About Facebook and this Report

Facebook provides major value benefits to approaching 1 billion users around the globe and we project that the company's worldwide user base will have grown to 1.4 billion by the end of 2016. Nevertheless, serious questions remain about the company's business model. For example:

  • What is the value of the worldwide social networking market? When will Facebook's core business begin to saturate? What happens when it does?

  • What is the risk of regulators and privacy advocates pouring cold water over Facebook's dream of commercialising its 'social graph'? What is the real value of Facebook's 'social graph' anyway and how might it be commercialised? 

  • Is it really acceptable for Facebook to expect users to contribute content to the site, without ever providing any form of monetary compensation to those users?

  • Facebook is a free service where users are not used to paying. Will it ever be possible to persuade users to pay for premium features?

This detailed report provides answers to these questions, and many more besides.



EXECUTIVE SUMMARY

INTRODUCTION: SOCIAL NETWORKING

DEFINITIONS

EXAMPLES: WHAT IS SOCIAL MEDIA AND WHAT ISN’T?

MARKET STRUCTURE

FACEBOOK: COMPANY PROFILE

OUTLINE

USER GROWTH

SERVICE FEATURES

REVENUES & PROFITABILITY

ACQUSITIONS

FACEBOOK MARKET REACH

KEY COMPETITORS

COMPETITOR PROFILES: SOCIAL NETWORKS

FACEBOOK AROUND THE WORLD

MARKET ANALYSIS: SOCIAL MEDIA

SECTOR VOLATILITY

MARKET STRUCTURE: VALUE CHAIN

CONTENT

USER GROWTH

REVENUE MODELS

AVERAGE REVENUE PER USER (ARPU)

TOTAL ADDRESSABLE MARKET: SOCIAL MEDIA

SHARE PRICE FOR PUBLIC SOCIAL MEDIA COMPANIES

PRIVACY AND REGULATORY ASPECTS

SOCIAL GRAPH

MULTI-PLATFORM

GOOGLE+ VS. FACEBOOK

PATH TO VALUE CREATION: SOCIAL MEDIA COMPANIES

FACEBOOK VALUATION: ANALYSIS

METHOD 1: SIMPLE P/E

METHOD 2: IPO P/E: GOOGLE VS. FACEBOOK

METHOD 3: PROJECTED FUTURE EARNINGS

METHOD 4: REVENUE GROWTH BENCHMARKING WITH APPLE & GOOGLE

SUMMARY

CONCLUSION

THE GOOD NEWS

THE BAD NEWS

RECOMMENDATIONS

MARKET FORECASTS

INTERNET USERS

SOCIAL NETWORKING USERS

PERCENTAGE OF INTERNET USERS THAT ARE SOCIAL NETWORKING

SOCIAL NETWORKING REVENUES: ADDRESSABLE MARKET

FACEBOOK USERS BY REGION

FACEBOOK USERS VS. ALL INTERNET USERS

FACEBOOK USERS VS. ALL SOCIAL NETWORKING USERS

FACEBOOK REVENUES

FACEBOOK MARKET SHARE

APPENDIX

The report includes profiles of the following social networks which compete with Facebook to varying degrees, either on a worldwide basis or in specific countries: 

  • Google+
  • Instagram (Acquired by Facebook in April 2012)
  • LinkedIn
  • Mixi
  • Pinteret
  • QZone
  • RenRen
  • Tumblr
  • Twitter
  • YouTube
  • Zynga

 

 

LIST OF FIGURES:

Figure 1: Illustration of Structure of Social Media - Newspaper Content

Figure 2: Illustration of Structure of Social Media - User-generated Content (UGC)

Figure 3: Facebook News Feed page

Figure 4: Facebook Social Sharing Features

Figure 5: Google+ Features

Figure 6: Google+ Stream interface showing the top 4 icons: Home, Photos, Profile, Circles

Figure 7: Google + Integration with You Tube - Example of broadcasting YouTube videos and starting multi-person video conferences

Figure 8: Google+ iPhone App Shows the Homepage Menu Options and the Huddle function

Figure 9: Instagram filter selection and popular images page

Figure 10: Instagram followers/following and news features

Figure 11: LinkedIn Profile

Figure 12: LinkedIn Mobile App

Figure 13: LinkedIn Subscription Levels

Figure 14: LinkedIn / Twitter Integration

Figure 15: Mixi Log In Page

Figure 16: Example of Mixi Profile Page

Figure 17: Pinterest Homepage


Figure 18: Pinterest User Pinboards

Figure 19: Renren Home Page

Figure 20: Examples of Renren Games

Figure 21: Renren VIP Membership Options

Figure 22: Tumblr Dashboard Page

Figure 23: Tumblr for iPhone and BlackBerry

Figure 25: YouTube "Share" Options

Figure 26: YouTube for Connected TV

Figure 27: Farmville Game

Figure 28: Cityville Game

Figure 29: Value Chain for Traditional Media Company

Figure 30: Value Chain for Social Media Company

Figure 31: Facebook Users compared with Worldwide Social Networking Users (Worldwide) from 2009 to 2016 (Millions)

