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INDUSTRY OVERVIEW
Facebook 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.
LARGEST SOCIAL NETWORKS IN THE WORLD
BY MONTHLY ACTIVE USERS
1,600,000,000
1,500,000,000
1,400,000,000

1,200,000,000

1,000,000,000

1,000,000,000

800,000,000
712,000,000
600,000,000

500,000,000

400,000,000

350,000,000

200,000,000

327,000,000
300,000,000
275,000,000

0
FACEBO OK

240,000,000
YO U TU BE

Q ZO N E
( CHI N A)

236,000,000
SI N A W EI BO
( CH I N A)

W HATS AP P

G OO G L E+

TU M BLR

LI N E
TW I TTER
WECH AT
( CH I N A)

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.
1

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.