Facebook's Success and its Portfolio Strategy

What made Facebook stick

Today, we shall take a look into Facebook – one of the world’s tech giants and most popular websites. Facebook started off as a literal “face book” – a school directory – but online. Word spread fast at Harvard and then onto other colleges in the area. From there, the founders added onto the platform until it was no longer just a “face book” for college students, but a social networking site for all.

The core to Facebook’s success as a product is its social element. People are social beings. However, one may wonder why Facebook succeeded whereas others – even earlier entrants – did not. This, according to Forbes, was a matter of timing.[1] Facebook rose to popularity on the heels of growing dislike for competitors Friendster and MySpace – whether it be for clutter of content or of the technology itself.

How, then, did Facebook sustain its leadership once the competition fell?

This could be attributed to its approach to software development, described succinctly by a motto coined by CEO Mark Zuckerberg himself: “Move fast and break things.” This allows Facebook to come up with new features that 1) make the experience more pleasant and 2) encourage people to share more and therefore use the product more.

As a Facebook engineer intimated in Quora, the software engineering process is "whatever the engineers on the team want."[2] The company has this pervasive attitude of revulsion against bureaucracy. I suspect that this approach is good as long as it aligns with “move fast and break things.”

There is, however, some method to the madness as far as testing is concerned. In 2012, Andrew Bosworth from Engineering published a Facebook note entitled “Building and testing at Facebook.” Here, he describes how they approach build and test. It’s a good read in itself, but in essence the process is to build features quickly, roll them out progressively to users, and measure its success. Bosworth perhaps reworded “move fast and break things” in this note politely as “ship early, ship often.”

And indeed, Facebook has been constantly been pumping out new features that get people to share more and stay on for longer. Some fail, while others have gone on to become big hits that keep people coming back. Take for example the addition of video in 2007, games and apps in 2010, video calling and live streaming in 2015, reactions (besides like) in 2016, “My Day” in 2017, and most recently 3D photos this year. All these continue to stoke the social fire in users – making them all the more beholden to the big F.

A Good Portfolio Mix Matters

The company not only owns the world’s leading social networking site, but also several other companies to complement or augment its mission to make the world social.

Much of its portfolio companies have been folded into the company through acquisitions. According to Investopedia, “strategic acquisitions have been key to Facebook's growth and success.”[3] The acquired companies serve to enrich the Facebook experience or, if not, provide the company control over other aspects of the online social experience. (WhatsApp comes to mind)

The following are the top companies owned by Facebook according to StashLearn.[4] We shall highlight how some of these have played a vital role in Facebook’s success and what they reveal about Facebook’s strategy:

• ·      Jibbigo – provides offline translation services. This would help further cement Facebook’s global presence and accessibility.
• ·       Atlas Solutions – gives users the ability to track social media campaigns, complementing Facebook’s revenue cow: advertising.
• ·       Onavo – helps improve app performance and provides insight and statistics for app makers. The acquisition also gave Facebook an office in the Middle East’s Silicon Valley: Israel.
• ·       PrivateCore – focuses on data security, an important area for a social site like Facebook that handles very personal information.
• ·       Face.com – was the source of facial recognition technology that now powers Facebook’s photo tagging feature.
• ·       FriendFeed – was previously a social media platform itself.
• ·       Messenger – was not an acquisition but a homegrown app or feature which was previously called Facebook chat. This shows how Facebook has been growing to take on more and more of the social activities we perform online.
• ·       Instagram – photo social networking site that is probably every bit as popular as Facebook among the smartphone generation. This acquisition demonstrates well how Facebook plans to extend its reach to all aspects of social networking, including photography.
• ·       Oculus VR – is a leader in the virtual reality segment. Facebook believes this will be part of the future of technology and thus wanted to have a slice of the action.
• ·       WhatsApp – a messaging app that was bought by Facebook for a cool $19 billion dollars – one of the largest acquisitions in tech. Once again, this points to Facebook’s drive to be involved in all the social activities we do online – including messaging.

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[1] https://www.forbes.com/sites/gilpress/2018/04/08/why-facebook-triumphed-over-all-other-social-networks/

[2] https://www.quora.com/What-software-development-process-does-Facebook-use

[3] https://www.investopedia.com/articles/investing/021115/facebooks-most-important-acquisitions.asp

[4] https://learn.stashinvest.com/companies-brands-owned-facebook