A Strategic Plan for Facebook

1. A Strategic Plan for Facebook By FahmeenaOdetta Moore 02/22/2019

2. Need for a Strategic Plan • It is a time of crisis. Facebook is being forced to make changes to its operations to deal with data protection issues as well as fake news being disseminated on its platform. Customers and the government (including regulators) are paying full attention to the issues. • It is a good time to think strategically about the future.

3. Need for a Strategic Plan (Cont’d) • Facebook made a mistake in handling the “threat” of using its platform for harm. • The company decided it should be more involved in ensuring its ecosystem protects users’ information and also take steps to reduce the fake news – a more socially responsible strategy and objective. • The company is unsure about the future.

4. The Strategic Planning Process • The strategic plan formulation process that will be followed is: • Answering “big picture” questions • A look at the operational and tactical planning questions • Customer analysis • Competitor analysis • SWOT analysis • Strategy choice • At the end, there will be a selected strategy for the future that will be communicated to staff. A communication plan will also be included. • GOAL: To develop a plan of action to ensure the company is resilient. The company must continue to perform well through and after the storm.

5. “Big Picture” Questions • Strategic planning involves answering “big questions” (or questions on big picture). • First 3 “big picture” questions: • Who are we? Why are we in business? What business are we in? • Facebook is known as one of the leaders in social media, i.e. one of the world’s top social media companies (Bhasin, 2018; Glensday, 2017). Facebook is a public company – it is listed on the NASDAQ stock exchange & owned by shareholders. Facebook creates value by connecting people and allowing them to communicate. The company earns revenue primarily by selling advertising (to advertise to users who log on to Facebook’s services/companies to share updates and/or communicate). Facebook owns other services such as Instagram and Whatsapp. • Facebook’s CEO is Mark Zuckerberg, the person who started it all. He has a vested interest in the company & knows the company/business inside and out.

6. “Big Picture” Questions (Cont’d) • Questions: What business should we be in? Who are our customers? Who should our customers be? • Facebook is good at what it does so it should continue to do business in social media. The company is a leader in the social media space. The company is still earning a lot (it is still a very profitable business). • Facebook spends a lot of time developing new ideas (features, add-ons, and so on) for users. Users could be considered Facebook’s customers. Users are important because the more users Facebook has, the more willing advertisers are to advertise on the platform(s). However, users are not the main customers – the main people who generate revenue by paying for a good or service of the company. • Facebook’s main customers: Advertisers are customers who pay money to advertise. Some of these customers temporarily suspended Facebook advertising during the recent scandal (Sherman, 2018).

7. Tactical and Operational Questions • Tactical and operational questions are shorter-term questions. • Tactical and operational questions for Facebook at this time: • How bad could the company’s issues (situation) get? What is the rock bottom? What problems should be dealt with? • What to do going forward? What is the continued plan of attack? No further action could be disastrous. • How should the company change its practice to collect information on users for use in targeted advertising (now that privacy is such an issue)? • What resources are needed?

8. Tactical and Operational Questions (Cont’d) • No one is sure how bad Facebook’s situation could get (what tomorrow will bring). Regulators could impose a lot of new regulations that drive up the cost of doing business. This will impact Facebook’s profitability. • There could be more fake news activity that causes trouble (and is missed by Facebook). This could lead to a boycott of Facebook advertising, which would impact Facebook’s revenue. • Data privacy could become even more of an issue. Facebook is taking action to deal with the data scandal (Langone, 2018), but there are still outstanding issues. For example, Ram (2018) reported that Facebook refused to pay users affected by the leak to Cambridge Analytica. A large percentage of users may decide to leave Facebook, which would impact future revenue and profitability. Facebook’s business model (using users’ data for targeted advertising) could be threatened. • Part of the strategic planning process is to determine what is likely to occur. Facebook is likely to be more regulated and to have to deal with increased costs for data privacy and fake news.

9. Tactical and Operational Questions (Cont’d) • Question: What to do going forward? • A strategic action could be to develop new ideas and technology to continue to solve the issues. This calls for innovation. • Facebook has a very innovative culture. The company is known for hackatons where Facebook employees develop new ideas over a short period of time. Hackathons led to a culture of innovation where employees contribute a lot to the company's new products and features. • Another strategic action could be to look into other revenue sources so that the company does not “put all eggs in the same [advertising revenue] basket.” Advertising is a huge percentage of revenues. Companies such as Google have diversified.

