In less than a decade, Facebook has morphed from a small, niche networking site for mostly Ivy League
college students into a publicly traded company with a market worth of $338 billion in 2016. Facebook
boasts that it is free to join and always will be, so where’s the money coming from to service 1.65 billion
worldwide subscribers? Just like its fellow tech titan and rival Google, Facebook’s revenue comes almost
entirely from advertising. Facebook does not have a diverse array of hot new gadgets like Apple does, a
global network of brick-and-mortar retail outlets like Walmart does, or a full inventory of software for sale.
All Facebook has to sell is your personal information and the information of hundreds of millions of others
with Facebook accounts.
Advertisers have long understood the value of Facebook’s unprecedented trove of personal information.
They can serve ads using highly specific details such as relationship status, location, employment status,
favorite books, movies, or TV shows and a host of other categories. For example, an Atlanta woman who
posts that she has become engaged might be offered an ad for a wedding photographer on her Facebook
page. When advertisements are served to finely targeted subsets of users, the response is much more
successful than traditional types of advertising.
Facebook has a diverse array of compelling and useful features. Facebook’s partnership with the
Department of Labor helps connect job seekers and employers; Facebook has helped families find lost pets;
Facebook allows active-duty soldiers to stay in touch with their families; it gives smaller companies a
chance to further their e-commerce efforts and larger companies a chance to solidify their brands; and,
perhaps most obviously, Facebook allows you to keep in touch with your friends, relatives, local restaurants,
and in short, just about all things you are interested in more easily. These are the reasons so many people
use Facebook—it provides value to users.
However, Facebook’s goal is to get its users to share as much data as possible because the more Facebook
knows about you, the more accurately it can serve relevant advertisements to you. Facebook CEO Mark
Zuckerberg often says that people want the world to be more open and connected. It’s unclear whether that
is truly the case, but it is certainly true that Facebook wants the world to be more open and connected
because it stands to make more money in that world. Critics of Facebook are concerned that the existence
of a repository of personal data of the size that Facebook has amassed requires protections and privacy
controls that extend far beyond those that Facebook currently offers.
Source: Laudon, K.C. & Laudon, J.P. (2018), Management Information Systems Managing the Digital Firm, p189.
Questions:
1- How does Facebook get revenues? (illustrate with an example).
2- How do Organizations get benefits from Facebook? (illustrate with an example).
3- Search the Web for challenges linked to Facebook Data privacy?