Microeconomics Project Essay

An overview Facebook was realized on February 4, 2004 by an American computer programmer and Internet entrepreneur- Mark Elliot Zuckerberg. Facebook has said it will be valued at up to $96bn ( £59bn) when it sells shares to investors this month in a record-breaking flotation. The first investment from Peter Thiel was $500,000 into Facebook. Facebook has minted four billionaires: Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin and Sean Parker. The 27-year-old Zuckerberg’s net worth was estimated at $17.5bn on the 2011 Forbes list of the wealthiest Americans. Moskovitz had a net worth of $3.5bn but pipped Zuckerberg for the title of world’s youngest billionaire, being eight days younger. The Brazilian-born Saverin, who left Facebook early on after a falling-out with Zuckerberg, had a net worth of $2bn. Parker, the Napster co-founder who briefly served as Facebook’s president, had a net worth of $2.1bn On November 15, 2010, Facebook announced it had acquired the domain name fb.com from the American Farm Bureau Federation for an undisclosed amount. On January 11, 2011, the Farm Bureau disclosed $8.5 million in â€Å"domain sales income†, making the acquisition of FB.com one of the ten highest domain sales in history Nowadays, 1 in every 13 people on earth uses Facebook, more than 900m active users, with over 250 million of them who log in every day. The average user has about 130 friends, but that has expanded in. The core 18-24 year old segment is now growing the fastest at 74% year on year. Almost 72% of all US internet users are on now Facebook, while 70% of the entire user base is located outside of the US. (Source: Facebook) At the beginning, Facebook has 1 million users. In 2008, it increased to 100 million. In 2010 the number of users reached 400 million and up to 500 million within 5 months. Google- a web search engine, it is the company’s most popular service. It began in January 1996 as a research project by Larry Page and Sergey Brin when they were both PhD students at Stanford University in California. Technology is enhancing us as human beings and the integrating of artificial intelligence is slowly being weaved and embedded into our activities and habits almost without us noticing. This reliance that is permeating our day to day existence even extends to a reported 60% plus of all buying decisions now starting with a Google search as we start our research online rather than walk the shop aisles and asking sales attendants questions. The first funding of $100,000 for Google was provided by Andy Bechtolsheim the co-founder of Sun Microsystems. Google’s initial public offering (IPO) took place five years later on August 19, 2004. The stock’s performance after the IPO went well, with shares hitting $700 for the first time on October 31, 2007. primarily because of strong sales and earnings in the online advertising market. In 2004: Gmail launched, Google IPO 8 billion pages indexed. They acquired YouTube in 2006 for $1.65 billion. Android was announced in 2007 and Google Chrome was launched in 2008. The 3 charts show the Revenue, Income and number of Employee in two companies. RIVAL PRODUCTION The big question is given, why a search engine like Google to be afraid of Facebook, a social network when the field of activities of these two different companies as far as they seem completely can live peacefully. Google is famous for its searching services, the key point lead to the huge success of Google. It links to billions of Web pages, so users can easily obtain the information they want through the keywords and the operators. Google also uses its search technology for many other search services, including Image Search (photos), Google News, interactive community Google Groups, Google Maps. They also launched variety kinds of services such as Gmail, Google Earth, Google Docs, Picasa, Google Desktop, Google talk, Google Chrome, Google Translate and Android. Facebook is a social networking website for free access with more than 600 million members worldwide with hundreds of millions of activities that occur every day. The amount of data produced in a day of Facebook occupies a huge part of Internet data. Users can communicate with others, make friends, send messages and update their personal profile. Facebook has several features that users can interact such as Wall, Pokes, Photos, Status, Tag (feature of imaging applications), Facebook Notes, Facebook Username, Facebook Messages, Voice Calls, Video Calling, Facebook Subscribe. Looking closely, using the Internet for social purpose has been increasing over the years. More and more people spend longer hours of socializing than browsing so the use of the internet had tilted more on the social side. Facebook has a strong impact to our society. The social circle will suggest what to read, what to check out, where to go to and what to see. These matters may seem not important, but for the business this is such a big deal. As a result, a vast number of companies had recently shifted their focus on socializing, this led to the competition Google versus F acebook. Google is stepping into the Facebook market. Google also has promoted the search function in social network (Social Search) combined between Facebook and search engine Bing with support in 19 languages. Google Social Search helps users to find the appropriate content from the online link on their social network such as websites, blogs, articles and other content created or