Facebook Porter's Five

1051 words 5 pages
Porter’s five forces analysis has become a pervasively adopted framework for industry analysis, which can be used to examine the competitive intensity and attractiveness of a market or a company. The social networking companies gradually come into the spotlight of the business world in recent years, which was especially featured by the significant event of Facebook’s IPO on May 18, 2012. In such circumstances, it will be extremely interesting to apply the five forces analysis to gauge this giant and even unfold some hints that why this star company has been struggling in the stock market since it went public. Although it has been a tough time period for Mark Zuckerberg, the more transparency and disclosure of the company’s financial as …show more content…

The Threat of Established Rivals(Strong)
As discussed, the social networking companies are facing a fully competitive market. Besides Facebook, there are several other main players, including LinkedIn, Google, Yammer, Myspace, etc, as well as hundreds of small websites focusing on specific segment or providing general social networking services. For example, LinkedIn has built up a professional network into a can’t-miss destination with millions of member professional. The year-over-year revenue growth for LinkedIn was very remarkable at over 80% for the last two years, and it has continued to see strong revenue growth beating analyst estimates. LinkedIn has shown an even more robust business model compared with Facebook. Rather than solely relaying on advertising income, LinkedIn also has considerable revenue from job postings and subscriptions, which help the company to grow its revenue at a notable rate and avoid stagnancy. In this sense, Facebook may have more struggles to improve its user experience and spur revenue growth especially compared with its competitors, and the threat of established rivals is absolutely strong. The Threat of New Entrants(Strong)
For new entrants to social networking market, the technical barriers are barely insignificant and Facebook’s most advantage might be its current huge user base. But such advantage is also easy to be mimicked


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