Using Porter Five Forces model as a guide, do you feel Facebook is a monopoly?
Please provide your reasoning.
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Sample Answers:(Dont copy Paste)
1) Industry competition – The competition in the industry is high with many companies are offering similar services.
2) Bargaining power of buyers – I believe this is low as the customer base of Facebook is so large and continues to grow. Facebook tries to be innovative and keep building their customer base.
3) Bargaining power of sellers – I believe this is low also. There are many businesses who offer the things facebook needs in the information industry so as long as they have a good supplier network set up it will remain low.
4) Threat of substitution – I believe this is high as there are other services that can be used and it seems like other services exist or are being created that offer a value proposition that is somewhat different.
5) Threat of entry – I believe this is high as companies it seems like there are a lot of companies trying to get into the internet information business and be innovative.
I do believe facebook is a monopoly as is the largest social network in the world and they do not have any direct competition for what they offer. Facebook has purchased companies that have posed a threat in the past years.
- Industry Competition – High. The social media industry is incredibly competitive. Facebook/Meta has continuously adopted its competitors features (i.e. Instagram Reels, Facebook stories) in an effort to stay relevant.
- Bargaining Power of Buyers – Medium/High. Users, especially younger ones continue to abandon or decrease their use of Facebook/Meta products for newer apps like TikTok. However, young people are not the only users of social media. Generation X and Boomers have a huge presence and favorability of Facebook over other social media apps. Regardless of age demographics, the main goal of any social media app is to increase user time on the app in order to serve more ads and generate more revenue.
- Bargaining Power of Suppliers – Low. Companies from nearly all industries use Facebook/Meta products to advertise and communicate with target audiences and existing communities. As other forms of advertising continue to become less relevant social media advertising is critical.
- Threat of Substitution – Medium/High. Although Facebook is seeing a decrease in younger users, it is unlikely that Facebook/Meta’s presence will ever be replicated or substituted. Additionally, with a recent $10B (New York Times, 2022) investment in to VR and the Metaverse, Facebook/Meta is on the forefront of what is likely the future of social media and what it means to be “online”.
- Threat of Entry – Medium/High. New social media apps pop up often but typically do not garner much adoption unless it’s on the cutting edge. This is why Facebook/Meta borrows and steals features from its competitors. Right now there just aren’t many cutting edge ways to “do” social media (Although BeReal has seen a relatively successful adoption, it is no where near industry powerhouses like TikTok or Facebook). Until there is a huge advance in the industry overall (such as VR), it is unlikely there will be a new social media app that rises to the top and goes toe-to-toe with Facebook/Meta.
In summary, while Facebook/Meta’s flagship product is becoming less popular, its investments in VR, AR and AI are unlikely to be outdone by other companies. If they aren’t considered a monopoly now (although I would consider it a monopoly in its current state), it likely will be in the future moves towards VR.