shared by their friends. Moreover, through many failures of Orkut (social networking and discussion), Google Buzz and Google Wave, in 2010 Google also revealed their plan about new social networking called Google Me to compete Facebook. Google Me combines best features of these social networks having failed before such as allow users check how many visitors clicked, watched, or your missed updates, provide variety kinds of games and application, control the amount of friends who have connected with your friends, stop spreading wide for what was posted. Example, both Orkut and Facebook allow users to delete the share, but this feature of Orkut is much better. This means that if you share a picture for yourself, then you want to delete them, you are allowed to erase that image on your home page, and on top of all other friends.Facebook does not do this,so Google Me is expected as a more attractive version of social networking. In 2011, Google has officially announced the Google+project, a social networking service has the functionality looks very similar to Facebook such as update status, share links and upload photos. Google+allow users to communicate separately for each group. Instead of posting a content update for everyone, Google+ allows users to display that content to the particular group (called a circle), such as classmates, colleagues, family members. Recently, Facebook is actively improving its own search engine. Old founder of the Google Wave, Lars Rasmussen, has joined Facebook, is developing a version of the search engines social networking to develop a new version called â€Å"search engines social networking†. This system will be expected to compete with the search engine of Giant Google in the future. The main purpose of the project is to develop a better search engine that can help brows through the huge amount of content created by users on social networks, as the status updates, articles, video clips and other information. Facebook expects a new email service will help them overtake Google and dominate the social networking world. In 2010, Facebook unveiled the project Titan to compete with Gmail from text messages (SMS), instant messaging (IM), email to Facebook messages. The system will combine messaging via mobile phones, email and chat messages to send to the recipients and they can reply to messages in any way. Facebook uses this project likea special strategy for competition generally on the Internet and particularly on social network. This time, there is notjust the war on email. Facebook seems want to dominate in every field. Facebook is a best place to share photos, surpassing all other services from Flickr, Picasa to Twitter even though its image quality is not high. Facebook members posted 250 million photos per day and this is the function most users use in the social network. Therefore, the Facebook pay billions for the application only works on iPhone and Android also is understandable. Moreover, they also developed a tool Facebook camera similar to Instagram. BUSINESS MODEL To understand why Google and Facebook abominate each other, it is necessary to study their business model. Facebook is now one of the largest social networks while Google is believed as the most powerful searching engine. Each tech titans have been reaping significant success in their domain. However, they both seem have the same main source of revenue is advertising. â€Å"Facebook has 901 million monthly active users (MAUs) as of March 31, 2012, an increase of 33% as compared to 680 million MAUs as of March 31, 2011. And 488 million MAUs used Facebook mobile products in March 2012†-Facebook Amended S1. With great numbers of users, people are deeply impressed by Facebook’s growth. Nevertheless, Google has crossed the 1 billion user mark, while Facebook is not far behind at 900 million — however, users spend a far greater amount of time on Facebook per day, approximately 7 times higher. Top 10 Web Brand for August 2011 (U.S., Total) Rank| Brand| Total Internet Audience(thousand)| Time per Person (hh:mm:ss)| 1| Google | 176,235| 1:47:42| 2| Facebook| 163,163| 7:45:49*| 3| Yahoo| 149,072| 2:12:08| 4| MSN/WindowsLive/Bing| 134,410| 1:43:45| Read as: During August 2011, 176.2 million unique U.S. people visited Google’s websites(Source: Nielsen) In the term of valuation, after the most crucial event of Facebook’s timeline- IPO, going public, Facebook is known being in the position of Google’s 2003. The table below indicates the comparison between Google (GOOG) and Facebook (FB) in different categories such as revenue, revenue growth, operating income and gross margin as they are in the public day. That means for Google, its first quarter is when they were in Q3, while Facebook’s would be Q1 2010 As the table shows, the growth of both companies over the time is almost equivalent as Google 19% and Facebook 16%. If taking into the specific, Google growth rate is arguably more stable than its counterpart social network. The primary reason causing such deviation is that Google was well-established. The following chart will present that point more clearly Source: GOOG data – YCHARTS In comparison, Facebook had a dramatic variable number and especially it was negative in the last quarter, Q9 with -6%.Probably, the company has not decided which its business model is yet (Husky Financial, Facebook vs Google: what you need to know post-IPO). Besides, the other factor affects a volatile Facebook’s development is the dependence