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this is my final thesis book, on "Business Model Innovation: Narratives building Business Logic. The social network case".
the whole work is divided into three parts: research (on Business Model and Social Network), analysis (longitudinal of Facebook, Twitter and google+ on different levels-logic, narratives, product), and project (the remodel of the Vodafone community Youniversity)
Msc Product Service System Design Final Thesis Book
“non le connessioni oggettive delle cose, ma le connessioni concettuali dei problemi stanno a base dei campi di lavoro delle scienze: allorché viene affrontato con nuovi metodi un nuovo problema e vengono in tal modoscoperte verità che aprono nuovi punti di vista significanti, allora sorge una scienza” M. Weber
BUSINESS MODEL INNOVATION Narratives shaping Business Logic The Social Network case M. CHIARA CACCIANI PSSd master thesis Politecnico di Milano Facoltà del Design A.A. 2009-2011 749212 thesis tutor Cabirio Cautela email@example.com
INTRODUCTION - Aknowledgments If you are reading those lines it means that I actually made it! I’m either graduating in this moment or I’m a Politecnico di Milano alumni; either way I’d like to thank who helped me real- ize this. To Cabirio Cautela for believing in me from the beginning, having the time, and the patience to keep me on track and for always showing me the flip side of the coin. It has been a very challenging and rewarding path, thank you for sparking my creativity. To Matteo Gemignani for having walked side by my side for those five years, for giving me the freedom to learn by doing, supporting all of my choices even if they brought me on the other side of the world. To all of my PSSDers, because I truly feel lucky I was part of the 2011 class: a vibrant mix of motivation, competition, intui- tion, passion and talent for designing. Today a special thought goes in particular to Valeria Adani, Gustavo Primavera, Miguel Bello, Angelica Bello and Ana Isabel Palacios for being guides, friends and inspiration in those two years together. Last but not least, to my family who supported me in this whole path, spoiling me with more than what I could have ever needed, lately even providing me with “an office” to foster my concentration and finalize my thesis. 7
INTRODUCTION - Table of Contents Introduction Abstract 1. English version 10 2. Italian version 11 Methodology 12 Objective 12 Research 2.1 Business Model Generation Why Business Model? You’re a designer! 16 A recent discipline 17 A definition in evolution 17 Business Model – The new unified perspective 18 1. Building Blocks 18 2. Taxonomies 19 3. Ideal type 19 4. Performative Representation 20 Business Model – conclusion 22 2.2 Social Network Why this case study 24 Not a new concept 25 Components and types 26 Online networks 31 2004 the boom 32 Typologies 34 Analysis 3.1 Three case studies Hypothesis 39 Methodology 40 3.2 Facebook – history 44 2004 46 2005 49 2006 52 2007 56 2008 61 2009 66 2010 72 2011 78 Longitudinal evolution and conclusion 84 3.3 Twitter – history 93 2006 94 2007 99 2008 103 2009 108 2010 118 2011 124 Longitudinal evolution and conclusion 128 3.4 Google+ A limit case study 134
History 135 June 136 July 142 August 147 September 152 October 156 Conclusion 1603.5 Compared conclusion 164 CVD (ComeVolevasiDimostrare) – preliminary remarks confirmed 166Project (Let’s Re-Model)4.1 Intro “Re-modeling” Youniversity 169 The methodology 1694.2 Context: Vodafone Intro 170 History 170 Vodafone Italy: history 172 Vodafone Italy: Employer Branding and Recruiting 1734.3 Youniversity Intro 174 The Golden RIBS 175 Business Logic 177 Business&Users Narrative 179 The platform evolution 185 The employer branding business model 1874.4 Re-modeling The Employer Branding Narrative System 189 The value proposition 190 Vodafone E.B. customer segment 190 Avoiding risks: the missing student and recruitment 193 The new Employer Branding Narrative 194 The new Business Logic 197 The multi-channel strategy 198 Youniversity channel intra-connection 199 Youniversity new RIBS 204 The Employer Branding interconnected channel system 2055. Conclusion Final consideration on the work 209Appendix User Narrative Survey 212 Bibliography 214 Webliography 216 Videography 222 List Of Figures 222 9
INTRODUCTION 1.1 Abstract - English version“Business Model Innovation: Narrative shaping the Logic” isa meta-design research oriented to provide evidences of thevalidity of the narrative business model approach, and provethe trans disciplinary value of PSS practice and tools, ultimatelyof the design discipline.The research is based on previous scholars’ work on the defini-tion and possible application of Business Models as narratives.This perspective considers Business Model beyond their func-tional value, as descriptors of the business logic, to interpretthem as “stories, that explain how the enterprise works” (Ma-gretta). The goal would be to present evidence of the meaninggeneration power of those narratives, it is in the encoding anddecoding communication process that messages can evolve andassume new meanings created in a crowd sourced way. For thiscrowd sourcing aspect I thought to select as analysis contextsocial networks, probably an extreme example of this theory.The work is structured in three parts:The researchIn the first part I collected and clustered different businessmodel and social network literature schools, with particularfocus on the Business Model narrative approach.The analysisThe second part is a longitudinal analysis of Facebook, Twitterand Google+. I selected those three social networks becausethey are the current major generalist social networks and/orwith greater growth potential.The analysis is based on observing the social network evolutionon three levels: business logic, narratives (business, user andmarket narratives) and platform; aiming to detect how thosethree levels interact and ultimately to analyze how the meaninggeneration process is built.The application: remodeling YouniversityIn the third and last part, I remodel Youniversity, an existent so-cial network by Vodafone, currently not satisfying the purposeit was created for, with a business model narrative approach,guided by the insights I had gathered during the research andanalysis phase.
