Launched in a Harvard dormitory in 2004 by Mark Zuckerberg, Eduardo Saverin, Chris Hughes, and Dustin Moskovitz, the project initially had high school and college students in mind. It attracted seven million users in its first two years of existence. Turning down a $1 billion offer from Yahoo Inc. in 2006, Zuckerberg stood pat until the company went public in 2012. The initial public offering (IPO) was one of the largest, yet disappointing, tech IPOs in the past 25 years, raising $16 billion.
Facebook's market cap stands at $659 billion as of June 8, 2020, as active monthly user numbers have soared past 2.6 billion, and mobile advertising comprised 98.5% of the company's total revenue in 2019. Facebook’s competitive advantage stems from its sheer number of monthly active users (MAU) when you compare it to LinkedIn (250 million MAU) and Twitter (330 million MAU).
The ruler of social media distances itself from competitors for the following reasons.
With the extraordinary number of users on the platform, a business would be remiss to forsake digital marketing entirely. Small businesses comprise the vast majority of Facebook’s eight million advertisers. Facebook pulled in $17 billion in advertising revenue for the first quarter of 2020. And the social network accounts for 22% of the global online advertising market.
Facebook holds an inordinate amount of user data and is efficient at target marketing. Broad-based ads aimed at men, women, or baby boomers have given way to a customized approach. Facebook’s ubiquitous single sign-on boxes thread through third-party websites, allowing marketers to track purchases and other meaningful interactions.
That said, the company came under scrutiny for a data privacy scandal, when it came to light in 2017 that political consulting and strategic communication firm Cambridge Analytica collected personal information from up to 87 million users on Facebook. Cambridge Analytica is the firm behind the pro-Brexit campaign in the U.K. and Donald Trump's presidential campaign in 2016.
Despite this, Facebook endures with mobile advertising rising.
Mobile applications have accounted for much of Facebook’s rapid growth with its Messenger app launched in 2013. As of 2019, Messenger has over 1.3 billion monthly users. Rather than battle mobile market competitor WhatsApp, Facebook acquired its rival in 2014 for $19 billion, bringing another one billion users into the fold.
Individuals with smartphones typically spend between four and five hours per day on their phones. More than 30 applications reside on the typical smartphone, with three applications accounting for 80% of daily usage. Among all worldwide users, the most popular app summoned each day belongs to Facebook.
Facebook defines "engagement rate" as the percentage of people who viewed a post and either liked, shared, reacted, or commented on the communication. In other words, when a large number of users pointedly respond, the post holds some meaningful impact on the psyche of the viewer.
For the casual user, these responses are inextricably tied to ego, and yet for a business, the engagement rate allows it to measure the pulse of potential buyers. Users have the ability to scroll through catalogs and express opinions on products and services. Businesses subsequently reap a wealth of potential and repeat customer data from which enhanced marketing strategies evolve.
The Bottom Line
Facebook is at the top of the social media game as its platform caters to a wide variety of people, incorporating many different media aspects, from photos to messenger to text. It is not as limited as LinkedIn and Twitter, which typically cater to a specific demographic.
Because of its wide appeal, Facebook has attracted a significant user base, which translates to ad revenue, since companies desire to spend their ad budgets on platforms that receive the most viewership, and with 2.6 billion active users monthly, it's hard to top Facebook.