Facebook SWOT Analysis

STRENGTHS:

Largest social media network:

Facebook is the largest social media network in the world. Its popularity continues to grow faster with time. The company experienced a solid increase in its user base and net revenue in the year 2020. Its monthly active user base in 2020 reached 2.8 billion monthly active users. Its popularity has increased across all age groups. The platform is investing in research and development to make it more attractive for users across all age groups.

Technological innovation:

Facebook’s leading strength is technological innovation. It is also the key reason that the company has found immense success globally. Despite Google’s dominance in digital marketing and advertising, Facebook has continued to maintain its market position. The company invests a large sum each year in research and development to maintain its growth rate and the attractiveness of its platform.

Strong advertising-based business model:

Facebook’s leading strength is the effectiveness of its advertising model. Due to its unique targeting capabilities, the company has been able to attract advertisers and businesses in very large numbers over the past several years. Based on its efficiency as an advertising platform, Facebook’s attractiveness for marketers and businesses has grown leading to superior financial results over time. In 2020, the company’s net revenue increased significantly compared to the previous year.

Global presence and technological capabilities:

Facebook is a truly global brand whose services are available throughout the world through a large number of data centers. the number of Facebook users around the world has grown with the proliferation of internet technology. A large number of these users are accessing Facebook through smartphones and other mobile devices. Apart from the regions, where Facebook is expressly banned, there is no problem for users trying to access Facebook.

Fast revenue growth:

The company has experienced solid revenue growth in recent years driven by growth in user base and technological innovation. In just the last five years, the net revenue of Facebook has more than trebled rising from $27.54 billion in 2016 to $85.97 billion in 2020.

Large product portfolio:

Another key strength of the company is its large and diversified product portfolio. Apart from the Facebook platform, the company also owns Instagram, Whatsapp, Messenger, and Oculus. Its other products and mainly Whatsapp and Instagram are enjoying strong global popularity. In the future, if the company monetizes its other platforms too through advertising, it could experience a sharp growth in its revenue.

WEAKNESSES:

Dependent mainly on advertising revenue:

Despite being the leading social media network, Facebook is dependent on a single main source of revenue. Its business depends totally on advertising. However, the world of digital advertising is not as simple as it seems. It is also full of challenges and apart from the heavy competition from Google and the other leading tech players, other challenges including regulatory challenges are making Facebook’s task difficult in this area.

Facebook Australian government friction:

Recently, the standoff between the Australian government and Facebook over a law that favors the Australian news agencies had the social network in a tight spot. Facebook even banned Australian news sources from posting on its platform. Such laws if also become applicable in other regions could affect the revenues and profits of Facebook negatively.

User privacy related issues:

Facebook has been battling with user privacy-related challenges for the past several years and while the company has repeatedly asserted that it will do its best to address all these loopholes and challenges, reports of data breach and loss of user data keep surfacing. In 2019, FTC imposed a $5 billion fine on Facebook and subjected the company to new restrictions regarding the decisions it makes related to user privacy and its protection.

OPPORTUNITIES:

Technological innovation

Technological innovation is a key factor that will continue to drive faster growth for the social media giant. The tech industry is marked by an intense level of competition and accelerating growth momentum requires a higher focus on research and development. In recent years, while the company has invested a large sum in research and development, it will need to maintain a continuous focus on technological innovation to maintain a higher growth rate and its competitive edge in the industry.

Acquisitions:

Facebook can also find faster growth through acquisition of new brands. It has expanded its product portfolio mainly through acquisitions. From Whatsapp to Instagram and Oculus, all these brands were acquired by Facebook. The social media giant has a healthy cashflow and can use it for acquiring more businesses that can help it cement its position and grow its revenue faster.

Changing advertising trends:

The world of advertising has changed a lot in recent years. Changing advertising trends require big businesses like Facebook to research these trends and respond accordingly. A lot of online traffic is now being generated from mobile devices and there has been an enormous growth in the number of smartphone users worldwide. Apart from focusing on its advertising strategy and altering it according to the latest trends, the company must study the changing consumer preferences in terms of media consumption.

Expanding into new business areas:

The company is facing a lot of competition from unconventional resources. Apart from social media and the search giant Google, there are a large number of gaming and online streaming brands also that compete with Facebook. Apart from YouTube, Netflix is also a competition of Facebook. If the social media giant expands into new business areas like online streaming, it could expand its revenue sources and also increase its market influence overall.

Competitive pressure:

Facebook is the social media king. However, that does not mean the company is not facing intense competition from various sources including the technology giant Google, which is its primary competitor in the advertising business. Other social media brands including YouTube (owned by Google), Twitter, TikTok as well as online streaming brands like Netflix and Hotstar also compete with Facebook. gaming businesses are also competitors of Facebook. With higher competition, the costs and expenses of the company are also growing higher.

Regulatory pressures:

The tech industry has grown highly regulated but its woes are not coming to an end soon. Not just in the US, but in the other markets too, the level of regulation faced by Facebook including the EU, Canada, and Australia is very high. Facebook has already paid hefty fines in various markets including the US and EU. It has also faced a large number of litigations.

Data breaches:

Data breaches. can be a real pain for any tech company. However, it seems even the largest tech brands have not remained immune from it. Once a breach occurs, it leaves the user data of millions of users exposed and the company a target of criticism and government action. Facebook has experienced several data breaches in the past three to four years. The recent breach exposed user data from 533 million accounts. It means the company is going to face higher government scrutiny and more backlash from the watchdog agencies worldwide. Such breaches have also left the image of the company tainted.

Image and reputation management:

Facebook has been facing an image and reputation crisis. Apart from making the company more accountable and transparent in terms of user data and other things, Mark Zuckerberg needs to focus on protecting the company’s image in the eyes of the government and society. Apart from the data breaches and user privacy-related concerns, the proliferation of fake news on the platform. and more issues have been plaguing the company. The US government has several times termed the management and unaccountable and criticized its lack of transparency. Facebook needs to focus on managing its image so the platform does not continue to lose credibility in the eyes of governments and society. The company has been investing in CSR projects to strengthen its image. However, there is a lot of scope for the company in terms of improving its image overall. It will have to address several internal problems before it can become an accountable brand.

Emerging taxes in the EU and other regions:

Governments and government agencies worldwide have been aggressively watching Facebook’s business practices. In some regions like the UK and the EU, new digital taxes have been applied on Facebook. According to Reuters, Canada is also planning a new digital tax for Facebook and other large tech brands from 2022.

Bans applied by various countries:

While Facebook is globally popular, it has been banned by some countries. One of them is the largest global market China. Apart from China, Iran, North Korea, and Syria have also banned Facebook. Several other countries have also applied short-term bans on Facebook in the past.

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Blog editor and founder notesmatic.com

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