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Facebook Business Model Case

Facebook Business Model Case

Facebook: A Business Model Under Attack

By 2019, Facebook Inc.’s (Facebook’s), popular social media and social networking service (known as Facebook) that launched in 2004, had emerged as one of the world’s largest market capitalizations.2 Over its 15
years, the company had experienced public relations incidents that led to controversies regarding its social media business model.3 Most criticism addressed the company’s unethical practices in relation to users’ data privacy, including the nature of the information collected, how the information collected was exploited internally, to whom the data was licensed, and the overall lack of privacy protection.4

Since its beginnings, Facebook had always struggled with privacy issues, and it had faced class-action lawsuits and paid hefty fines, especially in Europe.5 The company downplayed the impact of every privacy breach and promised to improve transparency and data protection. However, the frequency and magnitude of such incidents kept increasing, and many analysts asserted that the company was not serious about fixing user privacy issues.6 They argued that Facebook’s business model was fundamentally unethical by design7 and that the company made money out of private data using a mix of espionage, propaganda, and manipulative techniques.8 They subsequently concluded nobody should expect anything but a harmful societal impact from Facebook.9

Facebook lost the trust of its users who, since 2016, had started to share less and less information on the platform.10 Journalists and activists also started to shift their discourse from addressing individual privacy incidents to attacking the company’s business model.11 In 2018, the Cambridge Analytica scandal resulted in a campaign called #DeleteFacebook, which incited users to leave Facebook altogether. High-profile public figures, including the chief executive officer (CEO) of Tesla, Inc., Elon Musk, hopped on the bandwagon and deleted their companies’ profiles on Facebook.12 In her address to the 2019 World Economic Forum participants in Davos, Facebook’s chief operating officer, Sheryl Sandberg, admitted, “We did not anticipate all of the risks from connecting so many people. We need to earn back trust.”13 Clearly, the company’s executive team needed to step back and think about what to do going forward. The annual stockholder meeting on May 30, 2019, was only a few weeks away.14 It would be a great opportunity to announce any major changes to the company’s strategy.

Facebook Business Model Case Study Example

Case Study Summary

Facebook, a global social media giant, has been accused of misusing its users’ data to fight competitors and help third parties. According to Iskra and Taleb (2020), the company has struggled with numerous privacy issues since its inception. The privacy breaches have seen the company lose trust in its users. Facebook uses advertising as its primary business strategy. Anybody can join the platform for free by creating a profile and agreeing to particular terms and conditions of service.

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Facebook faced one of its worst crises in 2018 when it was accused of allowing Cambridge Analytica to access its user data illegally. The firm’s problems did not end there (Iskra & Taleb, 2020). In September the same year, it informed more than fifty million users that their personal information had been exposed through the “view as” function. With the increase in the cases of these privacy breaches, some scholars have argued that Facebook operates a fundamentally unethical business model.

The Key Issue Facebook Needs to Address

The key issue Facebook needs to address is protecting the privacy and security of its customers’ data by promoting secure browsing. The company asks users to create personal profiles to enjoy its services. As some private data is used in creating these profiles, the security of private data in this platform has become a topic of fierce debates. Facebook’s high tendency to engage in data privacy breaches has seen it lose many customers overtime (Arora & Zinolabedini, 2019). A survey conducted by Statista in 2018 revealed that 31.29 percent of Facebook customers were planning to use the platform much less in the future because of privacy concerns (Clement, 2019). Additionally, close to 10 percent of the respondents admitted to having exited the platform.  The Facebook data privacy scandal is an excellent replica of how the company has used its business model to expose its customers’ information to unauthorized personnel. The scandal centred around the gathering of personally identifiable data of close to 87 million citizens by Cambridge Analytica. The firm and other stakeholders were able to access the private data of Facebook customers due to the confluence of many factors, such as Facebook’s little or no oversight of developers, the abuse of Facebook’s API by developers, and inadequate privacy protection safeguards.

Analysis: Why Facebook’s Business Model is Unethical by Design

Facebook’s model is fundamentally unethical by design because it allows the company to engage in unethical business practices. Ideally, the company operates an advertising business model, which has allowed it to generate profits and remain ahead of its competitors. For instance, in 2018, the company generated 98 percent of its revenues (55.01 Billion U.S. dollars) from advertising, which consisted of displaying ad products on Messenger, Instagram, Facebook, and third-parties (Belanche, Cenjor, & Pérez-Rueda, 2019). Besides making profits, the social media giant has used this model to exploit its users by exposing their private information to third parties and other unauthorized personnel without their consent.  For example, in 2018, it was revealed that Facebook shared access to its users’ private information illegally to tech giants, including Yandex, Spotify, Netflix, Microsoft, Apple, and Amazon. Additionally, in 2019, the entity was fined five billion U.S. dollars by the Federal Trade Commission (FTC) for privacy breaches. In another instance, the company’s CEO, Mark Zuckerberg, was accused of overseeing plans to leverage Facebook’s user information to help friends and fight rivals (Srinivasan, 2019). As a result of its unethical business model, Facebook has been engaged in a string of ethical scandals and legal proceedings, such as the case of Six4Three.

Actions Facebook should Take to Address the Situation

Facebook should implement top-rate security and privacy measures to protect its users. It can implement three strategies to ensure secure browsing for its customers (Singh, Carminati, & Ferrari, 2019). First, it should stop sharing information concerning the religious and political preferences of its users with third parties and advertisers. This would deter malicious advertising agents from targeting users who are vulnerable to fake news. Second, it should create safeguards to restrict data sharing with third-party applications.  Finally, the firm should install stringent processes to audit and approve applications that require its users’ private data. Following these proposals would signify that Facebook treats privacy seriously.

References

Arora, N., & Zinolabedini, D. (2019). The Ethical Implications of the 2018 Facebook-Cambridge Analytica Data Scandal. Student Works.

Belanche, D., Cenjor, I., & Pérez-Rueda, A. (2019). Instagram Stories versus Facebook Wall: an advertising effectiveness analysis. Spanish Journal of Marketing-ESIC.

Clement, J. (2019 Feb, 20). U.S. Facebook usage change over privacy concerns in 2018. Statista. Retrieved from https://www.statista.com/statistics/972877/behavioral-changes-consumers-facebook-privacy-concerns-usa/.

Iskra, E. & Taleb, A. (2020). Facebook: A Business Model Under Attack. Ivey Publishing, 9B20M106, 1-17.

Singh, B. C., Carminati, B., & Ferrari, E. (2019). Privacy-aware personal data storage (p-PDS): Learning how to protect user privacy from external applications. IEEE Transactions on Dependable and Secure Computing.

Srinivasan, D. (2019). The Antitrust Case Against Facebook: A Monopolist’s Journey Towards Pervasive Surveillance in Spite of Consumers’ Preference for Privacy. Berkeley Bus. LJ16, 39.

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