Facebook is becoming a part of people’s life. Today, netizens are willing to share their daily life and comment on political issues online. More importantly, they make new friends via Facebook, which is the original intention of Facebook. People are getting used to being accompanied by Facebook. However, it wasn’t until the scandal of Facebook’s disclosure of personal information in 2018 that people began to realize that Facebook seems to be more than just a tool that allows “everyone to expand their circle of friends”.
From a critical perspective, this article will first provide the current state of Facebook and review its historical development. Also, the regulatory controversy it caused will be mentioned. Then, its business model will be analyzed, as well as its Internet ecology. Finally, the revolutionary changes brought by Facebook will be discussed.
What is Facebook?
Facebook is a social media site headquartered in California, USA. Users do not need to spend any money on account registration, nor the subsequent use of the website (Digital Connection, 2014). Users can express themselves by filling out their profile and sharing different information (text, photos, music etc.) to others.
Moreover, Facebook has a powerful friend search function, which not only allows users to search for friends by entering e-mail address or name, but also list common friends between users and their friends automatically. This increases the chance of users to expand their social cycle in the shortest time and, achieve the infinite extension of social cycle. Thanks to such features, there are 2.23 billion monthly active users on Facebook now (Statista, 2018), which helps Facebook to be one of the most popular social media platforms in the world.
Historical development of Facebook
Facebook is not a long-established business. Before the idea of Facebook, its founder, Mark Zuckerberg, who was a Harvard student then, had already established a website named FaceMash in 2003 – which allowed website visitors to rate two random student photos stolen from the university’s database (Bellis, 2018). After FaceMash was shut down, Zuckerberg founded Thefacebook, which is the predecessor of Facebook in February 2004 (Bellis, 2018), whose name was inspired by the student catalogues in university (Schoups, 2018).
At the beginning, the target group of Thefacebook was limited to Harvard’s student, aiming to make it easier for Harvard students to get to know each other. However, the earliest development of Facebook was not smooth. Six days after Zuckerberg launched Thefacebook, he was accused by his three seniors, Cameron Winklevoss, Tyler Winklevoss and Divya Narendra, as they alleged that Thefacebook plagiarized the idea of their social network website called HarvardConnection, this storm finally ended with an out-of-court settlement (Bellis, 2018).
Login interface of Thefacebook
After going through the initial trouble, the follow-up development of Thefacebook rose steadily. It was renamed “Facebook” in 2005. (Schoups, 2018). Meanwhile, the threshold of Facebook had also been lowered gradually, with its target users extending from only Harvard students to other university students. Finally, it opened its platform to everyone over 13 years old with an email address, which laid the foundation for Facebook to have large users in the future.
The regulatory debates it raised
The controversy on regulation of user privacy is frequently mentioned through the development of Facebook. Zuckerberg and his team believe in a “radical transparency” (MacKinnon, 2012). Therefore, under this ideology, Facebook requires users to use real names, or they will face penalties, such as account suspension. This means that users do not have much privacy on Facebook.
They are no longer anonymous, and everyone can know their true identities and the information they present online. The positive image they created in real life is possible to collapse because of the emotional comments they publish on Facebook. This helps to prove the team’s defense of “real-ID” policy that “having two identities for yourself is an example of a lack of integrity” (MacKinnon, 2012, p. 150).
Privacy on Facebook
However, this transparency also makes it easier for Facebook to collect and classify users’ private information. In the case, a large amount of user information is mastered by Facebook. If the scandal of Facebook had not been exposed in 2018, which revealed their user information to Cambridge Analytica, users were less likely to know that their data was collected and used for an election strategy (Cadwallader & Graham-Harrison, 2018). This scandal became a trigger for a campaign called “DeleteFacebook”, which aims to protest Facebook’s dictatorship of users and powerlessness in privacy regulation.
Therefore, people and governments around the world begin to rethink the regulation of digital privacy and, the EU first responded, as it enacts a General Data Protection Regulation, mandatory for all companies that is running personal data to give users more control over private data, thus curbing “cyber hegemony” (Solon, 2018).
Business model of Facebook
The business model of Facebook is playing a role that makes both users and advertisers happy. It provides users with a high quality and free social platform to get their loyalty and data, in meanwhile it helps marketers to increase efficiency of advertisement putting by the user base and large amount of personal data.
As mentioned above, Facebook is a free website, it can’t generate profits from users directly as well as those paid website, such as Apple Music. But its profits are still closely related to users, while it mainly benefits by advertising. According to Facebook annual report 2017 (2018), Facebook’s total revenue in 2017 reached $40.65 billion, of which the revenue of advertising was $39.942 billion. In other words, advertising revenue accounted for almost 99% of Facebook’s total revenue.
One of the strengths of Facebook’s business model is its multiple, active user. According to Statista (2018), by the second quarter of 2018, Facebook had 2.234 billion monthly active users worldwide, making Facebook the social platform with the most active users in the world (Despinola, 2018). Such large number of active user base ensures that advertisers’ advertisement will have a considerable amount of viewing and clicking.
Therefore, Facebook can easily filter out users who do not meet the requirements of advertisements, thus preventing advertisement from serving on non-targeted users and improving the overall advertising efficiency.
