Facebook: The First Ten Year Case Solution & Answer

Facebook: The First Ten Year Case Solution

User Interface

            Facebook initially provides better user friendly interface support to its prospective customer base at the time other social networking sites fails to provide better interface that is why millions of social sites users switched from its traditional site towards new innovative web site. New themes, widgets and thumbnails attract numerous users towards Facebook.

Customer Focused

            Facebook consistently focused on the demands and expectation of the users and developing new strategies for meeting those demands. Constant adaptability and huge innovation provides Facebook a better social networking site as compare to others where innovation is not an primary objective.

Facebook’s business model and it evolved over the years

            Facebook provides platform for the user’s better personal relations. The revenue model of the face book is rotates around the advertising sales. Major world brands advertised and promoted on the social networking sites and the revenue is based on the popularity of the site. The higher popularity of the site generates more revenue per user. Popularity is monitored by the hits of the users which mean how many times user log in to its account. Moreover Facebook earns from the gaming on the site which means many game users have to pay for the up gradation to a next level. Exhibit 1 provides better understanding of Facebook business model.

Facebook’s operating model and how has it evolved over the years

            Operating Model consists of people, structure and process these elements drive the company operations better. For optimal utilization of resources Facebook Adopts unconventional strategy for innovate at a faster levels. Facebook prefer highly innovative young staff on the older experience staff which makes the company operations modern. Facebook create a culture and an innovative environment within the company which leads to new ideas and plans.  Higher standards of ethical values and up to date governance models has maintained in the company which provides the company better compliance with code of corporate governance. Huge investment, designing, monitoring and control on the high technological systems provide operational and financial edge over the other companies.  Exhibit 2 provides enhanced interpretation of operating model of Facebook.

Facebook be around in 2026 and Valuation

            For the valuation of Facebook free Cash flow to the firm method has been used. The free cash flows has forecasted and discounted at company’s WACC to get the market capitalization of the Facebook. For the calculation purposes WACC of the company is assumed at 10% and at this assumption company value stand at 29.5 billion dollars which is indicating Facebook has the good future prospects and have the potential to generate reasonable return for its shareholders.  Future growth rates is based on the historic performance which is indicative not conclusive. In addition to this for better results sensitivity and simulation analysis should be useful for the company. Excel file attached shows the valuation of the Facebook.  ……………..

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