Facebook: A Business Model Under Attack - Case Solution

Introduction – Facebook: A Business Model Under Attack

Facebook was initiated on February 4, 2004, and was founded by Mark Zuckerberg. The platform has come a long way, from the starting point of the Harvard dorm room to becoming one of the biggest networking sites in the world. It has built interactions among more than 2.7 billion monthly users as of the second quarter of 2020.

From the initiation of the site “The Facebook” with the Harvard students, it implemented features such as a Wall to the profile, a Like button, Video calling, Facebook Reactions, etc.

Facebook is mainly driven by advertisements’ revenues and was attracted majorly for their insistence on the members’ transparency, as they believed transparency is important to forming relationships and building the network. However, as the company grew, data privacy issues have taken a prominent place in the Facebook Business model.

Question 01 – What is the key issue that Facebook needs to address?

The key issue Facebook needs to address is the protection of data privacy. FB has not accepted its ethical responsibilities appropriately, and they have only responded once the problem has taken place.

Tackling these data privacy issues is complicated for the organization as those are aligned with ethical matters. To do so, they might need to uproot the entire business model, which can damage the organization’s bottom line (Denning, 2018).

In 2018, with the ban of SCL and Cambridge Analytica from the platform, many changes were introduced to secure user data. API access capabilities have been limited, with no longer searching users with mobile numbers and email addresses.

The launch of the data bug bounty program to prevent data harvesting. In the same year, 2018, more than 200 apps were banned under the investigation carried out on the abuse of API and data harvesting (Patterson, 2020).

Over the years, data privacy issues have emerged drastically. In 2018, a security breach affected more than 50 million users as a result of the “view as” feature that allowed people to see what their profile looks like to other people.

Also, 540 million FB-related records were found in AWS servers, which were collected by Cultura Colectiva through the FB API (Patterson, 2020). Many situations like these have occurred as a consequence of the business model and the measures that they have taken for privacy, threatening the privacy of users.

Question 02 – How does FB make money?

Facebook was developed on the basis of an attention-based/ advertising business model. This model can be further elaborated by the digitized world saying, “If you aren’t paying for it, You’re the product” at Facebook. The users make money for them.

The money is not made directly via any content or through the user base. Still, they connect billions of people around the world to businesses on the basis of digital advertising (O’Connell, 2018).

The primary source of revenue is advertisements (more than 98% of revenues in 2018). It is comprised of self-service advertising, targeted advertising, Facebook and Messenger ads, and Instagram ads. Payment and other services that are gained from revenue from virtual reality products and infrastructure payments contribute 2% of total revenue.

Additionally, Facebook revenues consist of…