Facebook SWOT Analysis (2020)

Company: Facebook, Inc.
CEO: Mark Zuckerberg
Founders: Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz, and Chris Hughes
Year founded: February 4th, 2004
Headquarter: 1 Hacker Way, Menlo Park, California, U.S
Number of Employees (FY2019): 44,942
Type: Public
Ticker Symbol: FB
Annual Revenue (FY2019): $70.7 billion
Profit | Net income (FY2019): US$18.5 billion

Fun Fact: Did you know that the blue color scheme for Facebook was chosen because it is the color that Mark Zuckerberg can see most clearly due to his red-green color-blindness?

Facebook’s Strengths

1) Strong Brand

Having a strong brand is vital both for stability and long-term sustainability. In 2019, Facebook was ranked #5 most valuable brand by Forbes. With $88.9 billion in brand value, Facebook is the strongest brand in the social media industry globally.

2) Diversified Portfolio

Diversification enhances the stability of companies by protecting their core financial assets in case of revenues decline in one sector. Facebook clearly understands that you shouldn’t put all your eggs in one basket, opting instead to spread its investment across different areas.

With WhatsApp, Instagram, Messenger, Oculus (virtual reality device), Workplace (business tool), Portal (video calling device), and Calibra (electronic payment system) under its portfolio, Facebook’s diversification is a major strength.

3) Market Dominance

Companies that dominate the market can leverage their elevated positions to their advantage. The leading social network of the world, Facebook and its family products (Instagram, WhatsApp, Messenger), have Monthly Active People (MAP) value of 2.89 billion (Dec 31, 2019).

You will find more infographics at Statista

4) Loyal Customer Base

Nothing communicates a company’s strength, stability, and success more than a large and ever-growing number of extremely loyal customers. About 40% of the world population uses Facebook and its family products (Instagram, WhatsApp, Messenger), putting Facebook in an irreplaceable position.

5) World’s Best Employer

Facebook’s excellent HR policies are regarded as one of the best not only in the social media industry but also globally across all other industries. It is known to attract and retain top talent in the industry. Forbes ranked Facebook in the following categories:

#147 Best Employers for Diversity 2020,
#144 World’s Best Employers 2019, and
#71 America’s Best Employers 2019

6) Visionary Leadership

The impeccable and visionary leadership of Mark Zuckerberg is a strength that most companies in the world can only dream of. The fruits of Zuckerberg’s strong visionary leadership include company culture, stability, increased profitability, innovativeness, and sustainability with minimum internal wrangles within its ranks and management, unlike most other companies.

7) Focus on R&D

Regardless of the industry, success in the digital age requires technological innovation through research and development. Facebook is one of the global leaders in R&D spending and has increased investment in R&D from $4.8 Billion in 2015 to $13.6 Billion in 2019, which is about 19%of its annual revenue.

8) Strong Advertising Business

Even though Facebook is synonymous with social media networks, the major source of its revenue is from the advertisement. In 2019, $69.66 billion (98.5% of its $70.70 billion annual revenue) came from advertising.

9) Effective Marketing Strategy

Facebook’s marketing is simple. The fact that over 2 billion people use their applications every day makes it a very powerful and effective marketing tool.

Facebook’s Weaknesses

1) User’s Privacy Concerns

Facebook is facing backlash over its negligence in the protection of user’s privacy, with the company experiencing a decline in popularity in some regions across the world. If the company does not address users’ privacy concerns promptly and effectively, it risks losing its popularity.

2) Overdependence on Advertising

Facebook business model relies heavily on advertising for its revenues. About 98.5 % of its annual revenue comes from advertising. In 2019, Out of $70.70 billion annual revenue, $69.66 billion was its advertising revenue.

3) Spreading Fake News

Facebook has been under a lot of criticism for spreading fake and misleading information. Fakebook’s inability to control misleading information can be very detrimental to society at large.

