Main Business Risks that could damage the future growth potential of Facebook
Risk : Lack of storage capacity on the servers.
At the end of 2007, full capacity was reached in Facebook’s Californian datacentres. The company suffered from a lack of physical space, and was unable to install new servers in its buildings. With an increasing number of users, a similar technical issue could happen again.
Solution : Keeping the existing buildings and buying new ones to implement more servers as soon as possible, in order to prevent from technical issues.
Risk : 85 % of Facebook’s revenues come from advertising.
Any fluctuations could lead to dramatic swings in performance. Moreover, there is a slow growth rate of online advertising.
This particular business model is a weakness and could become a real threat for the firm.
This risk is strongly linked to another one, which is the drop-off of Facebook’s active user growth rate.
Facebook provides a free service for its users, so its revenues rely mainly on advertising. But if the active user growth rate slows, its website will become less attractive for Marketers, so the firm runs the risk to see its revenues decreasing.
Solution : squeezing more revenue out of each user through aggressive monetization tactics doesn’t seem to be the right solution. Maybe this would be effective in a short-term perspective, but it would affect the firm’s durability. So the firm should better try to retain users and get them to spend more time on the website, by increasing levels of user engagement in current and new markets.
Risk : No ads for mobile users of Facebook.
Why is it a risk ? The fact is that more and more people are using their smartphones to access Social Networks. In 2013, Facebook counted around 469 Millions of global mobile daily active users. Mobile is rapidly becoming a replacement for personal computers and that threatens FB’s advertising model. So the big question for the firm is : “How to turn...