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Topic : How to Start a Successful Startup?
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Entrepreneurs: Success Stories

 
By : Jagbir Singh, Senior Consultant, Ernst & Young
Activity:  23 comments  2395 views  last activity : 03 22 2013 05:54:10 +0000
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I came through an interesting case study of Facebook.com, the famous online social networking site at present. i am impressed the way they established their site from the beginning. Facebook was launched in February 2004 by Harvard undergrad students as an alternative to the traditional student directory. Its popularity quickly spread to other colleges in the US by word of mouth, and the site now registers close to 15M monthly UVs and over 6B page views per month.Facebook is already generating significant revenue(the latest was a rumored $750M offer), so despite all the valuation and web traffic metric hype, it has also established a very real business.

1) Provide pre-existing offline community with a complementary online service.

Facebook had its initial success with college students by providing an information service that was not available offline – an interactive student directory containing each student’s class schedule and social network.Before Facebook added the feature sets it has today, it was simply a more complete student directory.

While students already had a loose affiliation with all fellow students at a college, they didn’t have an easy way to learn more about their fellow students outside their direct social network. Given the large class sizes at most universities today, students don’t have the opportunity to interact with very many of their fellow classmates during class.Facebook organized students by class schedule for the first time at Berkeley in 200+ student lecture halls scanning the crowd for attractive girls or previous acquaintances, making it possible to learn more about that classmate you might have a crush on. Although I am highlighting one particular use case. Initially Facebook usage was indeed driven by dating type activity – checking people out, learning more about crushes, light stalking type of activity, etc.The larger picture here is that Facebook created a high utility online service for enabling pre-existing social behaviors within an offline community. This makes for an interesting lesson learned: it’s easier to piggyback off a pre-existing community with offline behaviors that drive online service usage.  

2) Restrict user registration (and other behaviors) to build desired online service.

Facebook made important product decisions that ensured harmony and trust between the offline community and the online service created. Facebook originally limited membership to those users who could verify they had a “.edu” e-mail address for the college they attend. Facebook also placed limits on the ability to search or browse users to the college that the user attends. These measures aim to make users feel that the site is exclusive and limited to members in their offline community (colleges and universities). In the early days of Facebook, something like 30% of users actually posted their cell phone number on their profile. Facebook has recently opened its doors to users outside the .edu networks. To accomplish this, they have created “networks”. High schools, employers and geographic areas are, essentially, what colleges were to the original Facebook.Additionally, Facebook has implemented a number of privacy controls that allow users to control exactly who gets to see the information they provide.

3) Aggregation of a series of deeply penetrated micro communities.

Facebook is a more compelling advertising opportunity than other social networking sites because of deep penetration within a series of micro communities (college campuses).Facebook will have ample opportunity to diversify its revenue streams beyond traditional banner advertising due to its deep penetration in these micro communities. Having the attention of 90% of students attending a university lends itself to online classifieds, event listings, e-commerce, and lead generation. Facebook should be well-positioned to be a major player in online classifieds given the usage patterns of its user base.If a local advertiser wants to target a particular college campus, Facebook is the best way to get the advertiser’s message to that audience.

4) Built strong brand recognition amongst user base and advertisers.
The key to an online advertising business targeting branded advertisers (advertisers looking for branding, not just clicks) is having a strong brand that advertisers want to be associated with.I believe that Facebook did a masterful PR job - highlighting the impact that Facebook has made on the lives of college students and their online media consumption in nearly every story written. How often do you hear that 90% of Facebook users login to the site once per week? Clearly the PR coverage came as a result of the tremendous viral growth, but capitalizing on that PR to help build brand was a key success factor.

5) Founder(s) credibility with college audience.
The “face” of Facebook is Mark Zuckerberg. Back in February 2004, when Facebook was founded, he was a student at Harvard. Two other students, Dustin Moskovitz and Chris Hughes were the second and third employees of the company. This added a level of credibility to the site in the minds of the student users. It was something one of them had created, not something fed to them by a “company” in the traditional sense. It was a place that they could trust because one of their own had made it.Adding to the underground feel of Facebook was the viral spread of the site. It fanned out throughout Boston, and then the Ivy League. Students at other schools had to wait in line until Mark and friends could find time to add their school. This created even more buzz around the product.