4) Friction in Management

Consecutive scandals have been disintegrating the harmony that existed between top-level management since the company was founded. The need for accountability is turning into a weakness as top executives point fingers and seek to distance themselves from major scandals such as the Russia meddling scandal

Facebook’s Opportunities

1) Diversify Portfolio

Even though Facebook Inc. owns WhatsApp, Instagram, Messenger, and other platforms, the majority of its business revenue is dependent on social media and advertising. Facebook has the opportunity to extend its portfolio beyond the social media industry.

For example, develop a business model with additional paid services such as online dating, peer to peer marketplace, hardware devices, e-wallet, news subscription, etc.

2) Expansion of Existing Platforms

With billions of users, Facebook can expand its existing services such as marketplace, online video streaming, online dating, business tools, e-wallet, etc. to compete with giants such as Amazon, eBay, YouTube, Netflix, Apple, Tinder, PayPal, etc.

3) Increasing Integration to other Applications

As technology advances, more and more applications and websites are integrated, allowing users to connect via other platforms. Facebook can open its platform to integrate with a variety of other applications such as e-commerce, surveys, blogs, podcasts, videos, contests, reviews, games, etc.

4) Target Different Audience

Although Facebook is popular, the drivers of its popularity is mainly tech-savvy and younger demographic. By introducing new features, Facebook can attract other target segments such as older generations or high-end business platforms such as LinkedIn.

5) Expansion through New Acquisitions

Facebook has financial resources to expand its portfolio by acquiring established entities. Also, it can acquire promising technology start-ups with the potential to revolutionize the world, just like Facebook did.

For example, In Oct 2019, Facebook acquired a brain computing start-up “CTRL – Labs” that specializes in sending brain signals to a computer and use these signals to perform various tasks.

6) Exploit Changes in Advertising Trends

A majority of Facebook users access their accounts via mobile app. Facebook has an invaluable opportunity to improve its mobile-based advertising to take advantage of a 26% increase in mobile in-app ads.

Facebook’s Threats

1) Competition

Competition from both old and new platforms is threatening to reduce Facebook users. As new entrants to the field, such as TikTok, provide customized platforms targeting younger generations, Facebook’s future becomes dimmer and dimmer. In an attempt to compete with TikTok, Facebook has launched its own version of short, fun videos platform “Lasso.”

2) Increased Regulations

The number of unfavorable regulations to Facebook is being passed and adopted at an alarming rate, fueled by recent scandals such as Cambridge Analytica.

In addition, issues with data safety, insensitive content, and infringement of intellectual property rights have prompted several regulatory bodies in the department of commerce to enact regulations that will force Facebook to adhere to new transparency and accountabilityrequirements.

These laws threaten to reduce the number of Facebook users, as some of its customers can migrate to other platforms.

3) Bans in Several Countries

In democratic countries, regulations are being adopted to curb fake news used to undermine democracy, while autocratic governments are restricting access to Facebook to curb freedom of speech.

For example, Facebook is banned in countries such as China, Iran, and North Korea. In addition, Russia has recently banned Facebook in its country.

4) Data Breach

Facebook has experienced many instances where its data was breached, affecting millions of its users. For example, in December 2019, during a major data breach, over 267 million Facebook users’ personal information (names, user ID, phone numbers) was exposed to the dark web.

5) New Digital Tax

Recently, the UK and the EU introduced a new digital tax that will require Facebook to pay a higher tax threatening its dwindling profits. If digital taxation is adopted by more countries, a large portion of Facebook’s profits will be directed to paying digital taxes.

6) Tainted Reputation

From New Zealand’s terror live stream to Cambridge Analytica data scandal to fake news, to hacked accounts, just to name a few, the spectacular image and reputation of Facebook is going down the drain at a frightening rate. This is a major threat.

7) Duplicate & False Accounts

Facebook estimates that out of its 2.5 billion (Dec 2019) Monthly Active Users (MAU) worldwide, 11 % may represent duplicate accounts and 5% false accounts. The majority of the duplicate and false accounts originate in developing countries such as the Philippines, Vietnam, and Indonesia.