MGMT 300 Chapter 11
Facebook Refines Feeds by
*Categorizing Sharing* - can find updates on the "news feed" that Facebook actively curates by default - *timeline* on your personal page offers a sort of digital scrapbook of content that a user has shared online - uses a secret and constantly refined algorithm that attempts to identify what you're most interested in, while cutting "spammy" content (not all posts are seen on a feed) - *100,000 individual weights in the model* that determines if you'll see a post
Facebook's Copilot
*Facebook COO, Sheryl Sandberg* - is known as the person who runs the place: is the coach, seasoned mentor, drill sergeant, and voice of experience in a workforce that skews remarkably young (billionaire) - regularly named to Fortune magazine's "Most Powerful Women in Business" list - Sandberg came to Facebook from Google (was a harvard grad) *in three years* - increase users ten-fold - devise an advertising platform that has attracted the world's largest brands - develop a sales organization that can serve a customer base ranging from the Fortune 100 to mom-and-pop stores - powerful speaker leading advocate for increasing the ranks of women in senior management (in her book Lean In)
Application Programming Interfaces Effect on Facebook
*Facebook had marshaled the efforts of* - 400,000 developers and entrepreneurs - 24,000 applications had been built for the platform - 140 new apps were being added each day - 95% of Facebook members had installed at least one Facebook application
Facebook is Written in
*PHP*: - a scripting language particularly well suited for website development - is a good portion of facebook data *MySQL*: - a popular open source database
Competitive Dynamics of *Smartphone Apps* differing from *Browser-based Desktop Services*
*Smartphone Apps* - can access a user's address book in order to rebuild the social graph for a new mobile service. - can more easily share photos and videos - can use push notifications to encourage use of the app. - smartphones have app icons on the home screen as a visual reminder to visit the app and a single-tap makes it easy to use - *authentication*, many firms have begun to offer "sign-on with mobile" as an alternative to using passwords, this could even be a more secure way to sign in since it's attached directly to a device that follows the user. *Desktops* - larger screen allows for additional menu items and options—mobile seems to prefer single-purpose, specialized apps.
Facebook Ads
*can be precisely targeted* since the firm has a large amount of actual data on users' self-expressed likes, interests, demographics, relationship status, geographic location, etc - *facebook has also taken steps to allow third-party databases to be incorporated into targeting ads on site* while preventing the possibility that databases can be combined to reveal online information to offline partners or vice versa. - spends more advertising online than they do on radio, magazine, cable television, or newspaper ads. - advertising represents a bulk of Facebook's overall revenue ( 90% coming from mobile) - Facebook Ads are for discovery or awareness building rather than a stated intent to purchase.
Facebook's Mission
*facebook's goal* as stated by Zuckerberg - is "to make the world more open and connected." *began* as a target of social networking for college students *now* has become a advancing and ecoloving force, occupying large swaths of user time and expanding into all sorts of new markets
Facebook's Challenges
*including* - generating more revenue from its customer base - growing advertising - monetizing mobile - transitioning to a mobile-centric world where competitive conditions differ - protecting user privacy - potential for abuse - competing with a slew of new competitors
Fake News Crisis
*motivated by various bad actors including* - those seeking to make money by attracting users to fake news sites that make money by running advertising - *election tampering* campaign allegedly undertaken by agents acting on behalf of the russian government (150 million american may have been exposed over Facebook and Instagram leading up to the 2016 presidential election - *technology has no built-in morality*, and tools to connect can become tools for abuse causing fake news
Beacon Platform Failure
*occurred because* - it was an opt-out system that was not thoroughly tested beforehand - user behavior, expectations, and system procedures were not completely taken into account *Beacon effort started from a simple question:* - Could the energy and virulent nature of social networks be harnessed to offer truly useful consumer information to its users? - *several partners associated* with beacon faced legal actions
Cambridge Analytica Scandal of Facebook
*whistleblower at UK-based research firm Cambridge Analytica* - detailed a surreptitious campaign to harvest user data on a wide scale, develop psychographic profiles, and sell services that will "find your voters and move them to actions." - Only 270,000 people authorized the app to collect data, but all were told the focus was academic research and no commercial ties were disclosed. - Facebook policy allowed app developers to access information on a user and their friend network—accelerated data access that created working profiles of some 87 million users, mostly US citizens. - Facebook has shut down app access to friend data, shut down 200 apps, has begun auditing 1,000s of apps, notified users who have had their data compromised, and introduced a host of new tools.