INTRODUCTION 1.1 Abstract - Italian version “Business Model Innovation: Narratives shaping Business Logic” è una tesi di ricerca nell’ambito del meta-design, che basandosi sulla recente letteratura di business model genera- tion, in particolare su quella scuola che vede la business model narrative come uno strumento di generazione di nuovi signifi- cati; si propone di verificarne la potenzialità dei meccanismi di comunicazione e di costruzione di significati nella narrazione nello specifico ambito dei social network. Infatti nel momento stesso in cui un’azienda comunica ai suoi clienti direttamente o indirettamente, sta creando una rappre- sentazione di se portatrice di un duplice significato: quello sog- getto principe della comunicazione e quello racchiuso nella mo- dalità scelta per la comunicazione, esempi di quest’ultimo sono il lessico, il tono, il mezzo di comunicazione scelto. Un terzo aspetto da considerare, e particolarmente rilevante rispetto al caso studio scelto, è la decodificazione del messaggio da parte dei riceventi; infatti, in questo processo è racchiusa un’ulteriore possibilità di significazione corale. Per questa caratteristica cor- ale ho selezionato come caso studio i social network, in quanto rappresentano l’esempio limite, e quindi spero più significativo. Il lavoro è strutturato in tre parti: Ricerca La prima parte è dedicata ad una panoramica della letteratura sui business model, con particolare dettaglio per la scuola di pensiero che interpreta i business model come narrazioni, ed una sui social network. Il concetto di social network infatti, nonostante sia diventato di dominio di massa con MySpace e Facebook è originariamente un concetto legato alle scienze statistiche e sociali, usato come strumento di analisi sociale. È tornato utile ai fini progettuali ricercare questi originari concetti base. Analisi La seconda parte è quella dedicata ad un’analisi longitudinale dei tre social network maggiori in termini di base utente e/o considerati dagli esperti con maggior potenziale; ovvero Face- book, Twitter e Google+. L’analisi è stata condotta analizzando anno per anno ogni social network su tre livelli paralleli: business logic, narrative (lato business, lato utenti e lato mercato) e il prodotto (la piattaforma web). Il fine ultimo è di capire come i tre livelli interagiscono tra loro e le dinamiche del processo di significazione proprio delle “storie” espresse dal business e dagli utenti (e come rappresen- tato sulla piattaforma). Applicazione: il progetto La terza ed ultima parte è dedicata a mettere in pratica le di- namiche individuate nella fase di analisi, re-modellando Youni- versity, un social network privato di Vodafone, che al momento non genera il valore, e quindi i significati, aspettati. 11
INTRODUCTION 1.2 Metodology of ResearchBusiness Model literature is still a fuzzy field; scholars are stilldebating about what the definition is, and what role businessmodel can have in the future.Firstly I dipped myself into the literature trying to read enoughliterature about Business Models to have the most completeimage I could. Same thing I did for social network; in factalthough I’m a Facebook addicted, I often tweet and I’m check-ing my Google+ page daily, I didn’t really know much abouthow they evolved since their launch or about their businessmodel; along with a research in social network literature formthe ’50s, when this discipline was developed in sociology, psy-chology and anthropology.Developed a sufficient knowledge about the two research fieldsI selected, I was able to define a thesis hypothesis to be testedin the analysis phase.In this second phase I used a longitudinal analysis approach Iexplain in detail in chapter 3.1., to gather evidences that couldsupport and prove my hypothesis.Ultimately to deeply interiorize my findings I decided to applythem to a project: I remodeled Youniversity, a social networkby Vodafone, according to the strategic business narrativeapproach I had tested and I believe it can help generate newsignificant meanings.INTRODUCTION 1.3 Objectives- Test business model narrative approach in social networkcontext- Deeply understand Facebook, Twitter and Google+ businessmodel evolution- Analyze social network interaction logic key drivers- Generate awareness of the crucial role social networks have inour meaning generation process- Detect and take into consideration in the project ongoingsocial trends- Remodel the social network Youniversity based on analysisfindings and coherently with Vodafone Employer Brandingstrategy- Root the project into PSS tools, methods and project logics- Propose product service system design as central player intobusiness model building and meaning generation- Develop a work I can be proud of
BUSINESS MODEL INNOVATION 2.1. Why Business Model? You’re a designer!This is a question people often ask me when I try to explainmy thesis research field, and every time I can’t avoid being a bitdisappointed, since I think the connection between businessmodel generation and product service system design is so clear!I’ve always admired the design discipline for its people centeredshape modeling power; through creative tools designers havethe ability and knowledge to craft products and services aroundpeople; Bruno Munari, Vico Magistretti, Achille Castiglioniwere all inspirations. And it is probably people the variable thatmakes design creation practice much more fascinating to methan scientific one.However today the context we are projecting for is very dif-ferent from Munari’s era, everything is changing and will keepchanging very rapidly. There are major social, economics, cul-tural, political and even religious trends that are yelling at us wehave to be more sustainable, that there is no place for furtherobjects or waste of resources. Our context is not about invent-ing new things, but it’s about finding new meaningful ways ofcombining existing parts. Deciding to take this challenge designhas to become a holistic discipline that deals with organizationand integration of services and products in the most sustain-able and useful way as possible.In today chaos of elements, it’s not easy to see connect the dotsand see the bigger picture and to finalize a strategy to make de-signed scenarios coming true. Business models are cross design-management tools to foster the creation of new meaningfulscenarios; the role of design assumes a special prominence ifwe interpret business model as narratives, as “stories that ex-plain how enterprise works”. Storytelling and visualizations arein fact key design expertise.This field of research is not completely new in the designworld, there is another growing design discipline: the “designthinking” that wants to tackle similar issues, it is indeed “a dis-cipline that uses the designers sensibility and methods to matchpeople’s needs with what is technologically feasible and whata viable business strategy can convert into customer value andmarket opportunity.”In conclusion I picked business model generation as my thesisfield, because I believe it’s a good opportunity where productservice system design and management, for the systemic naturethey share, can work together to shape new meaningful sustain-able future scenarios.