Figure 32: Worldwide Online Advertising Market from 2012 to 2016 (USD, Billions)

Figure 33: Facebook Users compared with Worldwide Internet Users (Worldwide) from 2009 to 2016 (Millions)

Figure 34: Facebook Revenue Projection Scenarios: Facebook (A) and Facebook (B) for 2012 to 2016 (USD, Billions)

Figure 35: Facebook Revenue Growth Scenarios

Figure 36: Facebook Revenue Growth (Like-for-like Benchmarking with Apple and Google) from 2008 to 2016 (USD, Billions)

Figure 37: Worldwide Online Advertising Market from 2012 to 2016 (USD, Billions)

Figure 38: Worldwide Internet Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Figure 39: Worldwide Social Networking Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Figure 40: Worldwide Social Media Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Figure 41: Facebook Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Figure 42: Facebook Users compared with Worldwide Internet Users (Worldwide) from 2009 to 2016 (Millions)

Figure 43: Facebook Users compared with Worldwide Social Networking Users (Worldwide) from 2009 to 2016 (Millions)
Figure 44: Facebook Revenues - Growth Options from 2012 to 2016 (USD, Billions)

 

LIST OF TABLES:

Table 1: Summary of Core Social Networking Features

Table 2: Defining Social Media

Table 3: Facebook User Growth

Table 4: Facebook: Rate of Growth in Users from 2010 to 2016 (Millions and Percent)

Table 5: Facebook Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Table 6: Facebook Revenue and Net Income from 2009 to 2011

Table 7: Facebook Acquisitions

Table 8: Google's Recent Acquisitions in social media space (Summary)

Table 9: Instagram Users

Table 10: LinkedIn Users

Table 11: Mixi Smartphone Users

Table 12: Pinterest Users

Table 13: Examples of Main Competitors to QZone

Table 14: Renren Revenues

Table 15: Renren User Numbers

Table 16: Leading Social Networking Sites in China

Table 18: Tumblr User Growth

Table 19: Twitter Acquisitions

Table 20: YouTube Page Views

Table 21: Zynga Acquisitions

Table 22: Zynga - Key Game Titles

Table 27: Leading Social Networking Sites in the US

Table 28: Facebook - Major Indicators in 2011 (United States)

Table 29: Leading Social Networking Sites in Canada

Table 30: Facebook - Major Indicators in 2011 (Canada)

Table 31: Top Social Networking Sites - Germany

Table 32: Facebook - Major Indicators in 2011 (Germany)

Table 33: Top Social Networking Sites - France

Table 34: Facebook - Major Indicators in 2011 (France)

Table 35: Top Social Networking Sites - United Kingdom

Table 36: Facebook - Major Indicators in 2011 (United Kingdom)

Table 37: Top Social Networking Sites - Italy

Table 38: Facebook - Major Indicators in 2011 (Italy)

Table 39: Top Social Networking Sites - Spain

Table 40: Facebook - Major Indicators in 2011 (Spain)

Table 41: Top Social Networking Sites - Russia

Table 42: Facebook - Major Indicators in 2011 (Russia)

Table 43: Top Social Networking Sites - Poland

Table 44: Facebook - Major Indicators in 2011 (Poland)

Table 45: Top Social Networking Sites - Greece

Table 46: Facebook - Major Indicators in 2011 (Greece)

Table 47: Top Social Networking Sites - Czech Republic

Table 48: Facebook - Major Indicators in 2011 (Czech Republic)

Table 49: Top Social Networking Sites - China

Table 50: Facebook - Major Indicators in 2011 (China)

Table 51: Top Social Networking Sites - Japan

Table 52: Facebook - Major Indicators in 2011 (Japan)

Table 53: Top Social Networking Sites - India

Table 54: Facebook - Major Indicators in 2011 (India)

Table 55: Top Social Networking Sites - Australia

Table 56: Facebook - Major Indicators in 2011 (Australia)

Table 57: Top Social Networking Sites - South Korea

Table 58: Facebook - Major Indicators in 2011 (South Korea)

Table 59: Top Social Networking Sites - Indonesia

Table 60: Social news sites - Tunden.com and Lintas.me

Table 61: Facebook - Major Indicators in 2011 (Indonesia)