Facebook Slogans
- "Done is Better than Perfect" and "Move Fast, Break Things" are cultural signposts that direct staff to keep an eye on what has helped make the firm successful. - *slogans resulted in the willingness* for facebook to take bold risks on new initiatives and push forward with innovations that many users initially resisted but eventually embraced
Instant Articles
- *allow* Facebook to host, cache, and serve content from media firms. - *faster article loads* increase article engagement and allow partners to make more money - *facebook hopes* partners may be more inclined to use its ad network. - *video ads* cached and served on Facebook are also booming, with Facebook serving as many videos a day as YouTube.
Facebook's position as the digital center of its members' online social lives has allowed the firm to
- *envelop* related businesses such as photo and video sharing, messaging, bookmarking, and link sharing
Strategic Concerns for Platform Builders
- *facebook allows third-party developers* to create all sorts of apps to access Facebook data *major challenges with a more open approach include*: *1. weakening of strategic assets* - opens up access to users and content risks supporting efforts that undermine the critical assets of network effects and and switching costs - why do to facebook if you can get facebook content on other sites *2. revenue sharing*: - *free rider problem:* occurs which is taking advantage of a user or service without providing any sort of reciprocal benefit. *3. security* - allowing data streams that contain potentially private posts and photographs to flow through the Internet and have them land where you want them raises all sorts of concerns - an errant line of code doesn't provide a back door to your address book or friends list, to your messaging account, or to photos you'd hoped to only share with family
Facebook's Acknowledgment of Fake News
- *flagging* content as fake actually increased the intensity of sharing *facebook* - enlists third-party fact-checking organizations and artificial intelligence, and demotes news deemed deliberately deceptive - increased steps to close and prevent fraud accounts, stop advertising linked with fake news sites and accounts, and prevent organizations with a track record of misinformation from using Facebook's advertising
Social Context Ads
- *include* the names of friends who have liked a firm's page - *perform* better on recall and sales lift than conventional ads enhancing Facebook's advertising appeal - *ads also use* a type of *social proof* leveraging friend interest to improve the likelihood of customer engagement.
Issues of *content adjacency* and *user attention* can make social networking ads less attractive than
- ads running alongside search and professionally produced content sites.
Facebook Open Graph
- allows developers to link Web pages and app usage into the social graph, placing Facebook directly at the center of identity, sharing, and personalization across the Web - projects Facebook's influence beyond the site itself *by using Facebook's Open Graph tools* - partners can add the "Like" button to encourage viral sharing of content, leverage Facebook user IDs for log-in, and tap a user's friend and feed data to personalize and customize a user's experience
Venture Capitalists (VC)
- are investor groups that provide funding in exchange for a stake in the firm and a degree of managerial control (such as voting seat or seats on the firm's board of directors) - *earlier a firm accepts VC money*, the more control these investors can exert - *they have* deep entrepreneurial experience and a wealth of contacts and can often offer important guidance and advice - *strong investor groups* can oust a firm's founder and other executives if they're dissatisfied with the firm's performance. *facebook* - rapid growth and high user engagement allowed Facebook's founder to demand and receive an exceptionally high degree of control over the firm - early backers ceded control when Facebook's board had only 5 directors, Zuckerberg appointed 3 of them - when Facebook filed to go public, Zuckerberg's ownership stake stood at 28%, but Facebook created 2 classes of shares, ensuring that Zuckerberg maintains a majority of voting rights
Criticism of Facebook and Internet.org
- as violating principles of net neutrality and extending Facebook's walled garden as a de facto proxy for the Internet
Facebook Reinforced Negative Perceptions regarding
- attitude toward users - notifications - privacy
Facebook also has concerns related to
- competing for user time with services that promote private sharing. - balancing user privacy with the potential for delivering products that are lucrative - whether Facebook can remain one of the Internet's most successful and influential firms.