BUSINESS MODEL INNOVATION 2.2 Business Model - a recent discipline The literature shows Business Model as a fuzzy topic; scholars, in fact, are still striving for a common definition and a manner to investigate this field. The “Business Model” term is a relatively young phenomenon, A. Osterwalder and Y. Pigneur pioneers of this discipline, researched on Scholarly Reviewed Journals the term, and found out that although it appeared for the first time in an academic article in 1957 (Bellman, Clark et al. 1957) and in the title and abstract of a paper in 1960 (Jones 1960) it was only towards the end of the 1990s that it became relevant, together with the advent of the Internet in the business world. This synchronicity is not a chance; first in the web 1.0, now in the 2.0 one, infor- mation technology became very cheap, allowing not only many companies to have access to it, but blurring industries bounda- ries. Indeed industry classification is not meaningful anymore as unit of analysis, and that’s probably the role that fits business model the best. BUSINESS MODEL INNOVATION 2.2 Business Model - a discipline in evolution A. Osterwalder and Y. Pigneur highlighted five main phases in the evolution of the business model literature and in the search for a proper business model definition. schema 1 deﬁne & classify list business model describe business model business apply businessACTIVITY business models components model elements model elements model conceptOUTCOME deﬁnitions & “shopping list” of components as reference models applications & taxonomies components building blocks & ontologies conceptual tools In a first phase, in early 2000 when the term started gaining popularity, a number of authors suggested business model definitions and classification an example of it is “the firm’s eco- nomic model, concerning its logic of profit generation”1 . In the second phase authors started to complete the definitions by proposing what elements belong into a business model. In this phase those lists merely mentioned descriptors of it, they were still very superficial indeed. 1 Morris M., Schindehutte M., Allen J., 2004, The entrepreneur’s business model: toward a unified perspective, Journal of Business Research 17
Only in the third phase they started doing detailed descriptionsof these components structuring and designing organizationswith them. Business models became “transaction structures”;they described the way firms configured their transactions withgroups of stakeholders including customers, suppliers and ven-dors: “a business model is the content, structure, and govern-ance of transaction designed so as to create value through theexploitation of business opportunities” (Amit and Zott, 2001)The business model became the manifestation of how certainorganizational variables were configured and the consequencesof that configuration on business performance; this approachis well known also as building blocks theory. Consequentlyvarious business model taxonomies were generated, such as the“efficiency centred” and “novelty centred” by Zott and Amit.In the fourth phase researchers started to model the compo-nents conceptually, proposing business model as meta-modelsin the form of reference models and ontologies. Business mod-els as well as their elements became “ideal types”, references tocluster and define businesses.The last phase, the current one, is the one in which referencemodels are being applied in management. Scholars are nowtesting in different fields, if the application of business model,can create a significant competitive advantage. Moreover whichare the best conceptual tools and application fields.BUSINESS MODEL INNOVATION 2.3 The new BM unified perspectiveIn conclusion, scholars’ contributions on the definition of busi-ness models can be classified in four different categories; I’llshortly go through the first two to then explain more exhaus-tively the last ones.1. Building-blocksFirst, Business Model are conceptualization of a particularreal world business model: this is the building-blocks perspec-tive, oriented to define the main blocks that create and capturevalue, the so called “business logic”. Osterwalder and Pigneur(2010) finalized a great tool to visualize the nine blocks thatconstitute the business logic, as they assert the communicationpower of business model crucial and worth to research on.This first conception is focused in particular on e-businesses,and tries to create and capture value from a given technology.In this domain, researchers have identified four possible “valuestreams” in an internet-based business: virtual communities,reduced transaction costs, exploitation of information asymme-try, and value-added market-making process.
2. Taxonomies There is a group of authors that describe business models as classifications, distinctive abstract types of business models, each one describing a set of business with common charac- teristics. In this sense business models are taxonomies, classes of things observed in the world and developed from empirical work, bottom up; they are both a scale and a role model, like scale models they represent descriptions not too general nor detailed of firms, but at the same time they individuate a set of known business models based on generic kinds of behavior which are distinctly different; they serve as role models that scholars use to cluster individual firms. Thanks to this double scale-role model function, according to Banden-Fuller and Morgan, business models seem to be the perfect environment for experimentation, to conduct the same testing that biologist do with their model organism when they check their theories against behavior in the world, to see how far the findings match the characteristics of the real world the their models purport to represent. Business models are to man- agement real-life examples to study and apply, in fact a collat- eral use of business model ideal type is as typification. This idea is associated with the role model nature described before that identify business model as well known categories and external identity that a firm can assume (Polos et al., 2002). This con- cept can be particularly relevant applying it to nascent markets, where there is little certainty about values associated with new ventures, firms in those situations strive to render themselves identifiable and legitimate and associating themselves with ideal business models can be a solution. 3. The ideal type Another business model definition is as abstract overarch- ing concept that can describe all real world businesses. This concept can be associated with Max Weber’s “ideal type”. “Business models might be understood as ideal types, for they seem to have the characteristics and fulfill the roles that Weber associated with such types: they are based on both observation and theorizing” The parallel that C. Baden-Fuller and M. S. Morgan create between business model and the Weberian concept of “ideal type” is fundamentally based on the double nature of the two tools as describer of the reality and as representation of a con- ceptual idea at the same time; it’s worth exploring the full mean- ing of “ideal type”, to better understand why this concept can be borrowed to enrich the definition of what business model are and are useful for. Max Weber (Stanford Encyclopedia of Philosophy plato. stanford.edu) besides being an economist, a politician and an historian is one of the principal architects of modern social science; his methodological contribution is the most interesting part of his research for the purpose of this thesis. Weber’s methodology is as ethical as it is epistemological; and that’s the interesting trait for this research, in fact ethic issues imply a judgment and meaning attribution process. Weber’s methodology is an attempt to give researchers tools to judge and give meaning to objects, facts and situations; his sig-19