Table 62: Top Social Networking Sites - Brasil

Table 63: Facebook - Major Indicators in 2011 (Brazil)

Table 64: Top Social Networking Sites - Mexico

Table 65: Facebook - Major Indicators in 2011 (Mexico)

Table 66: Top Social Networking Sites - Argentina

Table 67: Facebook - Major Indicators in 2011 (Argentina)

Table 68: Top Social Networking Sites - Venezuela

Table 69: Facebook - Major Indicators in 2011 (Venezuela)

Table 70: Top Social Networking Sites - Turkey

Table 71: Facebook - Major Indicators in 2011 (Turkey)

Table 72: Top Social Networking Sites - Saudi Arabia

Table 73: Facebook - Major Indicators in 2011 (Saudi Arabia)

Table 74: Top Social Networking Sites - South Africa

Table 75: Facebook - Major Indicators in 2011 (South Africa)

Table 76: Examples of Volatility in the Social Media Market

Table 77: Summary of the Main Differences between a Traditional Media Company and a Social Media Company

Table 78: Economic Value of Content Creation: Facebook (USD, Billions)

Table 79: Value Equation - Social Media Service and Users

Table 80: User Growth Trends - Leading Social Networking Sites (Millions)

Table 81: Summary of Revenue Models used on Social Media Sites

Table 82: Average Revenue per User for 12 Social Networking Sites

Table 83: Average Revenue per User per Month - Social Media (Facebook & Zynga) vs. Traditional Media (Newspapers & Books)

Table 84: Excluded Readership Scenarios for books and Newspapers

Table 85: Comparative Sizes of Industries: Social Media (Addressable), Newspapers, Books, Television Advertising, Pay TV and Fixed Broadband

Table 86: Worldwide Revenue Potential - Social Media

Table 87: Share Prices of Selected Social Media Companies for the first 9months after IPO

Table 88: Relative Change Share Prices of Selected Social Media Companies for the first 9months after IPO

Table 89: Major Internet service categories to have emerged over the last 10 years and category leaders

Table 90: Facebook Valuation: Method 1 (Simple P/E Ratio)

Table 91: Facebook 20-year Valuation ‘Aggressive' and ‘More Realistic' Growth Scenarios

Table 92: Facebook Valuation: Method 2 (Post IPO P/E: Google and Facebook)

Table 93: Comparative 20-year Valuations - Apple, Google and Microsoft

Table 94: Apple Revenues from 2001 to 2011 separated into ‘Legacy Macintosh Business' and ‘Digital Media Business' (USD, Billions)

Table 95: Google Revenues from 2001 to 2011 (USD, Billions)

Table 96: Comparative Rates of Revenue Growth for Apple, Google and Microsoft (USD, Billions)

Table 97: Summary of Findings - Facebook Valuation Methodologies

Table 98: Summary of Major Risks Affecting Facebook and Mitigating Strategies

Table 99: Worldwide Internet Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Table 100: Worldwide Social Networking Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Table 101: Worldwide Social Media Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Table 102: Worldwide Social Media Revenues (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (USD, Millions)

Table 103: Facebook Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

Table 104: Facebook Users compared with Worldwide Internet Users (Worldwide) from 2009 to 2016 (Millions)

Table 105: Facebook Users compared with Worldwide Social Networking Users (Worldwide) from 2009 to 2016 (Millions)

Table 106: Facebook Revenues - Growth Options from 2012 to 2016 (USD, Billions)

Table 107: Facebook Market Share [Social Networking Users and Revenues (Base Case Scenario)] from 2012 to 2016 (Percent)

Table 108: Constituent Regions (Generator Research Forecasts)

Table 109: Constituent Countries (Generator Research Forecasts)

This report contains the following market forecasts all of which at least cover the period 2012 to 2016:

  • Worldwide Internet Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

  • Worldwide Social Networking Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

  • Worldwide Social Media Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

  • Worldwide Social Media Revenues (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (USD, Millions)

  • Facebook Users (North America; Western Europe; Central, Southern & Eastern Europe; Asia Pacific; Latin America & Caribbean; Middle East & Africa) from 2012 to 2016 (Millions)

  • Facebook Users compared with Worldwide Internet Users (Worldwide) from 2009 to 2016 (Millions)

  • Facebook Users compared with Worldwide Social Networking Users (Worldwide) from 2009 to 2016 (Millions)

  • Facebook Revenues - Growth Options from 2012 to 2016 (USD, Billions)

  • Facebook Market Share [Social Networking Users and Revenues (Base Case Scenario)] from 2012 to 2016 (Percent)

 

