Running Head: BUSINESS MODEL

MEDIA MARKETING

Business Model of
SUBMITTED BY
FACEBOOK
& TWITTER
MUHAMMAD SALMAN
TAHIR
(1435236)
SUBMITTED
TO and Twitter
Business Models
of Facebook
MR. ALI NASIR
DATE:
Introduction
Business Model is a plan for the successful operation of a business, identifying sources of

OCTOBER 17, 2014

revenue, the intended customer base, products, and details of financing. In other words, it describes
the rationale of how an organization creates, delivers, and captures value, in economic, social,
cultural or other contexts. The process of business model construction is part of any business
strategy. This paper will present the business model of two successful organizations, Facebook and
Twitter.

Facebook

BUSINESS MODEL

Facebook is the leading Social Networking Site (SNS) of the World. Facebook mission is to
make the world more open and connected. Facebook has built a Multi-sided Platform (MSP) that
serves different customer segments with different value propositions.
Facebook helps Internet users stay connected with their friends, families, and colleagues. It
helps them discover and learn more about what is going on in the world around them. It helps them
express themselves by sharing their opinions, ideas, photos, and activities. Facebook provides a
number of products, free of charge, to its users. These include: Timeline, News Feed, Photos and
Videos, Messages (Email, Chat, Text Messaging), Groups, Lists, Events, Places, Subscribe, Ticker,
Notifications, and Facebook Pages.
Facebooks active users grew from 1 million people to 1 billion people in 8 years. Beyond
the sheer number of active users is how deeply the activity runs. A staggering 728 million users are
active daily, spending an average of 20 minutes per visit. The following statistics are further
illustrative of Facebook size and scale: 100 Billion friendships; 250 Million photos uploaded every
day; 2.7 Billion Likes and Comments per day. More than 425 Million MAUs, nearly half of Total
MAUs, used Facebook products on Mobile. With so many users using Facebook on a regular basis,
it has become an attractive destination for advertisers and developers alike.

Business Model of Facebook

Facebook business model can be represented over the Canvas as follows.

BUSINESS MODEL

Facebook offers a unique combination of reach, relevance, social context, and engagement
to the advertisers. Advertisers can engage with users based upon the information shared by users
such as Age, Gender, Location, Education, Work history or specific Interests. Facebook offers
advertisers an ability to include social context in their Ads. Social context highlights a users
connections with a brand or business. Businesses can also create Facebook Pages to engage with
interested customers and simulate an ongoing dialog with them.
Facebook offers development tools and APIs that enables developers to easily integrate with
Facebook. Developers can use Facebook platform to build apps and websites that are more
personalized, social, and engaging. Facebook offers developers Open Graph API and Social
Plugins that developers can use build different user experiences, including Apps on Facebook,
Desktop Apps, Mobile Apps, and Platform-integrated websites. At the end of 2011, more than 7
million apps and websites had been integrated with Facebook. Facebook offers developers an

BUSINESS MODEL

online payment infrastructure that enables developers to receive payments from the users in an
easy-to-use and secure environment.
While advertisements remain a key source of revenue for Facebook, the contribution from
payments is increasing consistently. Payment revenues increased from nearly 2% in 2009 to 15% in
2011. Ad revenues contributed 85% to the total revenues in 2011.
Facebook is investing heavily into Facebook-owned data centers. This is to support user
growth, increased user engagement, and delivery of new products. Facebook data centers currently
store more than 100 petabytes (100 quadrillion bytes) of photos and videos. This is going to
increase further in the future as users engage more on Facebook. To support these massive storage
and computing needs, Facebook custom designed and built their software, servers, and data centers
from the ground up.
To increase the user engagement even further, Facebook has partnered with companies such
as Netflix, Hulu, Spotify, Washington Post providing online movies, TV shows, music, and news.
Their apps help users share what they are watching, listening, or reading with their friends and
family.
On 9th April 2012, Facebook announced a decision to buy Instagram for $1 Billion.
Instagram is a photo sharing application that allows its users to apply digital filters to the photos
and then share them on different social networking services. The acquisition news has generated lot
of buzz because Instagram had no revenues and only 13 employees. However, following statistics
of Instagram were impressive: 30 million+ Registered Users; 1 billion+ Photos Uploaded; 5
million+ Photos Per Day; 575 Likes Per Second (~50 Million Likes per Day); 81 Comments Per
Second (~7 Million Comments per Day).