nification process is based on the concept of “ideal type” whichis “formed by the one-sided accentuation of one or morepoints of view and by the synthesis of a great many diffuse,discrete, more or less present an occasionally absent concreteindividual phenomena, which are arranged according to thoseone-sidedly emphasized viewpoints into a unified analyticalconstruct. In its conceptual purity, this mental construct cannotbe found empirically anywhere in reality, it is a utopia.”2In synthesis Weber is saying that the analytical construct of anideal type never exists in reality, but provides objective bench-marks against which real-life constructs can be measured sci-entifically. In this sense the ideal type is not an end but a meancreated by gathering multiple points of views and facts, thenunified by a utopic synthesis that ultimately serves as reference.By comparing the reality to the ideal type, relating the empiri-cal data to an ideal limiting case, we create unambiguouslysignificance and a mental model that codify some key causalrelationships in the business. A business model as ideal type is a“cognitive map” that tends to never be set in reality but provideongoing inspiration for improvement and change.4. Performing representation and narrativesThe last business model category is quite a new school ofthought, scholars define it as narrative or performative reprep-resentation, “in that business model is a text that re-describesand re-constructs reality and the social world in its own image”(M. Perkmann, A. Spicer).Narratives are a genre of text that describe a sequence ofevents; for a firm to embrace a business model as a narrativemeans to construct a representation of how it might succeedin a particular environment through both a textual and/or avisual images. The power of representations hasn’t been fullyexplored yet, however it has the potential to literally shapereality (and I’ll try to bring some evidences with this research);in fact following a semiotics cycle, it first reinterprets real-ity encoding it in a message (as M. McLuhan would say “themedia is the message”), then the receiver decodes it, filteringand enriching the received narrative with his own point of view.As Clarke and Hold state in an entrepreneurial research: “howentrepreneurs select and frame individual stories, both revealsand creates the entrepreneurial self; therefore entrepreneurs areconstituted by their narrative of experience”.Ultimately the current enterprise “reversed” meaning genera-tion cycle remarks the importance of this business modelinterpretation. According to a canonic cycle, enterprises whenlaunching products and services into the market, would shapebusiness logic first, deducing from it a coherent business narra-tive to communicate to the market, based on a negative marketanswer changes in the business logic would be implemented,affecting the business narrative and so on, in a one way cycle.What’s currently happening, in a market as fast as today andwith consumers that are more and more prosumers, is that themarket answer fosters a quick business narrative change, with-out affecting the business logic; this causes gaps and risks ofincoherence between business narrative and business logic, that2 Weber M. Objectivity in social sciences
ultimately can have consequences on the image of the company and the revenues stream. This new “reversed” meaning genera- tion cycle sets the business narrative as crucial interpreter of market needs and gatekeeper to the business logic. Business narrative research is a rather young domain and it must still prove its relevance; however scholars suggest three main possible uses of narratives that could help managers cre- ate new business meanings: as visualization, mediator, or com- munication tool; it’s important to consider that the three levels are strictly intra-connected. Visualizing complex systems increases the degree of com- plexity that can be handled successfully (Rode 2000); in fact using an intuitive and universal language it often enhances an easier identification of relevant measures to follow to improve management. Business models have a mediator role when they capture pow- erful and communicative images of the business that ultimately help different actors understand each other;schema 2 Competitive Forces Legal Customer Environment Demand BUSINESS STRATEGY BUSINESSSocial MODEL Technologicalenvironment Change BUSINESS ITC ORGANISATION as well as when modeling social systems they identify relevant elements and relationships among them, acting like a conceptu- al bridge that helps aligning business strategy, business organi- zation and technology. Ultimately business models can be used as powerful communi- cation tool, as logical consequence of their role as visualization and mediator. This use becomes particularly important if we consider not only actors within the firm context, but also final users and customers as receiver of the business narrative. In practical terms, there are various techniques to build busi- ness narratives, such as using widely known cultural myths, archetypical figures, scenarios and metaphors. 21
BUSINESS MODEL INNOVATION 2.4 ConclusionThis thesis aims to test business model considered beyond itsfunctional value, as “stories that explain how the enterpriseworks”3 , therefore as narrative.The meaning generation power of narrative will be tested in thesocial network context trying to understand what the currentmeaning generation cycle is, and the role of business narrativein it.Moreover it won’t only consider business narrative, but usernarrative as well. In fact the social network context can be con-sider an extreme case study to test those theories, in which, forthe market own nature, users take active part into the develop-ment of the business; therefore it is significant to examine theirnarrative as well, and see their effect onto the business narrativeand logic.3 Magretta J., 2002, Why Business Models Matter, Harvard Business Review
SOCIAL NETWORK 2.1.1 why this case studyAfter researching and reading on Business Model generation,dug into the literature, theories and future scenarios, I em-braced the theory of business model interpreted as narrativeand of its meaning generation potential as re-interpretation ofthe value proposition of the Business Logic. Shaping a power-ful Business narrative means crafting a message as clean anddirect as possible, that simply visualizes or expresses (image ortext based narrative) the value proposition indeed; a very goodexample of this are Apple’s commercials.So, why are Social Networks value proposition particularlyinteresting? Social Networks are transparent models, whichmeans that they don’t advertise to give an image of themselvesto customer, their image is simply deducted from the serviceitself, the platform indeed; this of course, makes the platforma narrative channels. I chose it as case study for this researchbecause social networks create a space, a reality that enableshuman communication and confront, which is, according tosemiotics, the base of our meaning generation process. We“create” meaning through difference, and context plays a role;our signification process takes place through a network (ironic?)among signifier, signified and referent; and one triangle canbecome the referent of another, this network of triangles is thestructure we use everyday to evaluate and give meaning to oureveryday life.Though, if on one hand social networks value proposition isto create contexts where users can generate meanings, on theother one, their possibility to evolve and innovate is completelydependent on their user base. The user narrative, not only thebusiness narrative, is crucial.There is another meaningful factor: the developers case.I consider Social Networks as a transparent company, thereforethe platform is the element they use as business narrative, butwhat if there are users who can shape the platform and com-municate through it as well? Through the APIs developers arecreating contents and modifying the platform, which is then theplace where business and users narrative meet.In conclusion when analyzing social networks the element totake in consideration are not only business narrative and busi-ness logic, but also users narrative as well as the platform, keytouch point in the meaning generation system.“The whole process of meaning generation starts and endswith people”1 especially in this “age of transparency” in which“what happen in Vegas stays on YouTube”2 .Social networks are such a fascinating business case to analyzewhen facing a meaning generation topic.1 Solomon Micheal R., 1998, Consumer Behavior, Buying, Having, and Being,4th ed., Prentice Hall (pp.270)2 Qualman E., 2009, Socialnomics: How social media transforms the way welive and do business. New York, Wiley (p. 47)