Programming language codes
Pricing method in this business model is unique. Advertisements are divided into two types in Facebook, one is impression-based and the other is action-based (Facebook, 2018). The former’s function is mainly to display the user an information, while the latter is persuasive, aiming to guild user take the action that advertisers intend.
Moreover, different from the physical billboard, Facebook does not calculate the price per advertisement based on how many “billboards” the advertiser bought, instead of using total advertising revenue divided by the number of advertisement served (Facebook, 2018). By applying intangible user data and traffic, Facebook’s business model obtains a huge success.
Facebook’s internet ecology
As one of the world’s biggest social media platform, Facebook doesn’t struggle alone. It has its own unique ecology to maintain its competitiveness and vitality.
Facebook has a collaborative relationship with some famous platforms and applications, such as WhatsApp, Instagram and Messenger (Facebook, 2018). Advertisements on Facebook can be also delivered to the first two platforms as they have advertisement partnership with Facebook after being bought by it. Whereas the latter is an application attached to Facebook, which provides online chat services for Facebook users.
Social media like LinkedIn, YouTube and Twitter are all competitors of Facebook. LinkedIn and Facebook are very similar, they both emphasize the relationship between people, while LinkedIn is more specific to the field of workplace. For YouTube and Twitter, although they are not the same types of social media as Facebook, as they are more focused on spreading news, they also have a lot of user traffic. According to Despinola (2018), in the list of active users of key global social platforms, YouTube and Twitter ranked second and eleventh respectively. Therefore, they also have considerable attraction in the field of advertising communication, to compete with Facebook for marketers.
Another notable competitor is WeChat, Weibo and QZONE from China. These outlanders fit the official description of a kind of competitor, which “provide regional social network that have strong positions in particular countries.” (Facebook, 2018, p. 5).
As a company that primarily makes money from advertising, third-party data provider such as Acxiom, Experian and advertising agency like WPP are the main suppliers of Facebook (Facebook, 2018). In addition, Facebook is an American company, it is under a supervision of US federal law (Facebook annual report 2017, 2018). Meanwhile, they will also adjust their campaign according to foreign laws. For example, it is illegal to deny the Holocaust in Germany, so Facebook will restrict the access of German users to related content.
Below is the diagram of Facebook’s internet ecology:
How Facebook change people’s life?
Different from the traditional real economy, Facebook brings people a new business model that turns invisible things into wealth. As mentioned in the business model section above, advertising is the main source of income for Facebook, which relies on the use of user behavior data. But this is not enough to be called innovation. The new thing that Facebook really brings is that, it consumes people’s social relationships, as it adds social context to their advertising marketing (Constine, 2010).
In this case, the user’s social context is combined with the brand into an advertisement. Thus, the behavior of user’s friend becomes a bait for purchase. For example, if their friends like a McDonald’s advertisement, or check-in at a McDonald’s, the News Feed will automatically send users an advertisement about McDonald’s, along with their friend’s behavior, to tell them about their friend’s interaction with McDonald’s. This business model is surprisingly effective – this measure can increase the advertisement recall rate of 10%, awareness by 4%, and purchase intent by 2% (Constine, 2010).
Therefore, the business model of Facebook is innovative, which firstly added the human social relations in Internet commerce, just as Apple added finger touch to mobile phones. It will open up a new direction for the further development of social advertising.
At the same time, Facebook provides a simple and convenient way for users to connect with each other. In the past, the way people used to contact with others was limited by many factors. If a user in Japan wants to call his parents in the United States, the first problem he should consider is whether his parents is convenience to answer the phone. Also, this method can only connect one person at a time. If the user wants to share his status with his brother, he has to make a new call.
But these restrictions no longer exist on Facebook. Users only need to press the “share” button, their edited textual or image information will appear in all their friends’ News Feed. This will not bother people’s lives like a phone ringtone. Users only need to take some time to swipe the phone screen to know the whole moments of their friends. Therefore, the emergence of Facebook has made people share the information with their friends and family easier.
Finally, Facebook plays a role in promoting social democratization. Although its original intention was only to help students get better contact, Facebook has become a “square” where people gather together worldwide and pay attention to (MacKinnon, 2012). More importantly, because the core concept of Facebook is social network, users can theoretically extend their social circle to maximum. Therefore, if revolutionaries initiate a decentralization campaign on Facebook, it can connect these people with similar ideas and let them realize that they are no longer lonely. It is also difficult for the regime to organize these movements, because everyone in the “Plaza” is watching.
The Egyptian revolution in 2011 is an example. In protest the Egyptian government’s autocracy and corruption, Wael Ghonim created an anonymous Group on Facebook. With the encouragement of this Facebook group, millions of Egyptians joined the protests, and eventually launch the Egyptian revolution in 2011 and overthrew the dictatorship. As he said, Zuckerberg had “created the world’s greatest organizing tool for freedom and democracy” (MacKinnon, 2012, p. 153).
Although it has only been established for fourteen years, adhering to a philosophy of making the world closer, Facebook has been one of the biggest companies with global influence. Its prosperity means that social media is becoming more and more important in the current online world. Everyone needs it, it is intertwined with social activities. It not only brings social relations into business activities, but also plays an important role in promoting people’s social activities and democratization around the world.
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