Classroom Companion: Business

 
Chapter 19 · Digital Business Models

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19
 Case Study 19.3 Facebook
Facebook offers a social networking ser-
vice in which users can interact, socialize, 
share pictures and videos, play games, 
and use other professional content. 
Facebook uses the ad-based free busi-
ness mode
l. Here, users have free access 
to the digital service but must give away 
control of personal data to Facebook 
and accept that they will be exposed to 
advertisements. Revenue is generated 
by selling targeted advertisement space 
based on data collected about the users. 
Unlike the freemium business model, all 
users have access to a complete and full 
version of the digital service. Facebook 
is the world’s biggest social network ser-
vice with more than two billion monthly 
active users. Its international impact 
has influenced business models world-
wide in several other business sectors, as 
well as motivated how people organize 
their social lives and spend time on the 
Internet. Facebook is modeled using the 
BMC and the SRM in 
.
Figs. 
19.8
 and 
19.9
, respectively.
Facebook offers three value proposi-
tions to three different customer seg-
ments (1): users involved in social 
interactions, advertisers, and third-party 
content developers. Revenue is gener-
ated from advertisements and service 
fees from third-party content develop-
ers (2). About 90% of Facebook’s rev-
enue is from advertisements. Due to the 
large number of users, it is not possible 
to establish a personalized customer 
relationship with every user. Instead, 
Facebook relies on automated mes-
sages to nurture relationships with the 
user segment. All customer segments 
access the value proposition through the 
Facebook web page (
7
facebook. com
) 
or the Facebook app (3).
Key activities are the software devel-
opment of 
7
facebook. com
and the 
Facebook app (4). Key resources are 
Key partners
Key activities
Key resources
Value proposition
Cost structure
Revenue streams
Customer relationships
Channels
Social
interaction
Internet users
facebook.com
Advertising fee
SW
development
Content
developers
Infrastructure
Facebook app
Infrastructure
and personal
user data
2
Advertisers
Developers
Advertising
Personell
Content and
service 
platform
Service fee
1
6
3
4
5
7
Customer segments
. Fig. 19.8 Facebook modeled using the BMC. (Authors’ own figure)