Case Study on Facebook

Transcript

1. Case Study Analysis: Facebook - A Titan of the Digital Age Victoria Adams
2. ​ Facebook, which is now operating under its parent company Meta, remains an original force in the era of digital marketing. Facebook has spearheaded the digital age, redefining social interaction, and digital advertising. The platform has continued to be a valuable area for grasping modern marketing practices. This case study analyzes Facebook’s position from an investor’s perspective by identifying financial and customer-related metrics to benchmark success, conducting a situation analysis focusing on business risks, and recommending a marketing strategy for the next 18 months. Through Facebook's careful attention to performance metrics, proactive risk management, and strategic marketing innovations, Facebook can maintain its market leadership and secure sustainable growth in an increasingly competitive digital environment. ​ Facebook was founded in 2004 by Mark Zuckerberg, and started out as a student directory, only showing pictures with a brief description, however it has transformed into one of the most influential digital marketing platforms in the world. The platform enables individuals and businesses to connect and share content, but it has also evolved into a powerful tool for targeted digital marketing. Chaffey and Ellis-Chadwick (2019) highlight Facebook’s significance with its unique combination of digital marketing strengths, including audience segmentation, analytics, multichannel integration, and advertising solutions. Its advertising allows marketers to segment their audiences, targeting consumers based on behaviors, interests, and demographics. These tools are essentials in today’s digital age, where marketers strive to make data driven decisions. Facebook’s revenue model relies heavily on advertising, generating income by offering businesses targeting based on user behavior, demographics, and interests. This capability gives Facebook a competitive edge in performance marketing, making it a go-to platform for both small businesses and global corporations. The company has built a complex system where user engagement, data collection, and advertisers reinforce each other. Even in 2021, after Facebook’s rebrand as Meta, the company's core business still revolves around digital advertising and user engagement.
3. From an investor’s standpoint, tracking the right financial and customer metrics is key to evaluating Facebook’s current business success and future growth potential. Financials are a key indicator of how a company is performing and if they are growing. More specifically, ad revenue should be examined, as it accounts for the bulk of Facebook’s income. Facebook’s global reach and strong advertiser have led to consistent growth in this area. However, with new privacy regulations and consumers being more hesitant about sharing data, this is something to keep an eye on. There are many metrics I would use to benchmark growth and current business success. Operating margins are an important financial metric to keep an eye on. It shows how efficiently the company is running, especially when it comes to tech infrastructure and development costs. A good operating margin should show that a company isn’t overspending as its operations grow. On top of this Average Revenue Per User (ARPU) is important to analyze when looking at if Facebook effectively monetizes its users. This is crucial as if the APRU declines or drops, it can be a sign that user engagement and interest in advertisement is decreasing; which is how Facebook generates revenue. Since Facebook functions from its users, customer-related metrics such as Daily Active Users (DAUs) and Monthly Active Users (MAUs), are important to track. These metrics help companies understand how many users are logging in to use the platform, and how frequently. Decline of DAU's and MAU’s can be an indicator that user-retention is down, and can leave impacts such as a drop in revenue. Engagement metrics are also used across all social media platforms, and can be a good indicator that users are enjoying the content they see. Engagement metrics can be things such as session length, click through rates on ads, likes, shares, or comments. Customer satisfaction is important on a user based platform, but can be hard to measure sometimes. A good way to measure this can be with the Net Promoter Score (NPS), which is how consumers would rate or recommend your service. It’s based on straight forward questions such as “How likely are you to recommend this good or service.” Brand surveys are another way to measure customer