in Zynga. There is 15% of Facebook revenue from Zynga (Forbes, By the numbers: Facebook investor checklist). According to the S1, â€Å"If Zynga does not maintain its level of engagement with our users or if we are unable to successfully maintain our relationship with Zynga, our financial results could be harmed†. The crucial income of two companies is generated from advertising. Google have recently proved their Google Adwords comes off well. Thousands of business could buy ads on Google and leads or sales with a proven positive ROI, return on investment. Advertising on Facebook shows much less convincing at this position. The stop in using Facebook’s ads is the forceful example. General Motors Co said on Tuesday (June 22) it will stop advertising on Facebook, even as the social networking website prepares to go public, with a source familiar with the matter saying the automaker had decided Facebook’s ads had little impact on consumers (Reuters). When going to public in 2004, raising just under $2 billion with an initial market cap of le than $25 billion, less than a decade, Google is worth close to 10 times. The IPO gave needed capital to expand their business. This scenario maybe not actually happen to Facebook, according to the previously mention. CONCLUSION A famous Chinese quote â€Å"One mountain cannot have two tigers†. Thus, a social media site or a search engine site will gain a victory? It has not exactly answered yet. However, according to several surveys and analysis in previous parts, Google has more strengthened than Facebook for some reasons: 1. We have many reasons to access Google but only a few reasons to login in Facebook. Most of us go Facebook for chatting , sharing your thoughts , seeing new update , seeing who liked our status, and sharing from our friend or using some applications and playing games . We are busy at looking the updates rather than ads on Facebook. Nobody logins in Facebook to check or to search when they can buy a cheap T shirt or which books are famous, so on. On the other hand, Google is more useful than Facebook. We can search to know any information that we need such as which college is the best or which food is good for health. When we all open up Google for the above mentioned purposes we click on various ads and indirectly generate revenue for Google. The more we search information the more revenue we will generate for Google. 2. People use Facebook less than they used to be A recent survey showed that 34% of users spend less time for Facebook over half a year ago. They assumed that Facebook is boring, not useful, not related and not safe to keep personal information. 20% users spend more time for Facebook, 1/3 users now do not login in Facebook, and nearly 50% of users login in Facebook that stay the same. In addition, a survey from 31/5 to 4/6 /2012 with 1.036 people in America by Reuters and market research company Ipsos presented that most of 80% users never buy product or service on Facebook. As a result, many advertising companies are disappointed and do not want to advertise on facebook anymore. For example: Early 2011, Facebook earned $3.7 billion through advertising. In 2012, this revenue is slowing. In fact, General Motors has recently regained about 10 million investments for advertising on Facebook because it was not effective. 3. Facebook will be forgotten Eric Jackson, founder of Ironfire Capital, said that in 5 to 8 years, â€Å"Facebook would disappear the same way Yahoo now.† Although Yahoo is still making money, still profitable, still has 13 thousand employees, but Yahoo is just 10% in value compared with their peak in 2000. Basically, Yahoo! has been considered as disappeared. † Whether Google or Facebook win, users also have benefit. Both companies are fighting to capture the heart of users worldwide. The competition gets its benefit because it can prevent monopoly situation. As long as the two companies keep on fighting, users will continue to gain benefits because the two companies will continue to improve, change, and figure out new features to attract users. For example: Currently, Google has extra the Google Plus to attract users and many other existent features such as YouTube, Feedburner, Chat, Analytics, and Docs. Facebook has the latest new Facebook Timeline feature. The competition between Google and Facebook is just at the beginning stage. We will be seeing more actions and tricks from both sides in future. As the main goal is to gather as many users as possible, both parties will take any necessary steps to capture users’ attention. In the future, users can get more benefit such as gifts, discounts, coupons, competition prize, lucky draws and many other events by just participating. Works Cited â€Å"August 2011 – Top US Web Brands.† August 2011, Top US Web Brands. N.p., n.d. Web. 20 June 2012. . â€Å"Facebook.† Wikipedia. Wikimedia Foundation, 19 June 2012. Web. 20 June 2012. . â€Å"Google Se Tao Ra Mang Xa Hoi Tot Hon Facebook.† Http://www.pcworld.com.vn/articles/tin-tuc/tin-quoc-te/2010/08/1220500/google-se-tao-ra-mang-xa-hoi-tot-hon-facebook/. N.p., n.d. Web. 20 June 2012. . â€Å"Google vs. Facebook.† Netchunks. N.p., n.d. Web. 20 June 2012. . â€Å"PGDE Scrapbook.† Enter Website Address or Keywords to Cite. N.p., n.d. 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YChart. â€Å"Google Price: 581.53.† Google Price (GOOG). N.p., n.d. Web. 4 June 2012. . YCharts. â€Å"By The Numbers:Facebook Investor Checklist.† Forbes. Forbes Magazine, 18