Facebook’s Business Strategy Contingencies
1. Lack of innovation
2. Disruption
3. Data Security Breach
Lack of Innovation
Facebook must constantly innovate new ways for people and businesses to interact amongst themselves and with each other. Myspace was the most popular platform for several years before being surpassed by Facebook who proved to be more agile and creative. Current market trends include Augmented Reality (AR), Virtual Reality (VR), and Smart Assistant technology such as Amazon’s Alexa. Facebook is competing against Amazon and Google, both companies who have large capital resources, in these new markets. Facebook spent nearly $6B on research and development in FY2016. (Yahoo Finance, 2017) To put this into contrast, Alphabet (Google) had R&D expenses of about $14B and Amazon was even larger at around $16B in that same fiscal period.
Amazon and Google both spend a lot of money on research and development. Facebook will need to take a similar business strategy to compete with these companies. The Internet of Things (IoT) presents many new ways to interact with technology in our daily lives and Facebook needs to take a strong position in the market. Facebook is aware that it needed to branch out of just social networking and as evidence, they bought Oculus VR in 2014 to compete in the virtual reality market. Facebook must continue to innovate new ways to interact through technology while also adding vertical integration where they can to produce their own products and services.
Disruption
The social media industry has proven to be fickle in its early existence. Users want innovative, intuitive software and apps that allow them to personalize how they interact with family, friends, and customers. Recently, smaller companies such as Snap and Twitter have invented new forms of social media. These firms are disruptive to Facebook’s standing as the largest social media company. There are two options to deal with disruptive companies: create products and services that improve upon those provided by the disruptive company or purchase the disruptive company to take advantage of the momentum that they’ve built.
Facebook’s recent strategy has been to purchase smaller, disruptive companies. This allows them to be at the forefront of social media by bringing valuable competitive products in-house. Facebook currently owns 4 of the top 5 social media apps (Facebook, Whatsapp, Messenger, and Instagram) when ranked by average daily users per month. (Nudelman, 2017) Facebook purchased Instagram in 2012 for $1B when it realized that...
