CEO Mark Zuckerberg, The Wall Street Journal,
January 5.
40 Ibid.
41 Facebook plays defense, The Wall Street Journal, September 5, 2012, http://on.wsj.com/PZnD7U.
42 Zuckerberg admits to missteps, The Wall Street Journal, September 11, 2012, http://on.wsj.com/OEFfmx.
43 Facebook Form S-1 registration statement.
44 Rusli, E. (2014), Profitable Learning Curve for Facebook CEO Mark Zuckerberg, The Wall Street Journal,
January 5.
45 Ibid.
46 Ibid.
47 Rusli, E. (2013), Even Facebook Must Change, The Wall Street Journal, January 29.
48 Edwards, J. (2014), Here Are Facebooks 5 Biggest Advertisers, Business Insider, May 6.
49 Lafferty, J. (2015), Facebook PMD Program Officially Changed to Facebook Marketing Partners, Social
Times, February 17.
50 Yahoo Poised to Pass Twitter in U.S. Mobile Ad Share by 2015, eMarketer, December 4, 2014.
51 Facebook, Inc. 10-K Annual Report, filed 01/29/2015.
52 Facebook Closes in on 1 Billion Mobile Users Worldwide, eMarketer, January 21, 2015.
53 Rusli, E. (2013), Facebook Crossed Its $38 IPO Price, The Wall Street Journal, July 31.
54 Facebook, Inc. 10-K Annual Report, filed 01/29/2015.
55 Facebook Form S-1 registration statement.
56 Ibid.
57 Introducing Graph Search: Help people discover your business, Facebook-Studio, January 15, 2013, http://
bit.ly/WcKyPl.
58 Facebook Form S-1 registration statement.
59 Ibid.
38
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from August 2016 to January 2017.
60 Total Media Ad Spending Worldwide, by Media and Format, 20132018, eMarketer, March 6, 2015.
61 Mobile Ad Spend to Top $100 Billion Worldwide in 2016, 51% of Digital Market, eMarketer, April 2, 2015.
62 Facebook annual report, Facebook, 2012.
63 Ibid.; Facebook IPO filing.
64 Facebook F8, Wikipedia.https://en.wikipedia.org/wiki/Facebook_F8
65 Facebook, Inc. 10-K Annual Report, filed 01/29/2015
66 Ibid.
67 Ibid.
68 Metz, C. (2014), Facebook Challenges Google with Its Own Mobile Ad Network, Wired, January 22.
69 Estienne, S. (2014), Facebook challenging Google in online ad market, Yahoo News, October 15.
70 Marshall, J. (2014), Facebook Extends Reach with New Advertising Platform, The Wall Street Journal,
September 22.
71 Van Grove, J. (2015), Facebook Takes On Googles YouTube in Competition for Video Ads, The Street,
January 20.
72 U.S. Digital Video Ad Spending, 2013-2019, eMarketer, March 9, 2015.
73 Barr, A. (2015), Facebook Challenges Google with Product Ads, The Wall Street Journal, February 17.
74 Insta-Rich: $1 billion for Instagram, The Wall Street Journal, April 10, 2012, http://on.wsj.com/IfvnR7.
75 Instagram Will Top 100 Million U.S. Users by 2018, eMarketer, March 4, 2015.
76 Insta-Rich: $1 billion for Instagram, The Wall Street Journal, April 10, 2012, http://on.wsj.com/IfvnR7.
77 Frier, S. (2014), Facebook $22 Billion WhatsApp Deal Buys $10 Million in Sales, Bloomberg, October 29.
78 Four Numbers That Explain Why Facebook Acquired WhatsApp, Jim Goetz, on behalf of Sequoia Capital,
Tumblr, http://sequoiacapital.tumblr.com/post/77211282835/four-numbers-that-explain-why-facebookacquired - comment-1253364330.
79 U.S. Ad Spending: Q1 2015 Complete Forecast, eMarketer, March 24, 2015.
80 Ibid.
81 Marvin, G. (2014), 7 Challenges Facing Google with the Rise of Native Mobile Advertising, Marketing Land,
December 22.
82 U.S. Ad Spending: Q1 2015 Complete Forecast, eMarketer, March 24, 2015.
83 Estienne, S. (2014), Facebook challenging Google in online ad market, Yahoo News, October 15.
84 U.S. Ad Spending: Q1 2015 Complete Forecast, eMarketer, March 24, 2015.
85 Winkler, R. (2015), Google+, a Disappointment with a Purpose, The Wall Street Journal, March 4.
86 Kemp, S. (2014), Global Social Media Users Pass 2 Billion, We Are Social, August 8.
87 Efrati, A. (2013), Theres no avoiding Google+, The Wall Street Journal, January 2.
88 Why it doesnt matter that Google+ users only spend three minutes a month on the site, Forbes, February 28,
2012, http://onforb.es/yoxUre.
89 Twitter shares active user numbers, The Wall Street Journal, September 8, 2011, http://on.wsj.com/q27dF1.
39
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90 Twitter VP Jason Goldman steps down, The Los Angeles Times, December 8, 2010, http://lat.ms/fSWZnI.
91 U.S. Ad Spending: Q1 2015 Complete Forecast, eMarketer, March 24, 2015.
92 Koh, Y. (2015), Twitters User Growth Falls Below Facebooks for the First Time, The Wall Street Journal,
February 5.
93 Frier, S. (2015), Twitter Reaches Deal to Show Tweets in Google Search Results, Bloomberg, February 4.
94 Patel, N. (2015), Everything You Need To Know About The Google-Twitter Partnership, Search Engine Land,
March 20.
95 Twitter Users Worldwide by Country, 20132019, eMarketer, April 1, 2015.
96 Twitter Share of Social Network Uses Worldwide by Country, 20132019, eMarketer, April 1, 2015.
97 Facebook Users and Penetration Worldwide, by Region, 20132018, eMarketer, December 15, 2014.
98 What keeps Facebook up at night, Fox Business, February 2, 2012, http://fxn.ws/yRkBrc.
99 U.S. Ad Spending: Q1 2015 Complete Forecast, eMarketer, March 24, 2015.
100 Chowdhry, A. (2014), Facebook Removes Microsoft Bing SearchFeature, Forbes, December 15.
101 Microsoft to acquire Skype, Microsoft, May 10, 2011, http://news.microsoft.com/2011/05/10/
microsoft-to-acquire-skype/
102 Why the Facebook-Microsoft alliance should worry Google, The Wall Street Journal, July 7, 2011, http://bit.
ly/noRRYd.
103 Parkhurst, E. (2012), Microsoft, Facebook get cozy as competitors hover, Puget Sound Business Journal, May
4, http://bit.ly/17N5yzp.
104 Gupta, M. (2015), A Battle for Dominance: Google vs. Facebook, Techvibes, March 27.
40
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