Twitter
Twitter is one of the most popular Social Networking Site (SNS) and Micro-blogging
platform in the world. It enables its users to share text messages with a length constraint of 140
characters. These messages (aka tweets) are publically visible, by default. Any user can subscribe

BUSINESS MODEL

to tweets from other users by following them. Users can tweet through Twitter website or Twitter
clients and apps for desktops, tablets, or smartphones. The following video (from Twitter early
days) explains how it works:
While Twitter started as a service to enable an individual share short updates to a small
group, it is now being used for a variety of purposes by different set of users. Some users use it as
broadcasting medium to broadcast their own thoughts or the content they want to share. Some users
simply sign-in to listen to experts or celebrities or brands, whom they like and admire. Some use it
to discover what other people are saying about their topics of interests; while some use it to follow
content publishers to stay informed on the latest.
Businesses are also using Twitter in several ways. Content and Media companies are using
Twitter to drive traffic to their websites. It is being used by e-commerce and local businesses for
deal promotions. Some businesses are using it as a customer service channel; while some are using
it increase their brand awareness and monitor their brand perception. Some non-profits are using
Twitter as a fund-raising channel as well.
Twitter started as a service in 2006. It gained immense popularity in 2009-10. As on 8 Sep
2011, as per Twitter official blog, Twitter had 100 Million active users. More than half of them
logged in each day. As on 26 Jan 2012, as per Twitter official blog, 1 Billion tweets were send
every four days, which means 250 Million tweets were shared every day.

Business Model of Twitter

Twitter business model can be represented over the Canvas as follows.

BUSINESS MODEL

With so many users connected to the platform and using it on a regular basis, it is becoming
an attractive destination for the advertisers. Unlike other SNS websites, Twitter hasnt yet started
offering the option of Display Ads to the advertisers. Instead, it has provided them with the
following innovative ways to reach the users:
1. Promoted Accounts Businesses can scale up their follower-base through Promoted
Accounts product. The promoted account appears in search results and within the Who to
Follow section (powered by Twitters account recommendation engine). Promoted
Accounts are offered through Cost-Per-Follow (CPF) auction, where a business is charged
when a user converts into a follower.
2. Promoted Tweets Businesses can promote key messages through Search Results to the
non-followers of their account. Promoted Tweets can also be targeted at followers of a
business or at the users having similar profile to that of a follower. Promoted Tweets are

BUSINESS MODEL

offered through Cost-Per-Engagement (CPE) auction, where engagement is defined as

click, favorite, retweet, or reply of a promoted tweet.
3. Promoted Trends Businesses can leverage Promoted Trends product to scale
conversations and build mass awareness. Trends reflect hottest topics of discussion during a
moment. They appear next to a users timeline. Promoted Trends appear at the top in the
Trends section.
Twitter is an example of a multi-sided platform. Twitter has built an App ecosystem. Twitter
offers APIs that help developers build third party apps. Twitter for Websites (TfW) allows easy
integration of twitter into websites with Tweet and Follow buttons. Search API allows a user to
query Twitter content and find tweets meeting a search criterion. REST API allows access to core
Twitter objects such as timelines, status updates, and user information. Streaming API provides
real-time access to Twitter firehose. It helps developers with data-intensive needs. As per Twitter
official blog,
Application developers play a fundamental role in helping people get the best out of
Twitter. As an ecosystem, weve just crossed one million registered applications, built by more than
750,000 developers around the world. This is up from 150,000 apps just a year ago. A new app is
registered every 1.5 seconds, fueling a spike in ecosystem growth in the areas of analytics, curation
and publisher tools.
Twitter business goal is simple: Increase the number of users using the service. This will
help attract more advertisers. While third-party apps help increase website traffic and content
usage, Twitter has entered into different kinds of partnerships to increase awareness and drive more
users to the service. Here are 4 kinds of Partnerships that Twitter has entered into:
1. Search Vendors Twitter licenses full feed of public tweets to search engine vendors such
as Microsoft (Bing Social), Google (Google Realtime), and Yahoo. This helps in enabling
real-time search and discovery.

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2. Device Vendors Twitter partnered with Apple to enable deep integration of Twitter in
iOS5 mobile operating system for iPad, iPhone, and iPod touch. This means users can tweet
directly from Apple apps such as Camera, Photos, and Safari, along with third-party apps
such as Flipboard, Livingsocial, and Instagram.
3. Media Twitter has entered into partnerships with companies such as Mass Relevance and
Crimson Hexagon to help media companies and brands deliver compelling Twitter
integration to their users more easily. This can help media companies capture real-time
reactions to the important news. Though these partnerships are not major source of revenue,
they help in expanding user base. Additional visibility drives further growth for Twitter.
4. Mobile operators Twitter has partnered with Telecom operators across the globe to
enable users to send and receive tweets from mobile phones using SMS.