SOCIAL NETWORK 2.1.1 not a new concept The terms Social Network is a lot older than seven years, which is when for the first time it gained worldwide fame thank to Facebook (2004). Social Network Analysis is inherently an interdisciplinary topic that has been shared by mathematics, statistics, computer methodology and social science for the past twenty years; the first use of the term “Social Network” is attributed to the anthropologist John Barnes (1954) indeed. Out of all, I’ll manly focus on the social science perspective, making some references to the mathematics one. Social Network analysis is a distinct research perspective within the social and behavioral sciences; distinct because it is based on the assumption of the importance of relationships among interacting units, instead of analyzing the single unit value itself; encompassing theories, models and applications that are expressed in terms of relational concepts of processes. Pioneers of this discipline come from sociology, psychology and anthropology; and they define a Social Network as “a network of relations linking social entities, or of webs or ties among social units emanating through society.”3 The last part of this definition is extremely interesting, it’s stating that analyzing social network also provides a formal, conceptual means for thinking about the social world; provid- ing formal statements about social properties and processes (Freeman, 1984), specifically about relationships among social entities, and on the patterns and implications of these relation- ships. Thinking in terms of Social Network is essentially very similar of thinking in terms of product service system. Many researchers have realized that the network perspective allows new leverage for answering standard social and behavio- ral science research questions by giving precise formal defini- tion to aspects of the political, economic, or social structural environment. From the view of social network theory, the social environment can be expressed as patterns or regulari- ties in relationships among interacting units; those patterns are defined as structure composed by nodes (units/actors) and ties (relationships). To fully understand the Social Network theory first we have to understand how it interprets units and relationships, to then have a look at the different types and dynamics. 3 Wasserman S., Faust K., 1994, Social network analysis. Methods and applica- tions, 2nd ed., Cambridge University Press (pp.10) 25
SOCIAL NETWORK 2.1.3 components and typesWhen a computer network connects people or organizations,it is a social network. Just as a computer network is a set ofmachines connected by a set of cables, a social network is a setof people (or organizations or other social entities) connectedby a set of social relationships, such as friendship, co-workingor information exchange.Social network analysis reflects a shift from the individualismcommon in the social sciences towards a structural analysis.This method suggests a redefinition of the fundamental unitsof analysis and the development of new analytic methods. Theunit is now the relation, e.g., kinship relations among persons,communication links among officers of an organization, friend-ship structure within a small group. The interesting feature ofa relation is its pattern: it has neither age, sex, religion, income,nor attitudes; although these may be attributes of the individu-als among whom the relation exists. . . .Social network analysts look beyond the specific attributes ofindividuals to consider relations and exchanges among socialactors. Analysts ask about exchanges that create and sustainwork and social relationships. The types of resources can bemany and varied; they can be tangibles such as goods andservices, or intangibles, such as influence or social support; theresources are those that can be communicated to others viatextual, graphical, animated, audio, or video-based media, forexample sharing information (news or data), discussing work,giving emotional support, or providing companionship.RelationsRelations (sometimes called strands) are characterized by con-tent, direction and strength. The content of a relation refers tothe resource that is exchanged.A relation can be directed or undirected. For example, oneperson may give social support to a second person. There aretwo relations here: giving support and receiving support. Alter-nately, actors may share an undirected friendship relationship,i.e., they both maintain the relationship and there is no specificdirection to it. However, while they both share friendship, therelationship may be unbalanced: one actor may claim a closefriendship and the other a weaker friendship, or communicationmay be initiated more frequently by one actor than the other.Thus, while the relationship is shared, its expression may beasymmetrical.Relations also differ in strength, and such strength can beoperationalized in a number of ways . With respect to com-munication, pairs may communicate throughout the work day,once a day, weekly or yearly. They may exchange large or smallamounts of social capital: money, goods, or services. They maysupply important or trivial information. Such aspects of rela-tionships measure different types of relational strength.TiesA tie connects a pair of actors by one or more relations. Pairsmay maintain a tie based on one relation only, e.g., as membersof the same organization, or they may maintain a multiplex tie,based on many relations, such as sharing information, givingfinancial support and attending conferences together. Thus
ties also vary in content, direction and strength. Ties are often referred to as weak or strong, although the definition of what is weak or strong may vary in particular contexts [Marsden & Campbell, 1984]. Ties that are weak are generally infrequently maintained, non-intimate connections, for example, between co-workers who share no joint tasks or friendship relations. Strong ties include combinations of intimacy, self-disclosure, provision of reciprocal services, frequent contact, and kinship, as between close friends or colleagues. Both strong and weak ties play roles in resource exchange net- works. Pairs who maintain strong ties are more likely to share what resources they have. However, what they have to share can be limited by the resources entering the networks to which they belong. Weakly-tied persons, while less likely to share resources, provide access to more diverse types of resources because each person operates in different social networks and has access to different resources. The cross-cutting “strength of weak ties” also integrates local clusters into larger social systems. Multiplexity The more relations (or strands) in a tie, the more multiplex (or multistranded) is the tie. Social network analysts have found that multiplex ties are more intimate, voluntary, supportive and durable. Yet some analysts have feared that email, the Internet are unable to sustain broadly-based, multiplex relations. These fears are extended by the boutique approach to online offer- ings which fosters a specialization of ties within any one of thousands of topic-oriented news groups. However, this ten- dency toward specialization is counter-balanced by the ease of forwarding online communication to multiple others. Through personal distribution lists Internet participants can sustain broad, multiplex, supportive relationships. Composition The composition of a relation or a tie is derived from the social attributes of both participants: for example, is the tie between different or same sex dyads, between a supervisor and an un- derling or between two peers. Beyond the Tie: Social Networks two Views: Ego-centered and Whole Networks A set of relations or ties reveals a social network. By examin- ing patterns of relations or ties, analysts are able to describe social networks. Typically analysts approach social networks in two ways. One approach considers the relations reported by a focal individual. These ego-centered (or “personal”) networks provide a Ptolemaic views of their networks from the per- spective of the persons (egos) at the centers of their network. Members of the network are defined by their specific relations with ego. Analysts can build a picture of the network by count- ing the number of relations, the diversity of relations, and the links between alters named in the network. This ego-centered approach is particularly useful when the population is large, or27