10. Customer Analysis • More in-depth analysis of the customer. • Look at: who they are, what are their thoughts concerning issues, who customers should be, and so on. • It is important to know your customers. • Customers defined as advertisers who pay to advertise across Facebook’s services/companies. Some of these advertisers, such as Pepboys and Commerzbank, made the decision to temporarily discontinue advertising following the scandal (Sherman, 2018). It is important to understand what drove the decision.

11. Customer Analysis (Cont’d) • Facebook’s employees aided in collecting information on the customer. There were 2 surveys – an employee survey and a survey for previous customers of Facebook.

12. Competitor Analysis • More in-depth analysis of competitors. Reveals industry issues, position in the industry, and so on. • Current competitors in social media: Twitter, Snapchat, YouTube, Tumblr, and others. • Very competitive environment. Some competitors have similar issues. For example, Twitter is dealing with data privacy issues. • Facebook is the largest social networking site in the world (Bhasin, 2018; Glenday, 2017). Facebook leads competitors in number of users and in advertising.

13. Competitor Analysis (Cont’d) • Potential competitors include: • News companies Huffington Post, the Washington Post, • Business magazine Forbes. News stories is an area Facebook could get into. The company would be working to curb fake news by getting involved in the business to ensure news stories are credible. Facebook would then compete with organizations such as Huffington Post, Washington Post, CNN, and Forbes. • Video streaming service Roku Channel (Roku). The Roku Channel is a free, ad-supported video streaming service that streams movies and TV shows. Facebook could also get into video streaming services. Facebook focuses on video – sees it as a growth area. • In a broad sense, Facebook competes with some of these companies for advertising dollars.

14. SWOT Analysis • SWOT Analysis developed as part of a well-planned strategy workshop. • Strengths: • (1) Facebook has more users than other platforms (its monthly active users is highest). Facebook is a leader in the social networking business. • (2) The company is good at using information collected on users for targeted advertising. Purchasers of advertising appreciate this. • (3) The company has been very profitable for years so it is in a strong financial position. In 2015, Facebook's revenue was $17.93 billion and net income $3.668 billion. In 2016, Facebook's revenue was $27.638 billion and net income $10.188 billion. In 2017, Facebook's revenue was $40.653 billion and net income $15.92 billion. There has been growth every year. • Weaknesses: • (1) Facebook's users as well as governments (regulators) take issue with the propagation of fake/false information on Facebook’s network and also with the inappropriate release of personal data on Facebook's users in 2018. These issues have been a public relations nightmare for Facebook and affected the company's revenues. It is important to note that other companies (competitors) are also facing similar issues. This signals an industry-wide problem. • (2) Facebook has almost all eggs in an advertising dollars basket. Advertising makes up over 80 per cent of Facebook's total revenues. If advertising spending reduces in the economy, Facebook will be adversely affected.

15. SWOT Analysis (Cont’d) • Opportunities: • (1) Facebook could get into the news business as a way to deal with its issues. The company could provide news to social media platforms and/or check the validity of news on the platforms. Getting into the business is an excellent way to ensure fake news stays out of the Facebook network. • (2) Facebook could diversify into other businesses that earn revenues primarily from advertising, such as the Roku Channel that provides a free video streaming service (streaming movies and videos) and a social network that is more for business/corporate use (such as LinkedIn). This would be a strategy to increase its dominance/competitive stance in the market for advertising dollars. There are businesses that could be purchased. • (3) Facebook could diversify into new, unrelated growth areas such as healthcare and aging so that it has different types of revenue (revenue streams). These areas will change the business Facebook is in. If the company makes appropriate investments or appropriate decisions, then there is no need for it to begin in an unprofitable position in new industries. • Threats: • (1) The social media advertising industry is very competitive. Facebook’s competitors, such as Twitter, are pursuing similar markets and strategies. For example, Twitter is pursuing increased business due to videos just as Facebook has been doing. • (2) The focus on privacy in Europe and the United States threatens Facebook's business model where the company tracks information on users for use in its targeting advertising. Data for targeted advertising is likely at a high level and so do not identify users individually or personally, but even this may be an issue as some will want no use of users' personal data. There was an issue raised where Facebook provided data on a user's location for targeted ads even though location settings were turned off. Facebook responded that there is no way to opt out of the location data collection.