Executive Summary10

Introduction: Social Networking16

Definitions16

Social Networking16

Social Media18

Examples: What is Social Media and What Isn’t?19

Spotify19

Amazon Instant Video19

Online Newspapers20

Market Structure22

Professionally-generated Content (PGC)22

User-generated Content (UGC)22

Facebook: Company Profile25

Outline25

User Growth25

Service Features27

Revenues & Profitability30

Acqusitions30

Facebook Market Reach30

Key Competitors31

Competitor Profiles: Social Networks32

Google+32

Outline32

Service Features32

Business Aspects36

Analysis36

Instagram (Acquired by Facebook in April 2012)37

Outline37

Service Features37

Social Media Interaction38

Revenue Model39

User Growth and Revenues39

Key Competitors39

Analysis39

LinkedIn40

Outline40

Service Outline40

User Growth42

Revenue Model42

Social Media Integration43

Business Aspects43

Key Competitors44

Mixi45

Outline45

Service Features45

User Growth47

Revenue Model48

Business Aspects49

Social Media Integration49

Key Competitors49

Analysis49

Pinterest50

Outline50

Service Features50

Social Media Interaction51

Revenue Model52

User Growth and Revenues52

Business Aspects52

Key Competitors52

QZone53

Outline53

Service Features53

User Growth54

Revenue Model54

Revenues54

Key Competitors54

RenRen56

Outline56

Service Overview56

Revenue Model59

Business Aspects59

User Growth60

Social Media Integration61

Key Competitors61

Analysis61

Tumblr62

Outline62

Service Features62

Social Media Integration63

Revenue Model63

User Growth and Revenues64

Business Aspects65

Key Competitors65

Analysis65

Twitter66

Outline66

Service Features66

User Growth and Revenues67

Key Competitors68

YouTube68

Outline68

Service Features68

User Growth71

Revenue Model71

Business Aspects71

Social Media Integration72

Key Competitors72

Analysis72

Zynga74

Outline74

Revenues and Growth74

Revenue Model75

Business Aspects76

Social Media Integration76

Key Competitors76

Facebook Around the World78

North America78

United States78

Social Networking78

Mobile Social Networking78

Social Gaming79

Social Music79

Social Media Advertising79

Video and Picture Sharing Sites79

Location-based Social Networks79

Summary: Facebook in the US79

Canada81

Social Networking81

Social Media Advertising81

Summary: Facebook in Canada81

Western Europe83

Germany83

Social Networking83

Social Gaming83

Social Music84

Social Media Advertising85

Video and Picture Sharing Sites85

Location-based Social Networks85

Summary: Facebook in Germany85

France86

Social Networking86

Social Gaming87

Virtual Commerce & Goods87

Social Music87

Video and Picture Sharing Sites87

Summary: Facebook in France87

United Kingdom88

Social Networking88

Mobile Social Networking89

Social Gaming89

Social Media Advertising89

Video and Picture Sharing Sites89

Location-based Social Networks90

Social News90

Summary: Facebook in the United Kingdom90

Italy91

Social Networking91

Mobile Social Networking91

Video and Picture Sharing Sites91

Social News91

Summary: Facebook in Italy92

Spain93

Social Networking93

Mobile Social Networking94

Social Gaming94

Video and Picture Sharing Sites94

Location-based Social Networks94

Summary: Facebook in Spain94

Central, Southern and Eastern Europe96

Russia96

Social Networking96

Social Music97

Social Media Advertising97

Video and Picture Sharing Sites97

Location-based Social Networks97

Social News97

Summary: Facebook in Russia98

Poland99

Social Networking99

Video and Picture Sharing Sites99

Location-based Social Networks99

Summary: Facebook in Poland100

Greece101

Social Networking101

Mobile Social Networking101

Social Gaming102

Social Music102

Social Media Advertising102

Video and Picture Sharing Sites102

Social News103

Summary: Facebook in Greece103

Czech Republic104

Social Networking104

Mobile Social Networking104

Social Music104

Social Media Advertising104

Summary: Facebook in Czech Republic105

Asia Pacific106

China106

Social Networking106

Mobile Social Networking107

Social Gaming107

Virtual Commerce & Goods107

Social Music108

Social Media Advertising108

Video and Picture Sharing Sites108

Location-based Social Networks108

Summary: Facebook in China108

Japan110

Social Networking110

Social Gaming110

Virtual Commerce & Goods111

Social Music111

Social Media Advertising111

Video and Picture Sharing Sites111

Location-based Social Networks111

Summary: Facebook in Japan111

India113

Social Networking113

Mobile Social Networking113

Social Gaming113