the boundaries of the population are hard to define. For ex-ample, Wellman and associates ([Wellman, 1988a]; [Wellman &Wortley, 1990]) used ego-centered network analysis to explorehow a sense of community is maintained through ties, ratherthan through geographical proximity, among Toronto residents.They built a picture of the typical person as having about adozen active ties outside of their household and workplace,including “at least 4 ties with socially close intimates, enoughto fill the dinner table and at least 3 ties with persons routinelycontacted three times a week or more”The second, more Copernican, approach considers a wholenetwork based on some specific criterion of populationboundaries such as a formal organization, department , clubor kinship group. This approach considers both the occur-rence and non-occurrence of relations among all membersof a population. A whole network describes the ties that allmembers of a population maintain with all others in that group.Ideally, this approach requires responses from all members ontheir relations with all others in the same environment, such asthe extent of email and video communication in a workgroup.This requirement places limits on the size of networks that canbe examined.Ego-centered and whole network views provide two waysof examining the communication links among people: ego-centered network analysis can show the range and breadth ofconnectivity for individuals and identify those who have accessto diverse pools of information and resources. Whole networkanalysis can identify those members of the network who areless connected.Network CharacteristicsRange: Social networks can vary in their range: i.e., in their sizeand heterogeneity. Larger social networks have more hetero-geneity in the social characteristics of network members andmore complexity in the structure of these networks [Wellman& Potter, 1997]. Small, homogeneous networks are characteris-tic of traditional work groups and village communities; they aregood for conserving existing resources.Centrality: it may be important to examine who is central orisolated in networks maintained by different media. Thus, themanager who does not adopt email becomes an isolate in theemail network while retaining a central role in the organization-al network. Information exchanged via email will not reach thismanager while information exchanged in face-to-face executivemeetings will not reach lower-level workers. In a situation suchas this, another person may play a broker role, bridging betweenthe email network and the face-to-face executive network andconveying information from one network to the other. Socialnetwork analysis has developed measures of centrality whichcan be used to identify network members who have the mostconnections to others (high degree) or those whose departurewould cause the network to fall apart.Roles: Similarities in network members’ behavior suggest thepresence of a network role. Teachers fill the same networkrole with respect to students: giving instruction, giving advice,giving work, receiving completed work, and assigning grades.Regularities in the patterns of relations (known as structural
equivalence) across networks or across behaviors within a network allow the empirical identification of network roles. For example, the “ technological gatekeeper” is a role that may be filled by any member of a network according to what resources they bring in to the network. Partitioning Networks Groups In social network analysis, a group is an empirically discovered structure. By examining the pattern of relationships among members of a population, groups emerge as highly intercon- nected sets of actors known as cliques and clusters. In network analytic language, they are densely-knit (most possible ties exist) and tightly-bounded, i.e., most relevant ties stay within the defined network. Social network analysts want to know who be- longs to a group, as well as the types and patterns of relations that define and sustain such a group. Network density is one of the most widely used measures of social network structure: i.e., the number of actually-occurring relations or ties as a proportion of the number of theoretically- possible relations or ties. Densely-knit networks (i.e., groups) have considerable direct communication among all members: this is the classic case of a small village or workgroup. Much traditional groupware has been designed for such workgroups. By contrast, few members of sparsely-knit networks communi- cate directly and frequently with each other. As in the Internet, sparsely-knit networks provide people with considerable room to act autonomously and to switch between relationships. How- ever, the resulting lack of mutual communication means that a person must work harder to maintain each relation separately; the group that would keep things going is not present. The social network approach can also be used to see where relations and ties cross media lines. Which kinds of groups maintain ties via multiple media, and which communicate only by means of a single medium? For example, a luncheon group might coordinate meeting times through email, coordinate food delivery by phone, with final consumption face-to-face. Other network groups, such as remotely-located technicians, might exchange information about only one topic and use only one medium, such as email. Positional Analysis As well as partitioning social network members by groups, analysts also partition members by similarities in the set of relations they maintain. Such members occupy similar posi- tions within an organization, community or other type of social network. Those who share empirically-identified positions are likely to share similar access to informational resources. Some central positions have greater access to diverse sources of information, while other positions may have a limited pool of new ideas or information on which to draw. For example, why assume that managers always give orders and subordinates always take them when an analysis of email traffic may show otherwise? Thus our study (of university computer scientists) found that faculty did not always give orders and students did not always receive orders. The actual practice was more a func-29
tion of specific work collaborations among network members.Networks of NetworksThe concept of networks is scalable on a whole networklevel to a “ network of networks” [Craven & Wellman, 1973]:network groups connected to other network groups by actorssharing membership in these groups. This operates in a numberof ways. People are usually members of a number of differentsocial networks, each based on different types of relationshipsand, perhaps, different communication media. For example,a scholar may belong to one network of researchers and alsobelong to a network of friends. This person’s membership inthese two networks links the two networks: there is now a pathbetween researchers and the scholar’s friends.Not only do people link groups, but groups link people; thereis a “duality of persons and groups”. The group of researchersbrings together people who are themselves members of dif-ferent groups. Their interpersonal relations are also intergrouprelations. Such cross-cutting ties structure flows of information,coordination and other resources and help to integrate socialsystems.