Content Adjacency
- concern that an advertisement will run near offensive material, embarrassing an advertiser and/or degrading their products or brands. *IDC report suggests* that content adjacency is the reason why "brand advertisers largely consider user-generated content as low-quality, brand-unsafe inventory" for running ads. - *dispelling concerns hinges* on a combination of evolving public attitudes toward content adjacency issues in social media and better technology/policing of the context in which ads appear.
Challenges Faced When Creating a Platform
- copyright - security - appropriateness - free speech tensions - efforts that tarnish platform operator brands - privacy - potential for competition with partners *all* make platforms management more complex than simply creating a set of standards and releasing this to the public *Platform owners beware*: - developers can help you grow quickly and can deliver value - misbehaving partners can create financial loss, damage the brand, and sow mistrust.
Switching Costs
- cost a consumer incurs when moving from one product to another. *can involve* - actual money spent (ex: buying a new product) - investments in time - any data loss - *switching costs are extremely powerful* for Facebook - *moving to another service* means *recreating* your entire *social graph* - *more time you spend on the service*, the more you've invested in your graph and the less likely you are to move to a rival
Smartphone apps have a huge benefit for increasing engagement over browser-based desktop services because of ________
push notifications
Mark Zuckerberg, the founder of Facebook, ensured that he remained in control of the firm even after it went public by:
retaining a majority of voting rights in the public company.
Facebook's primary competitive advantages are grounded in
- network effects - switching costs
Facebook Messenger App
- *zuckerberg claims*, messaging is one of the few things that people actually do more than social networking - facebook messenger has 1.3 million users (only smaller than WhatApp) - *messenger has expanded* to become a tool for corporations to communicate with customers - firms can now use Facebook to send customer updates, receipts, shipping information, and use for customer support chat - are attractive when email may be segregated from a main inbox and quarantined in a "Promotions and Offers" folder - *allows firms* to build AI (artificial intelligence) powered chatbots that interact with customers. - *has become a payments platform*, allowing users to send and receive money with their contacts. -
*mobile market* differs from *desktop* in many key ways:
- Access to address books - media libraries - the cloud - push notifications - home screen icons - limited screen real estate are enforcing a new competitive reality on Facebook and rivals.
Facebook's Data Centers
- Facebook's 11 data centers are scattered around the planet *these data centers* - serve more than 2.7 billion Likes, 350 million photo uploads, 2.5 billion status updates and check-ins - 3 times the messaging volume of the SMS network (through Messenger and WhatsApp), and countless other bits of data - collect to user data to customize feeds, estimate which ads to serve up, and refine and improve the Facebook experience. - receives 50 million requests per second, yet 95% of data queries can be served from a distributed server cache that lives in 15 terabytes of RAM *facebook's storage needs* - have grown by a factor of 4,000 in 4 years - total storage of 300 petabytes and growing at more than 600 terabytes a day *Facebook's annual spend on networking equipment and infrastructure* - is estimated to be between $14 billion and $15 billion in 2018 (up about 50%) and on par with Google and Apple spend
- Facebook's IPO, Instagram, an 18-month-old firm with 13 employees, had 50 million users and was adding new ones at a rate of roughly 5 million a week - Facebook acquired Instagram for $1 billion - *Facebook turned the potential rival, Instagram* into an asset for growth and another vehicle for the firm to remain central to users' lives *since acquisition* - Instagram has continued to operate as a separate brand - tripling its user base the year following acquisition (800 million by mid 2018) - usage numbers far higher than Snapchat and Twitter
Why Study Facebook?
- Network effects - Platforms - Partnerships - Issues in the rollout of new technologies - Privacy - Ad models - Business value of social media - Differences between desktop and mobile markets
Admirable Goals and Unintended Consequences of Internet.org
- Zuckerberg has declared Internet access to be a "human right." - *goal* to make sure that actually, literally every single human being on earth has an internet connection - * to achieve the goal*, Facebook actively worked on schemes for providing Internet access to areas with no signal. - 85% of the world's population already lives within range of a cell tower with at least a 2G data network, - world population with no internet access is roughly 3 times larger than the facebook user base
Colossal Walled Garden
- a closed network or single set of services controlled by one dominant firm - *some fear that Facebook* may be an all-too-powerful walled garden that may stifle innovation, limit competition, and restrict the free flow of information.