Launch strategy
Prior to launching Facebook, Mark Zuckerberg had experimented with a number of different web products. In fact, his first attempt targeted at the Harvard student body was called FaceMash, which drew criticism from the University and some students, prompting Mark to drop the service. Mark launched Facebook (at the time called thefacebook.com) in February 2004. Once the site was ready for users, the Facebook founders blasted e-mails to Harvard students to let people know about the site. The team had access to the e-mail addresses of Harvard students at each dorm. Thus e-mail marketing, viral feature sets, and word of mouth was how Facebook was launched. Given the immediate positive reaction that Facebook received at Harvard, Facebook began rolling out the service to other universities. Facebook did not use a targeted geographic roll-out strategy in the early days, they received registration requests from students at other schools, and then prioritized which schools to open based on the number of these requests.

The Facebook success story is most interesting to me because of how daily offline social behavior drove usage of the site. There are plenty of activities in our daily life that could benefit from a complementary online product. However, if that offline behavior only occurs once every few months, you have the challenge of user recall. Namely, will users remember your service and know how to find it to fill their need. Facebook demonstrates you have a great Internet service if offline behaviors can drive nearly daily usage online. In the life of a college student, you are meeting or interacting with new people nearly every day. It is human nature to be curious to learn more about that person, hence you jump on Facebook. Facebook fills a high value need for college users on a nearly daily or weekly basis, consistently reinforcing the utility of the service, and building goodwill with users. The issue of user recall is an import one for a web entrepreneur to understand, particularly if the need they are addressing occurs infrequently in the lives of their target users.

Another lesson that Facebook reinforces is the importance of brand and PR buzz to advertising rates. The amount branded advertisers are willing to pay for online advertising is hugely subjective – it’s still more art than science.To get premium rates, entrepreneurs must establish a brand – not only with users, but also with advertisers. Many social services do not have high click thru rates on ads because people are not in the mind frame of looking for information when they are using a social service. All social networking sites suffer from this “lack of click thru” problem. While immersive advertising opportunities will eventually displace banner advertising on most social services over time, for the time being,

Finally, we can learn a lot from Facebook by how they built initial trust between users and their service. While these days it is easy to build a consumer Internet product, establishing trust with users is not. As an entrepreneur, how quickly you can establish trust with your users can be a critical success factor.

Facebook built immediate trust via the home page by showing only a select few colleges as being open to registration. Coupled with the registration process, users immediately understood that the site was exclusively for use by college students. This made them feel comfortable disclosing information that people normally wouldn’t post on the Internet. Simple, but very powerful. Facebook does give users control over the information displayed on their profile and to whom it is displayed, but only a small percentage of users actually change the default settings. Thus, the key part of the trust equation is not features, but branding and messaging about the service and who uses it.
 Top Comment : prasanraj    | 01 22 2009 04:33:32 +0000
A fantastic read.. Keep it coming !!!!
 
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23 comments on "Facebook - A Success Story"
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  Commented by  Suresh Prasad Gupta, Freelancer, Pharmaceuticals    | 07 01 2012 09:40:13 +0000
Interesting read, keep it up.
  Commented by  Business Management Consultant, Business Management Consultant, Strategic Planner & Strategic Management Specialist    | 06 30 2012 22:06:11 +0000
Good insight. They have really come a long way and they've made great improvements over the years.
  Commented by  Suvrajit Gangopadhyay, B.Tech/B.E. student, Shri Sant Gadge Baba College Of Engineering & Technology    | 09 27 2009 10:18:10 +0000
Rating : +1 
WOW !!! ....... great insight ........ worth a read ......
  Commented by  Rohini Kaushal, HR Executive, Etech, Inc pvt ltd    | 09 27 2009 06:35:15 +0000
Rating : +1 
nice sharing
  Commented by  Rohini Kaushal, HR Executive, Etech, Inc pvt ltd    | 09 27 2009 06:34:30 +0000
nice sharing
  Commented by  Jacob, Director -Relationship ,Interprise Innovations    | 09 27 2009 04:50:47 +0000
Nice one :) even the twitter alos is hitting a abig mass of people now a days !
  Commented by  Darshil, CEO/MD/Director, Darshil Cotton Company    | 09 21 2009 08:16:43 +0000
Nice insight on the history of facebook
  Commented by  Dinesh, B.Tech/B.E. student, Symbiosis Institute Of Operations Management,nashik.    | 07 05 2009 11:15:43 +0000
i don't know about this .........wow,,great 
  Commented by  Swedha Pati, Software Developer, HCL Technologies    | 03 14 2009 16:16:11 +0000
Great insight! Keep sharing!
  Commented by  prasanraj, Head/VP/GM-HR, Goldman Sachs Group    | 01 22 2009 04:33:32 +0000
Rating : +1 
A fantastic read.. Keep it coming !!!!
  Commented by  varsha ., Technical manger(QMS)    | 01 16 2009 15:58:49 +0000
nice sharing....
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