SOCIAL NETWORK 2.1 online networks I’ve analyzed the origin of the concept of Social Network, its descriptive variables, and uses; but in the past ten years this concept became a product of worldwide fame. The term “social network” today is synonymous with online networks like Facebook. Online communities exists since even before the World Wide Web was invented, an early example is Usenet, a network composed by thematic discussion groups in 1979. In 1987 Howard Rheingold, a very active user on another platform called “The Whole Earth Lectronic Link” (WELL), published an early book about what he called “virtual commu- nity”: “A virtual community is a group of people who can meet on or off line and who share thoughts through a forum and informatics networks.” After that the trend became bigger: the French post lunched Minitel, America Online was released, IBM and Sears created Prodigy, ultimately AOL came out and absolutely dominated the market in the States. Common traits of all of those community was the use of a user/nickname, this is true even for the e-mail service that burst out in the early ‘90s. In 1997 sixdegrees.com was the first social network with most of the features we still use nowadays: a public or semi-public profile page, a list of contacts, visible personal network of friends and friends’ network, and for the first time real people’s name, and this feature for the time was visionary. The two pos- sible interactions were: connectMe and networkme. But it was too early for this kind of service, both the technol- ogy and the society weren’t ready, costs were too high and with the boom of the dot.com the company was closed. In 2001 the world was ready for the second round: the first generation of social network, Plaxo, Ryze and Friendster, were released starting from this year; and would be soon been fol- lowed by LinkedIn, Tribe.net and MySpace. Ryze (end 2001) was about people helping each other ‘rise up’ through quality networking, make connections and grow their networks. You could network to grow your business, build your career and life, find a job and make sales, as well as just keep in touch with friends. Plaxo (Nov.2002), funded by Sean Parker was an online address book and social networking service integrated with Microsoft Outlook, viral it identified in a reliable way a person based on his friendships. Friendster (Feb. 2003), the most successful one, was a service that allowed users to contact other members, maintain those contacts, and share online content and media with those con- tacts. It was also used for dating and discovering new events, bands, and hobbies. Users could share videos, photos, messages and comments with other members via their profile and their network; and this last one was the big revolution that helped the website grow that big. The second generation of social network is based on the divi- sion between personal and business networks. 31
Tribe.net (early 2003) is a social network started in the SanFrancisco bay area. Tribe is similar to social networks likeFacebook and MySpace, but allows users to create their ownpersonal networks with other users; forming “tribes.” Anyonemay register as a new tribe user, and may then define their im-mediate network of friends, either by choosing from existingmembers or by inviting new members to join. Each of theseusers may in turn define their own network of friends.4LinkedIn (May2003) with over 100 million users representingover 200 countries around the world, LinkedIn is a fast-growingprofessional networking site that allows members to createbusiness contacts, search for jobs, and find potential clients. In-dividuals have the ability to create their own professional profilethat can be viewed by others in their network, and also view theprofiles of their own contacts5.MySpace (August 2003) is one of the world’s largest socialnetworks, with about 125 million users. Originally inspired byFriendster, MySpace quickly grew to become the world’s larg-est social network, before being overtaken by Facebook. Userpages are highly customizable and support integration withwidgets such as Slide or YouTube. MySpace provides users witha way to connect around content and culture. Today is the lead-ing social entertainment destination powered by the passion offans. Music, movies, celebs, TV, and games made social6.SOCIAL NETWORK 2.2 2004 the boom Global Social Network Penetration schema 3 80% 70%% Active Online Users 60% 50% 40% 30% 20% 10% 0% s es g ia a K y So erm e a M d l g o ly C ge a ap a n a A ina Fr in nd A he K zi ea Po e si on an c si al ad i on ic n si pa in or Ita Si Ind l A US et U a ra an ne or la ra ay tr rla us H ex h Sp pp K an Ja B C us ve do al R ili ng h M G In Ph ut ba N lo G4 http://www.crunchbase.com/company/tribe5 http://www.crunchbase.com/company/linkedin6 http://www.crunchbase.com/company/myspace
“If we want to understand what motivates people to act in the way that they do, we need to understand that people live in networks. When we think of our customers, it’s easier to think about people in isolation, people as independent actors. But that doesn’t exist, people live in networks and those networks influence almost every aspect of their lives: what they do, where they go, what brands they prefer, what products they buy” P. Adams This is how Paul Adams, user experience designer at Facebook, previously at Google+, pictures our nowadays lives. How did we get this far? The first milestone was set in 2004, when Mark Zuckerberg together with his college roommates and fellow computer science students Eduardo Saverin, Dustin Moskovitz and Chris Hughes started “The Facebook In fact Facebook, Twitter, and the new entry Google+ have changed and now dominate the recent Social Network scene; we are in the social network era: besides those three giants, every day many new social networks come out from scratches. If a year and a half ago, we might have thought that Facebook and/or Twitter would have crushed any remaining competitors and that would be the end of it, what’s happening is that other social networks, such as LinkedIn and Google were able to find unfilled niches, and we now have