Facebook Inc (NASDAQ:FB) is rapidly innovating and constantly trying to launch newer products for a better user experience. The company went from barely any mobile revenues to generating almost a quarter of its ad revenues from mobile devices, as well as the unveiling of Graph Search and Gifts. A good look at Facebook’s Strengths, Weaknesses, Opportunities, and Threats can help us paint a better picture of the company going forward.
Network Effects: Due to Facebook’s global scale and more than 1.06 billion users, the size alone creates enormous network effects. The presence of friends and family in a social media setting harnesses the amount of time people spend on Facebook, and represents a huge and growing moat for the company.
Time Spent: Consumers on Facebook Inc (NASDAQ:FB) are very engaged in communicating with each other, uploading photos, sharing videos etc. As a result, the time spent on Facebook is much higher than competing high-traffic platforms like Google Inc (NASDAQ: GOOG) and YouTube.
Mobile Traffic and Run Rate: The number of users accessing Facebook Inc (NASDAQ:FB) on mobile has a surged substantially, growing 57% year over year, and now stands at 680 million users. In terms of time spent on mobile devices, Facebook represented 23% of all time spent on mobile apps as of Jan 2013, according to a comScore report. Facebook’s monetization on mobile has taken off, and represented more than 23% of ad revenue in the last quarter of 2012. The mobile run rate of Facebook stands at an impressive $1.22 billion, and will likely increase in the near future.
Category Leader and Brand Name: Facebook Inc (NASDAQ:FB) is a clear-cut leader in social media. The Facebook name has evolved into a truly global brand and now boasts of more than 1.06 billion users, which is more than five times the base of its nearest social media rivals. Compare that figure to LinkedIn‘s 202 million users and an estimated 135 million users on Google+.
Data Bank: Facebook Inc (NASDAQ:FB) has collected huge amounts of data from its billion users. This provides a solid backbone for Facebook’s advertising revenues, as the data is used to target and display ads to the consumer. This highly customized targeting capability of Facebook’s custom audiences and other advertising products is a major unique value proposition of the company.
Instagram Adoption: Wildly popular photo-sharing app, Instagram now has more than 100 million active users, uploading in excess of 40 million photos on a daily basis. The time spent on Instagram’s app has surged, and now represents more than 3% of all time spent on mobile apps, as of Jan 2013, according to comScore. The addition of Instagram to Facebook has led to a more vibrant and enhanced user experience on mobile.
Weaknesses
Payments and Fees Revenue hasn’t lived up to expectations, and revenues haven’t portrayed much growth in recent quarters. Facebook’s contract changes with Zynga Inc (NASDAQ: ZNGA) werepartially liable for the decline. As a result, the 30% of gaming revenue from Zynga that Facebook received in prior years will likely diminish in the future.