Facebook Cloud
- a collection of resources available for access over the Internet. - the big group of connected servers that power the site *are scattered across multiple facilities* including server farms in: - San Francisco, Santa Clara, northern Virginia, Oregon, North Carolina, Iowa, Nebraska, New Mexico, Ireland, Singapore, and Sweden *open source software (OSS)* - software that is free and whose code can be accessed and potentially modified by anyone - is used to power facebook, on Linux a=operating system and Apache Web server software
Cambridge Analytica Scandal shows what can happen when
- a firm builds a business from access to user data, violates user expectations, and fails to recognize and deal with unscrupulous partners - *fallout from users leaving Facebook is less severe than the impact on:* - employee morale - potential hires - partners growing leery of associating with a firm with a tarnished reputation - potentially increasing government regulation.
Internet.Org (facebook partnered)
- a nonprofit organization crafting non-exclusive partnerships with local carriers to offer a free tier of services, a sort of "Internet dial tone" *includes* - social networking - information such as weather, health care information, education, and food prices all through a lightweight app that runs on very low-end phones. - provided free access to over 100 million people worldwide
- emerged as the global leader in mobile messaging, sending more total messages than the entire worldwide SMS text messaging standard - had 450 million monthly users, and a million more were signing up each day. - Facebook bought WhatsApp for $19 billion ($16 billion in cash, $3 billion in stock) - In the high-growth markets of India, Brazil, and Mexico, *whatsapp usage numbers* were 12 to 64 times ahead of Facebook for mobile messaging
Facebook Membership Increases in Value by
- enhancing network effects - strengthening switching costs - creating larger sets of highly personalized data to leverage
Social Graphs
- global mapping of users and organizations and how they are connected - *refers to Facebook's* ability to collect, express, and leverage the connections between the site's user - *is everything* that's on Facebook as a node or endpoint that's connected to other stuff - *expresses the connections* between individuals and organizations. - *examples* friends, tagged photos, comments posted carry your name, your preferences, membership to groups, link between nodes in the social graph - Facebook was one of the first social networks where users actually identified themselves using their real names. *friending* - is a link between nodes in the social graph - required both users to approve the relationship - resulting in the network fostering trust among its user-base
Several major global messaging apps including *WeChat* and *Line*
- have evolved into platforms that host other apps and services, creating substantial revenue opportunities along the way. *WeChat* is the dominant mobile platform in *china* with roughly 700 million users
Ads in the News Feed
- have the advantage of falling directly within the screen real estate that a consumer is focused on. - *news ads* are considered superior to ads that may occupy easy-to-ignore spaces on the right-hand side of a content window.
Facebook has created a set of services and a platform for hosting and integrating with other services
- helping the firm foster its stated mission to "make the world more open and connected."
Facebook Graph Search
- intending to evolve search beyond the keyword - *allows users* to draw meaning from the site's social graph and to find answers from social connections - *some claim* Graph Search could become a primary source for job placement, travel info, and even dating. - *results are based* on the connections in your social graph
Deep Web (dark web)
- internet content that can't be indexed by Google and other search engines - provides access to user content, user opinions, and trending news that Google cannot access - *any search that prompts a user to start at Facebook instead of Google* is a revenue and data collection opportunity for Zuckerberg - *partnerships with Bing and Facebook's own Graph Search* attempt to harness the firm's deep Web asset to answer questions - *much of Facebook is private*, accessible only among friends - Facebook's activity represents a massive blind spot for Google search
Short Selling
- is an attempt to profit from a falling stock price. - *sellers* sell shares they don't own with an obligation of later repayment, in hopes that the price of sold shares will fall. - *repay share debt* with shares purchased at a lower price and pocket the difference between initial share price and repayment price.
Mobile Traffic
- is growing, and despite initial concerns over Facebook's ability to find growth in this space, the firm's mobile ads in particular have grown at a tremendous rate and are solidly profitable.
