Facebook SWOT and PESTLE Analysis

Strength

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Weakness

1. Advertising is the only major revenue source: The major source of revenue for Facebook Inc. is advertising. Facebook earns its bread and butter substantially from selling advertising placements to third parties advertising on Facebook, Instagram, Messenger, and third-party applications and websites. For 2017, 2016, and 2015, advertising accounted for 98%, 97% and 95%, respectively, of this American social media pioneer’s revenue. Ads enable marketers to reach people based on a variety of factors including age, gender, location, interests, and behaviours. This sole dependency on advertisements for revenue is an innate weakness of the Company as revenues could be adversely impacted due to decrease in user engagement, improper targeting efficiencies, pricing policies, competition and legal developments or government interventions. Moreover, in the light of the covid-19 pandemic, Facebook encountered a notable decline in the demand for advertising, as of March 2020 the advertising revenue witnessed a steep decline of almost 17% y-o-y. Such an economic crisis can adversely impact a substantial portion of Facebook's revenue weakening its financial stability. This section is available only in the 'Complete Report' on purchase.

2. User privacy and security scandals: The personal data of users for Facebook Inc. products are stored on cloud servers which are accessible across world. With increase in identity theft issues, Facebook Inc. has got embroiled in many controversies and scandals. The company trailed into 2018 with a damaged reputation, and concerns about abuse, hate speech and privacy. Perhaps the worst scandal Facebook hit in March 2018, when news broke that data consulting firm Cambridge Analytica used Facebook data on behalf of the Trump campaign to target and influence voters in the U.S., which violated the social network's rules. By and large, 87 million Facebook users got impacted by the Cambridge Analytica data scandal, a figure that was originally pegged at 50 million. More so, the social networking platform was allegedly used to spark a genocide of Rohingya Muslims in Myanmar, played a role in Russian interference in the 2016 U.S. presidential election, and, most recently, beans were spilled about Facebook hiring an opposition research organization to tie its opponents to George Soros and even accuse them of anti-Semitism. Facebook stocks steeply fell in light of these revelations, as they apparently sealed controversies about Facebook’s failure to protect user data. The rage and anguish of the people resulted in massive protests against the stock, sparking a #DeleteFacebook campaign at one point.

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

1. Embroilment in data scandal marred Facebook’s reputation: Facebook has been embroiled in major scandal regarding harvesting of customer data without their consent and using it to influence the customer political affiliations. In March 2018, it was revealed that a data firm, Cambridge Analytica worked along with Facebook work in collaboration with Trump campaign office and harvest user data to influence voters ultimately leading to fixing of elections. This blew into a major controversy and the company’s CEO, Mark Zuckerberg admitted in April 2018 that the data of up to 87 million users was improperly shared with Cambridge Analytic. Zuckerberg also had to apologize and testified before US Congress in April 2018. Facebook was fined £500,000 by United Kingdom's Information Commissioner's Office in July 2018 and is facing multiple lawsuits in the US as of April 2019. This may ultimately lead to stringent regulations by global regulatory authorities around user data on social platforms which could badly hurt Facebook’s business model.

2. European Union’s GDPR to set increase data privacy implications: European Union’s General Data Protection Regulation (GDPR) is set to be implemented in May 2018. The new regulations will impose stringent data privacy standards for data related to EU citizens and violation of the same can lead to penalties up to four per cent of global turnover. Facebook’s needs to impose stringent standards on how it deals with user data- especially after the recent controversy regarding Cambridge Analytica. Any violations of compliances will not just lead to financial penalties but also massive reputational and consequential financial damage.

Environmental

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