Industry Overview

Spring 2015

Industry OverviewFacebook is apart of the custom computer programing services industry. This industry began in the 1990s when the internet boom started taking over the average household. The main objective many firms have, is to simplify communication using the tools the internet provides the average user. Through this, tech firms such as Facebook, google, and twitter have been able to design online platforms capable of connecting everyone in the world. All the consumer needs is a computer with a stable internet connection. Research has shown, that due to such simplicity, that no matter what age, larger sums seem to be gravitating towards the social networking industry, as shown from the table below.The computer programing industry has had immense growth since the dawn of the internet, being the twelfth fastest growing industry in the United States. As of 2014 the market size has topped over $10.7 billion dollars, and total revenues are approaching $12.5 billion dollars. The reason behind this growth is due to the fierce competition as new firms seem to enter the market everyday on a daily basis. However the market share distribution seems to be very similar each year, due to the loyal consumer bases, and consistent innovation. As it currently stands Facebook holds majority of the market share with 72%, and Twitter and Pinterest holding 7.5% respectively. The business model for the social media industry is very lucrative, as many provide their services for free. The way these firms make a profit is by monetizing specific advertisements to each user. For example, if a user likes a certain page on Facebook, they use that data to display advertisements that, that user will more then likely click on.

However due to the massive amounts of users that many of these companies have, using advertising as a sole revenue source, becomes a very safe and viable option. We can see evidence of this by simply looking at how revenue has double digit growth (%) in the last three years for every major company.

Industry Analysis The most effective way to analyze the custom computer programing services industry is to look at it through the lens of Porters Five Forces. This way we can see how competitive the rivalry within the industry is, the threat of new firms entering the industry, what substitutes are available, and the power of both consumers and sellers. 1 Chart4

Sheet1Facebook1,500,000,000Youtube1,000,000,000Qzone (China)712,000,000Sina Weibo (China)500,000,000Whats App350,000,000Google+327,000,000Tumblr300,000,000LINE275,000,000Twitter240,000,000WeChat (China)236,000,000

Sheet2Facebook72%Twitter7.51%Pintrest7.48%Other13%

Sheet3DemographicPercent Use18-299030-497850-646565 +46