4. satisfaction by giving them an opportunity to speak candidly about their experience, leaving room for growth. Overall, tracking this mix of financial and customer-related KPIs gives a well-rounded view of where Facebook stands and where it may be headed. For investors, keeping a close eye on these indicators helps inform decisions and assess long-term viability. When it comes to evaluating Facebook’s potential risks, a risk analysis helps break down any roadblocks that could threaten potential growth or profit. One of the biggest challenges Facebook currently faces is regulatory pressure. Governments around the world, especially in the U.S. and the European Union, have grown increasingly concerned about how tech platforms use personal data. Facebook has been involved in multiple controversies related to privacy and misinformation, and these issues have resulted in major investigations and lawsuits. If stricter laws or regulations are passed, relating to data privacy/collection, Facebook could face increased costs or limitations on how they run ads. Another major risk is demographic change. While Facebook remains one of the most used platforms globally, younger users are spending more time on other apps like TikTok, Snapchat, and YouTube. According to Chaffey and Ellis-Chadwick (2019), adapting to shifts in user behavior and preferences is key for digital platforms to stay competitive. If Facebook is unable to engage Gen Z or the upcoming Gen Alpha generation, it may lose cultural relevance and advertiser interest over time. The overall reputation of Facebook can pose a risk. Facebook has faced negative media attention related to political interference, hate speech, and the mental health impact of social media. While the company has made efforts to address these issues, public trust remains fragile. Especially after concerns
5. around data privacy, many users have lower trust in the platform. This affects not only user retention but also business partnerships and the willingness of brands to advertise on the platform. Lastly, Facebook is operating in an increasingly competitive environment. While it still dominates in terms of user numbers and ad revenue, platforms like TikTok are growing fast and changing how people engage with content. Meanwhile, Apple’s iOS privacy updates have made it harder for Facebook to track users across apps, which directly impacts its ad targeting capabilities, a big part of what makes the platform valuable to advertisers. Given these risks, Facebook’s marketing strategy for the next 18 months should be focused on reinforcing trust, adapting to audience shifts, and strengthening its presence. First, trust-building must be at the center of Facebook’s communication strategy, as users won’t want to interact with the platform if it’s untrustworthy. This includes launching transparent campaigns around data privacy, improving content moderation tools, and being more open about how algorithms work. This transparency will not only help users understand how ad targeting works, but will increase their comfortability with the platform. The goal should be to reassure both users and advertisers that the platform is safe, ethical, and user-first. Second, Facebook needs to better capture the attention of younger audiences. This can be done by pushing short-form video content on Instagram Reels and Facebook Stories, similar to how TIk-Tok has captured Gen-Z audiences. Building relationships with digital creators and influencers can be a great way to bring in younger generations. Working with influencers that younger users already follow and trust can help Facebook tap into these newer generations without feeling forced. Not only will this help in bringing in newer audiences, but it will keep Facebook in a competitive market.
6. Third, international expansion should be more important. Many developing countries still have growing internet access and mobile device adoption. Facebook should continue localizing its content, partnerships, and ad tools to better serve these markets. This not only grows the user base but also unlocks new revenue streams that aren’t as saturated as the North American and European markets. Lastly, Facebook should continue evolving its platform to provide more value to advertisers. This includes expanding its e-commerce capabilities through tools like Facebook Shops and making it easier for businesses to sell directly through the platform. Tik-Tok has offered a platform which allows users to purchase straight from the TikTok shop, and this would add value to Facebook as well. It also means investing in AI to help advertisers and sellers optimize their campaigns automatically, making it more accessible. By leaning into trust, innovation, and market-specific strategies, Facebook can strengthen its position and continue on a path of growth. In conclusion, Facebook stands in a unique position, as being one of the first most powerful advertising and digital marketing platforms, with a massive user base. However, the platform does face issues such as regulatory pressures, shifts in user demographics, competition, and lack of user trust. The best way for Facebook to tackle this challenge, is increase transparency around data policies, monitor it’s overall performance, and be quick to respond to rapid changes. As discussed in the case study, tracking financial and customer metrics such as ARPU, DAUs, and NPS provide insight into the site's performance and growth. If Facebook acts intentionally, building user trust, reaching younger audiences, expanding globally, and continuing to innovate, it can remain a leader in the digital space. If it continues to evolve in a way that respects user needs and leads ethically in the digital space, it can redefine what it means to be a truly sustainable and future-forward platform.
7. References Chaffey, D., & Ellis-Chadwick, F. (2019). Digital Marketing: Strategy, Implementation and Practice (7th ed.). Pearson Education Limited. ​