Homework assignment

• What is Facebook’s “Customer Value Proposition?”

The value we provide to each of our non-paying users - the problem we solve for users- is to reduce isolation and increase social interaction with 2.7 billion other people anywhere in the world. Facebook is a unique medium enabling users to share and discuss personal, professional, and civic information including experiences, feelings, opinions, emotions, and ideas with loved ones, family, friends, communities, and others. We give people the power to build community and bring the world closer together.

The value we provide to our paying customers is access to the world’s largest market of 2.7 billion people amplified by computer technology that produces the world’s highest response rate on advertising spend:

• $0.97 CPC (cost per click)

• 9.2% CTR (click-through rate)

• $18.68 CPA (cost per action)

• $7.19 CPM (cost per 1,000 impressions)

• What is Facebook’s Profit Formula?

• More than 98% of our revenue is from advertising.

• We sold $21.47 billion in Q3 of 2020 or $85.88 billion annualized to 9 million customers.

• $85.88b / 9m = $9,542 on average to each advertiser.

• Our 2020 Q3 expenses were $53.7b yielding an EBITDA excluding interest income of $32.16 billion.

• Our cost per customer is $53.7b / 9m = $5,969 for all expenses to develop, produce, market, and sell advertising.

• $9,542 - $5,969 = $3,573 gross profit per customer.

• Our Customer Acquisition Cost (CAC) is $10.73b Sales and Marketing / 9m customers = $1,192.

• Considering 1 year the customer lifetime, our Lifetime Value (LTV) is $9,542 yielding an LTV/CAC of 8x.

• What are Facebook’s Key Resources and Processes?

Resources:

• 2.7 billion active and engaged users

• World’s best SW to capture user data and activity that provides the world’s leading advertising ROI.

• User-created, crowd-sourced groups dynamically create interest “pools” driving user data for advertising.

Processes

• Employee empowerment freeing employees to experiment and innovate maintains our technological superiority.

• Monitoring and curating posts accelerates innovation, increases end-user satisfaction.

• Industry best and most competitive recruiting process and team to maintain our technological and cultural leadership.

• What is the root of Facebook’s competitive advantage? Describe why it is the root of their competitive advantage.

Facebook’s competitive advantage is rooted in our ability to provide ongoing interaction and content to users by enabling and encouraging their interaction with each other. This engagement captures and maintains the user’s interest and time. This provides value to the user and ensures the advertiser the best matches for their ads resulting in high click-through and positive result rates. This is accomplished using our unique, automatic, computerized technology based on Artificial Intelligence and Machine Learning. This is the result of a superior team of technology professionals that is directly derived from our employee-oriented, empowering culture and industry-leading recruitment process.

TABLE 1 - Key Resources and Processes

Resource and Why	Process and Why
2.7 Billion users - users know they can find their real friends and can share their information with the largest number of people in the world. Advertisers can reach the largest number of people in the world.	Empowering employees - employees are free to experiment and initiate new ideas. This accelerates innovation and increases employee satisfaction.
User-created, crowd-sourced Groups - Sub-communities that enable users to focus on particular interests, areas, groups of people, and ideas. This enables advertisers to better focus advertising for a better ROI.	Monitoring Posts - monitoring and curating posts for content is essential to keeping the content shared on Facebook free from legal and social liability.
User desire to spend time in the app remains high - this provides the primary value users seek - the ability to share and find the information and other users they desire. This also ensures advertisers higher impressions and click-throughs	AI learning process - we have developed learning processes for machine learning programming incorporating people to ensure their accuracy and effectiveness. This is key to our response metrics SCA.
Our technology professionals who are experts in machine learning, AI, and other software that enable us to innovate and maintain the industry-leading social media software that captures and maintains the interest, engagement, and activity of end users using their personal information and activity on the internet. This data enables us to provide the world’s best responsiveness, performance, and ROI of advertising spend four our paying customers.	Recruiting and assessment - our ongoing and aggressive recruiting and performance assessment ensures we are hiring and advancing the best people.

FODDER

The user can control (or opt into) who they send information to and who they receive information from. Facebook refers to this relationship as being “friends” with another user. Users share information using the Facebook suite of apps, websites, and devices. The types and media that can be shared include photos, videos, text, documents, and links to other sites and apps. The user enters or uploads the information onto their personal Facebook page. This is called a "post". Posts then appear on their friends' Facebook pages in their "feed". Users can also decide to share these posts more broadly with users who are not their friends. Users can also text message, voice chat, and video conference with other individuals, groups. They can send live video to every user if they desire through “live streaming”. We are also rolling out technology enabling users to meet in a virtual reality environment that replicates meeting in person much better than video conferencing..

Facebook leapfrogs all other communication technology and media. Telephone and video conferencing have limits on the number of people in an event as well as the amount and type of information that can be shared. Books, magazines, newspapers, movies, radio, and television all broadcast one way. They are only one to many and non-interactive with no means of feedback or interaction.

Facebook also provides value to advertisers. We provide leads to advertisers in the form of directing the user from an app or browser to the customer's chosen landing page in an app or browser. When Facebook users click on an advertiser’s ad on our platform, they are taken to the customer's site to buy, or agree, or take a survey, or take any other type of “action” the advertiser desires. We charge the advertiser each time a user clicks through to their landing page. Our customers include all industries and organizations including brands, non-profits, political parties, governments, small businesses, consultants and many others. Because we have the largest number of users of any company in the world, we are the best place for a user to connect to the world, and for customers to advertise to users.

2021 Strategies For Facebook 210121

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