Global Growth
- is highly appealing to firms, but expensive bandwidth costs and low prospects for ad revenue create challenges akin to the free rider problem. - *The New York Times points out*, fewer than half of global Internet users have disposable incomes high enough to interest major advertisers.
Word of Mouth
- is the most powerful method for promoting products and services - *Beacon* was conceived as a giant word-of-mouth machine with win-win benefits for firms, recommenders, recommendation recipients, and Facebook.
Facebook rules as
- kingmaker, opinion catalyst, and traffic driver making media outlets eager to be friends - *facebook beats rivals* in driving traffic to newspaper sites and is way ahead of Twitter and Pinterest in overall social traffic referrals - *games firms, music services, video sites, daily deal services, and publishers* integrate with Facebook hoping that posts will spread their services virally.
What Powers Facebook
- largely on commodity hardware, open source software, and proprietary code tailored to the specific needs of the service.
Facebook empowers its engineering staff to
- move quickly and release innovations before they are perfect at times - *hope is that* this will foster innovation and allow the firm to gain advantages from moving early, such as network effects, switching costs, scale, and learning *Facebook has repeatedly executed new initiatives and policy changes* - in ways that have raised public, partner, and governmental concern.
Facebook was able to establish a stronger gocial graph than other social networking rivals because
- of the trust created through user verification and friend approval requiring both parties to consent - encouraged Facebook users to share more
Facebook Feed
- offering news feeds concentrated and released value from the social graph - catalyze virality and promote information sharing - each time you perform an activity on Facebook (make a friend, upload a photo, join a group), the feed offers the potential to blast this information to all of your connections. - *feeds make* Facebook a key channel for continued customer engagement. - *are the lifeline* of Facebook's ability to strengthen and deliver user value from the social graph by categorizing sharing - *Like button* allows users to share reactions including "wow,", "sad", or "angry" offering deeper insight on users and posts
Factors that Determine What Posts are on your Feed
- past interest of a given user in the content's creator - post's performance among other users - performance of past posts by the content creator - type of posts a given user prefers (e.g., status, link, photo, etc.) - recency of the post
Application Programming Interfaces (APIs)
- programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data - specified how programs could be written to run within and interact with Facebook - *zuckerberg was opening up Facebook* screen real estate, user base, and features like Feed to the world's developers - *developers who make applications* create *complementary benefits* that have the potential to add value to Facebook beyond what the firm itself provides to its users. - *developers of APIs* are allowed to charge for products, offer them for free, run ads and keep earnings through their apps.
Facebook Audience Network
- provides a way for firms to allow Facebook to gather advertisers, target ads, serve ads on third-party sites, and collect revenue - *does not* provide a way to sell user information
Acqui-Hire
- referring to "acquiring" a startup firm as a means of securing new talent to "hire" - facebook has become one of Silicon Valley's most aggressive practitioners of acqui-hire
Facebook Mobile Install Ads
- some gaming firms are willing to spend as much as $10 per install for these ads.
Envelopment
- strategy whereby a firm with a significant customer base adds a feature to an existing product or service and eliminates the need for any rival, stand-alone platforms *Facebook Example* - photo sharing, chat, video, marketplace, workplace, and dating features give them a key advantage to its central role in the lives of consumers - *resulting* in Facebook users posting over *350 million photos* each day - *resulting* in Facebook serving as many views a day (4 billion) as YouTube
Content Delivery Networks (CDN)
- systems distributed throughout the Internet that help to improve the delivery speeds of Web pages and other media by spreading access across multiple sites located closer to users - *Akamai* is the largest CDN, helping firms like CNN and MTV quickly deliver photos, video, and other media worldwide.
