Facebook is one of the most popular and profitable social media platforms in the world. It has over 2.9 billion monthly active users and generated over $86 billion in revenue in 2020. It owns and operates several other platforms and services, such as Instagram, WhatsApp, Messenger, Oculus and more.
But how does Facebook achieve and sustain its competitive advantage in the dynamic and competitive social media industry? What are the strategies that guide its business and corporate decisions? In this blog post, we will explore some of the key business and corporate-level strategies that Facebook employs to create value for its customers, shareholders and stakeholders.
Business-Level Strategy: Differentiation
A business-level strategy is a strategy that defines how a firm competes in a specific market or industry. It involves choosing a target market segment, identifying the customer needs and preferences in that segment, and offering a unique or superior value proposition that satisfies those needs and preferences.
One of the most common business-level strategies is differentiation, which means offering a product or service that is distinct from those of competitors in terms of features, quality, design, performance, customer service or brand image. A differentiation strategy aims to create customer loyalty, reduce price sensitivity and increase market share.
Facebook employs a differentiation strategy in the social media industry by offering a platform that enables users to connect, communicate and share with their friends, family and communities across various devices and formats. Facebook differentiates itself from other social media platforms by providing:
- A large and diverse network of users that covers almost every demographic, geographic and interest group.
- A variety of features and functionalities that cater to different user needs and preferences, such as news feed, stories, groups, pages, events, marketplace, dating, gaming, watch, live, reels and more.
- A high level of personalization and customization that allows users to control their privacy settings, news feed preferences, notifications, profile appearance and more.
- A high level of innovation and experimentation that constantly introduces new products and services, such as Portal, Workplace, Libra, Novi and more.
- A high level of integration and interoperability that allows users to access and use Facebook’s other platforms and services seamlessly, such as Instagram, WhatsApp, Messenger, Oculus and more.
By employing a differentiation strategy, Facebook creates value for its users by offering them a unique and superior social media experience that meets their diverse and evolving needs and preferences. It also creates value for its advertisers by offering them access to a large and engaged audience that can be targeted based on various criteria. It also creates value for its developers by offering them tools and resources to build applications and games on its platform. which means entering or acquiring new businesses or units that are different from the existing ones in terms of products, markets, technologies or competencies. A diversification strategy aims to reduce risk, increase growth, leverage core competencies or exploit market opportunities.
Facebook employs a diversification strategy in the social media industry by entering or acquiring new businesses or units that complement or extend its core platform. Facebook diversifies its portfolio by pursuing:
- Horizontal diversification: This means entering or acquiring new businesses or units that offer similar products or services to the same customers or markets. For example, Facebook acquired Instagram and WhatsApp, which are also social media platforms that target similar users and advertisers as Facebook.
- Vertical diversification: This means entering or acquiring new businesses or units that offer different products or services along the same value chain or supply chain. For example, Facebook acquired Oculus, which is a virtual reality hardware and software company that provides a different way of delivering content and experiences to users and advertisers.
- Related diversification: This means entering or acquiring new businesses or units that offer different products or services that share some commonalities or synergies with the existing ones. For example, Facebook launched Portal, which is a smart video calling device that leverages Facebook’s social network and communication features.
- Unrelated diversification: This means entering or acquiring new businesses or units that offer different products or services that have no apparent connection or synergy with the existing ones. For example, Facebook launched Libra and Novi, which are a cryptocurrency and a digital wallet service that aim to provide a new way of transferring money and accessing financial services.
By employing a diversification strategy, Facebook creates value for its customers, shareholders and stakeholders by expanding its product portfolio, increasing its revenue streams, reducing its dependence on a single market or industry, enhancing its competitive advantage and exploring new opportunities.