16. Strategies from Analyses • There are different options or strategies depending on the analysis. • The “big picture” questions, customer analysis, and competitor analysis support a strategy to continue in the same area of business (Facebook is a leader) and to look for ways to deal with current issues. • Tactical and operational questions support strategies to: (1) develop new ideas and technology to solve the issues – an innovation strategy (in the short term), and (2) diversify so that the company does not “put all eggs in the same [advertising revenue] basket.” • The opportunities in the SWOT analysis are strategies Facebook could employ: (1) Facebook could get into the news business as a way to deal with its issues, (2) Facebook could diversify into other businesses that earn revenues primarily from advertising and a social network that is more for business/corporate use, and (3) Facebook could diversify into new, unrelated growth areas such as healthcare and aging so that it has different types of revenue (revenue streams).

20. References • Bhasin, H. (2018, February 10). Top 13 Facebook Competitors – Facebook Competition Analysed. Retrieved February 20, 2019 from https://www.marketing91.com/13-facebook-competitors/ • Brown, L., Hicks, E., Petersen, B., & Leclerc, A. (2018). Self-Assessment and Strategic Planning at a Small Retail Food Co-op: Using the Sustainability and Planning Scorecard Kit in a Crisis Context. Canadian Journal of Nonprofit & Social Economy Research / Revue Canadienne de Recherche Sur Les OSBL et l’économieSociale, 9(1), 5–27. https://doi-org.proxy1.ncu.edu/10.22230/cjnser.2018v9n1a260 • Glenday, J. (2017, July 28). Facebook obliterates social media competitors in new survey. Retrieved February 20, 2019, from https://www.thedrum.com/news/2017/07/28/facebook-obliterates-social-media-competitors-new-survey • Kharpal, A. (2019, January 22). Facebook is the most ‘vulnerable' big tech firm facing disruption, top VC says. CNBC. Retrieved from https://www.cnbc.com/2019/01/22/facebook-is-the-most-vulnerable-big-tech-firm-facing-disruption-vc.html • Langone, A. (2018, April 4). Facebook’s Cambridge Analytica controversy could be big trouble for the social network. Here’s what to know. Time. Retrieved from http://time.com/5205314/facebook-cambridge-analytica-breach/

21. References • Meredith, S. (2018, April 10). Facebook-Cambridge Analytica: A timeline of the data hijacking scandal. CNBC. Retrieved from https://www.cnbc.com/2018/04/10/facebook-cambridge-analytica-a-timeline-of-the-data-hijacking-scandal.html • Pacios, A. R. (2004). Strategic plans and long-range plans: is there a difference? Library Management, 25(6), 259. Retrieved from http://proxy1.ncu.edu/login?url=https://search.ebscohost.com/login.aspx?direct=true&db=edb&AN=71376292&site=eds-live • Phillips, S. (2007, July 25). A brief history of Facebook. The Guardian. Retrieved from https://www.theguardian.com/technology/2007/jul/25/media.newmedia • Ram, A. (2018, May 24). Facebook refuses to compensate users affected by Cambridge Analytica leak. Financial Times. Retrieved from https://www.ft.com/content/e08095ba-5f7d-11e8-ad91-e01af256df68 • Sherman, L. (2018, March 27). Can Mark Zuckerberg fix Facebook’s mess? Forbes. Retrieved from https://www.forbes.com/sites/lensherman/2018/03/27/can-mark-zuckerberg-fix-facebooks-mess/#209ab22561f6

22. References • Siva, V. (2017, January 20). What your company can learn from Facebook’s internal hackathons [Blog post]. Retrieved from https://www.hackerearth.com/blog/innovation-management/20160120facebook-internal-hackathon-drives-innovation/ • Teigãodos Santos, F., & Partidário, M. R. (2011). SPARK: Strategic Planning Approach for Resilience Keeping. European Planning Studies, 19(8), 1517–1536. https://doi-org.proxy1.ncu.edu/10.1080/09654313.2011.533515 • Tracy, B. (2015). Business Strategy (the Brian Tracy Success Library), AMACOM, Retrieved from ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ncent-ebooks/detail.action?docID=1964253 • Uzarski, D., & Broome, M. E. (2019). A Leadership Framework for Implementation of an Organization’s Strategic Plan. Journal of Professional Nursing, 35, 12–17. doi: 10.1016/j.profnurs.2018.09.007 • Wagner, K. (2019, February 14). Facebook may be facing a “multibillion-dollar” fine from the FTC. Here’s why. Retrieved February 20, 2019 from https://www.recode.net/2019/1/23/18193314/facebook-ftc-fine-investigation-explained-privacy-agreement • Yuen, K. F., Thai, V. V., & Wong, Y. D. (2017). Corporate social responsibility and classical competitive strategies or maritime transport firms: A contingency-fit perspective. Transportation Research Part A, 98, 1-13. doi: 10.1016/j.tra.2017.01.020