Crowdsourcing
- the act of taking a job traditionally performed by a designated agent (employee) and outsourcing it to an undefined large group of people in the form of an open call
Facebook's website is easy to update and push out to all users or to A/B test on a subset of users on a smaller scale
- the firm does not have this kind of control over mobile apps
IPO (Initial public stock offering)
- the first time a firm makes shares available via a public stock exchange, also known as "going public." - facebook is the third biggest IPO ever
Facebook has cut the number of ads its shows its users, while improving profits
- this is accomplished through the scarcity limited abs builds and better targeting allowing Facebook to charge more
Facebook Regularly Rotates Technical Staff
- this is in an effort to keep the ideas flowing - every 18 months employees are required to leave their teams and work on something different for at least a month - *getting people into new groups* helps Facebook's geniuses more broadly share their knowledge, generates idea flow, and prevents managers from developing fiefdoms - *facebook also runs hackathons*, all-night sessions with one key rule: no one is allowed to work on what they normally do.
Facebook's Founding Ethos
- to make the world more open and connected *Facebook co-founder* has called for the firm to be broken up, as its power gives it "unilateral control over free speech
Google benefits from its advertising being associated with *intent-to-purchase*
- users are on a "hunt" to find information when they enter Google and ads can be seen as quite helpful (search based) - *Google only charges text advertisers* when a user clicks through - *whereas* users go to Facebook when they have a rough idea of what they'll encounter, but this often lacks the easy-to-monetize, directed intent of search.
Oculus VR
- was founded by an eighteen-year-old Palmer Luckey, a homeschooler who hacked together prototypes in his parents' garage in Long Beach, California (had no customers, no revenue, and no complete product) - Facebook acquired Oculus VR (virtual reality) for $2 billion as a long-term bet at keeping the firm at the vanguard of computing's evolution - *Oculus Rift* was still in prototype form at the time of acquisition, it's essentially a computing screen that you strap to your face. - *possess* two very high-resolution displays fill ski-goggle-like gear with a wraparound image covering your field of vision - *goal* is to , "build the next major computing platform that will come after mobile."
- was started by Mark Zuckerberg as a 19 year old college sophomore and eventual Harvard dropout - is ban in China (taking about 20% of world population off the table) - after deleting 2 billion fake accounts, roughly 1 in every 5 people on the planet has a Facebook account - *daily traffic* on facebook is 3x larger than the viewership of the Super Bowl - *accounts for* the largest share of social networking in the world with usage rates that would be the envy of most media companies - *Facebook apps* account for 30% of US mobile Internet use - 85% of facebook users come from abroad *In 2012* - public offering valued facebook at over $100 billion, and the $16 billion raised in the offering made it the biggest tech IPO - Zuckerberg's net worth topped $19 billion *In 2018* - revenues were over $55 billion and profits topped $22 billion - today mobile brings in over 90% of Facebook advertising revenue
Network Effects
- when the value of a product or service increases as its number of users expands. - *also known as* Metcalfe's Law, or network externalities. - people are attracted to facebook because others they care about are more likely to be on this social networking platform - *without the network effect*, Facebook wouldn't exist
Libra (Facebook backed)
- will be a decentralized, blockchain powered, government-less cryptocurrency that lowers transaction costs and enables micro-transactions - is referred to as *facebook's cryptocurrency*, but Facebook is just the effort's instigating founding member. *at announcement, Libra was backed by 28 firms* - including Visa, Master-Card, PayPal, Stripe, Vodafone, Mercy Corps, eBay, Uber, and Spotify - *purpose is to* focus on creating new opportunities to serve the 1.7 billion adults worldwide who don't have a bank account - *will use its own separate blockchain*, not one tied to Bitcoin or any others, and the machines that support this distributed transaction ledger will be run by member organizations - *will be open to scrutiny by international authorities* demanding controls to prevent money laundering and use to fund terrorism
Three Reasons Many Humans are Offline
1) data is too expensive for many of the world's poorest citizens 2) services aren't designed for emerging market use by populations who need ultra-low bandwidth services that run reliably on very low-end or old, recycled hardware 3) content is not compelling enough to draw in non-users. *Cost, Compelling content, and Technical issues to make services available on low-end hardware are the three factors limiting Internet use.*
_____ is the biggest photo-sharing site on the Web, taking in around 3 billion photos each month.
Facebook is currently the _____ most valuable public company on Earth.
fifth
Facebook, a firm that has built its reputation on desktop dominance, is seeing new competition, especially in ____________ where the competitive dynamics differ significantly
mobile apps
