Questions and Excel Spreadsheet About Advertising on Facebook

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Question

1.Evaluate the success of advertising on Facebook.
- How well do ads work on Facebook? Click through rates?
- Banner advertising vs. social advertising.
- How we can apply this "social" framework to understand how firms can be successful in leveraging Facebook for commercial purposes?

2. Evaluate the Facebook Platform and Facebook for Web sites.
- Here it is useful to examine the most successful platform applications -social games( for example Cityville by Zynga)
- How does Facebook monetizes social games?
- What are the benefits and how many companies are leveraging Facebook for websites?
- Group gifting through eBay and Facebook for website.

3. Drawing from Trefis and other sources, develop a valuation for Facebook based on Zynga and other Internet companies. Be sure to discuss the relevant variables and develop an Excel spreadsheet.
- This gives you the opportunity to implement the PIE valuation model. You should also discuss relevant ratios and other metrics for Facebook and compare to Zynga and other peers in the industry.
Consider what are the key drivers for success, etc.? Also, illustrate Zynga’s contribution to the valuation. For example from trefis:"Till 2011, substantially all of Facebook's payment-based revenues were coming from virtual goods transactions on social games, driven by game developers like Zynga. As social games like Poker and Farmville rapidly proliferated, the Average Virtual Goods Spend per Facebook Visitor has seen a rapid rise from 2009 to 2011, growing from around $0.16 to roughly $2.42 respectively. "
There is a lot of information in the FB case, FB filings with the SEC, FB Prospectus, Form S-1 Registration Statement, trefis.com and other online sources that will provide you with the data and information needed to adequately address all questions. Also, after the MedNet case you should be well equipped to analyze online advertising in general.

Solution Preview

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1. The initial roll out of Facebook Ads in 2007 was a modest success. It allowed businesses to bid on certain methods and Facebook set recommended prices for advertising per click. Facebook knew that in the long run it must have a successful advertising program to create revenue while not harming the user and turning them off the website. This was the single most important step during the growth of Facebook. Facebook expanded its ad campaigns with the roll out of Social Ads. This would share the users personality of certain products of which they enjoyed, and shared it with their friends. Click through rates were disappointing for banner adds. Some studies showed that only 5 in 10,000 clicked on a banner add. This is why Facebook rolled out Social Ads and Sponsored Stories....

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