Virtual Commerce & Goods114

Social Music114

Social Media Advertising114

Video and Picture Sharing Sites114

Location-based Social Networks115

Summary: Facebook in India115

Australia116

Social Networking116

Social Media Advertising116

Summary: Facebook in Australia116

South Korea118

Social Networking118

Mobile Social Networking119

Social Gaming119

Virtual Commerce & Goods120

Social Music120

Video and Picture Sharing Sites120

Location-based Social Networks120

Social News120

Summary: Facebook in South Korea121

Indonesia122

Social Networking122

Mobile Social Networking122

Social Gaming122

Virtual Commerce & Goods122

Social Music123

Social Media Advertising123

Location-based Social Networks123

Social News123

Summary: Facebook in Indonesia124

Latin America125

Brazil125

Social Networking125

Mobile Social Networking126

Social Gaming126

Virtual Commerce & Goods126

Social Music127

Social Media Advertising127

Video and Picture Sharing Sites127

Location-based Social Networks127

Summary: Facebook in Brazil128

Mexico129

Social Networking129

Mobile Social Networking130

Social Gaming130

Virtual Commerce & Goods130

Social Music130

Social Media Advertising130

Video and Picture Sharing Sites130

Summary: Facebook in Mexico131

Argentina132

Social Networking132

Mobile Social Networking133

Social Gaming133

Virtual Commerce & Goods133

Social Media Advertising133

Video and Picture Sharing Sites133

Summary: Facebook in Argentina134

Venezuela135

Social Networking135

Mobile Social Networking136

Social Gaming136

Virtual Commerce & Goods136

Social Music136

Video and Picture Sharing Sites136

Social News137

Summary: Facebook in Venezuela137

Middle East and Africa138

Turkey138

Social Networking138

Mobile Social Networking140

Social Gaming140

Virtual Commerce & Goods140

Social Music140

Social Media Advertising140

Video and Picture Sharing Sites141

Summary: Facebook in Turkey141

Saudi Arabia142

Social Networking142

Mobile Social Networking142

Social Gaming143

Virtual Commerce & Goods143

Social Music143

Social Media Advertising144

Video and Picture Sharing Sites144

Location-based Social Networks144

Summary: Facebook in Saudi Arabia144

South Africa145

Social Networking145

Mobile Social Networking146

Social Gaming146

Social Music146

Social Media Advertising147

Video and Picture Sharing Sites147

Location-based Social Networks147

Summary: Facebook in South Africa147

Market Analysis: Social NETWORKING

Sector Volatility148

Market Structure: Value Chain149

Content153

Cost of Creating Content for Social Networking Sites154

Content Ownership155

Equity Implications156

User Growth158

Revenue Models160

Advertising160

Paid-for Revenue Models161

Average Revenue per User (ARPU)163

Social Media163

Comparison with Traditional Media: Newspapers and Books164

Analysis165

Total Addressable Market: Social Media166

Share Price for Public Social Media Companies170

Privacy and Regulatory Aspects171

Social Graph173

Multi-platform176

Google+ vs. Facebook177

Path to Value Creation: Social Media Companies179

Advertising179

User Payment179

Success Formula182

Facebook Valuation: Analysis184

Method 1: Simple P/E184

Method 2: IPO P/E: Google vs. Facebook186

Method 3: Projected Future Earnings188

Addressable Market: Social Networking Industry188

Base Case: Core Social Networking Business190

Growth Scenarios: Facebook (A) and Facebook (B)191

Facebook (A)192

Method 4: Revenue Growth Benchmarking with Apple & Google194

Summary196

Conclusion197

The Good News197

The Bad News197

Facebook’s Business Model198

Advertising198

Premium Revenue Streams198

Key Risks200

Recommendations203

Market Forecasts207

Internet Users207

Social Networking Users209

Percentage of Internet Users that are Social Networking211

Social Networking Revenues: Addressable Market213

Facebook Users by Region214

Facebook Users vs. All Internet Users216

Facebook Users vs. All Social Networking Users217

Facebook Revenues218

Facebook Market Share220

Appendix221

Regional Segmentation: Constituent Countries221

Research Methodology223

About the Authors224

Andrew Sheehy224

Sara Foster224

Dr Dave Taylor224

This report contains details on Facebook's presence in 24 countries around the globe:

  • Argentina
  • Australia
  • Brazil
  • Canada
  • China
  • Czech Republic
  • France
  • Germany
  • Greece
  • India
  • Indonesia
  • Italy
  • Japan
  • Mexico
  • Poland
  • Russia
  • Saudi Arabia
  • South Africa
  • South Korea
  • Spain
  • Turkey
  • United Kingdom
  • United States
  • Venezuela