four different major social networks, each with its own specialty, but with major overlaps. The biggest point of overlap is in sharing news and other content online. Each site provides a mechanism for sharing the latest headlines with your friends and colleagues. Here’s a representation of the most adopted social networks. SOCIAL NETWORK ADAPTION CYCLE schema 4 In the innovators area we can place Friendfeed, which stopped innovating after its acquisition by Facebook; Foursquare, the most famous location based social network with 10 million users; and Google+ with its explosive adoption rate (20 million users in 3 weeks). In the early adoption stage we find professional social net- works like Viadeo and LinkedIn, or generalist ones like Orkut (owned by Google), VKontakte (leader in Russian territories), Bebo. Badoo is the only service specifically designed for dating purposes. MySpace, after reaching the early majority is now struggling for conquering a niche (it fell from 225 million users to 125 million because of several management mistakes and Facebook’s rise). RenRen, the most important Chinese real-name SNS, and Twit-33
ter were able to successfully cross the chasm and reach theearly majority. Meanwhile QZone, China’s largest nickname net-work built on the back of Tencent’s QQ Messenger, is enteringthe late majority area.In the laggards: Facebook, the social network that has con-quered the masses seems determined to hit the one billion usersmark.SOCIAL NETWORK 2.3 typologyCommonly the word typology is used improperly, as mean-ing: a classifications of specific and characterized categories,whereas if we go back to its Greek roots the word tupos meansfuzzy shape and logia means study; the real meaning of typologyis indeed “the study of the fuzzy shapes”. I think that in thisspecific case typology is exactly what I’m about to do; becauseof the quantity and common shared features of the existingsocial networks, it’s very hard to properly classify them. Let’s tryto categorize the most adopted ones, following two differentlogics. schema 5SOCIAL NETWORK COUNTRY REGISTERED USERS ADOPTION RATE facebook U.S.A 700.000.000 75% Qzone China 481.000.000 48% twitter U.S.A 200.000.000 20% ren ren China 170.000.000 17% Vkontakte Russia 135.000.000 14% mySpace U.S.A 125.000.000 13% badoo U.S.A 122.000.000 12% orkut U.S.A 120.000.000 12% linkedIn U.S.A 100.000.000 10& google+ U.S.A 20.000.000 2% U.S.A 1% foursquare 10.000.000Geography base classificationA geography based classification can be remarkable; in fact it’sinteresting to notice that all of the major social network areborn in California, U.S.A. This is not surprising: the SiliconValley is worldwide known for being an incubator of technol-
Russia The Netherlands 26.06m 6.30m 56% 45% 62% 42% 46% Canada 18% 11.72m P olan d UK J apan 54% 12.03m 19.27m 13.66m 43% 48% 44% 16% 26% 46% 40% 16% 28% 26% 8% Germany China 155.29m 18.81m 47% USA 47% 114.55m 53% 38% 34% South Korea 51% 32% 10.93m 51% 23% 20% Italy 12.66m 33% France35 15.92m 38% 11% 57% 49% Hong Kong 45% 36% 2.56m 28% 39% Philippines 56% 14.43m Mexico Spain 33% India 60% 10.10m 12.80m 35.08m 73% 47% 52% 50% 46% 45% 63% 64% 36% Malaysia 37% 49% 11.50m Indonesia 18.93m Brazil 54% 57% 33.49m 63% 66% 54% 41 % 52% 51% 34% Singapore 1.96m Australia 48% 7.05 m Global Map of Social Networking 2011 57% 50 % schema 6 32% 48 % 27 % Behaviour Types: active social networkers (mil) messagers and mailers content sharers joiners and creators of groups
ogy, innovation and creativity. But since this time the topic aresocial networks it’s meaningful to keep in mind that Facebook,Twitter and so on are an American culture based, and trying togo more and more global they are practically exporting a modelrooted into American values, such as individualism, entrepre-neurship, or simply freedom of speech.The country fighting for the pool with the United States isChina. China both in terms of population and of culture has agreat potential in the social network race. Mangas and video-games are born in Asia, in particular in China and Japan indeed.Even if they have almost the same functionality, Chinese andAmerican platform are deeply different.In fact the most important social networks in terms of numberof active members are: Facebook, Qzone, Twitter and Renren.User Experience based classificationAnother interesting classification can be adopted from B.Wirtz’s work7 “ 4C typology of business model” which clas-sifies business model according to how they create value. Ibelieve that today after the social network boom, social networkcan be considered an independent business model (we canidentify its operational and output system and they way it cre-ates value) and not just “a broad factor fundamental to the Web2.0” as B. Wirtz stated in 2010.Therefore we can divide them according to their mission andthe audience they’re trying to reach in:- Content-oriented: focused on the collection, selection,compilation and distribution of online content. Their valueproposition is to provide convenient, user-friendly online accessto various types of relevant content. Their interaction logic canbe one-to-many such as Vodafone Lab (usually are companiesdivisions); as well as many-to-many such as Wikipedia, Cargoc-ollective and slideshares.- Commerce-orientated: focused primarily on the initiation,negotiation, payment and delivery aspects of trade transactions;examples are eBay, and Tao Bao- Connection-oriented: the most popular ones nowadays, theyaim at providing the network infrastructure that enables users’participation in online networks, either on a physical intercon-nection level, or a virtual interconnection level. We can alsocall them “generalist” social network because of the generalistnature of their content, popular examples are Facebook, Twit-ter, Google+.7 Wirtz B.W., Schilke O., Ullrich S., 2010, Strategic Development of BusinessModels, implications of the Web 2.0 for creating value on the internet, LongRange Planning 43, Elsevier (pp 272 - 290)
ANALYSIS 3.1 Three case studies – hypothesis Based on previous analyzed literature, business models can be interpreted as narratives, as “stories that explain how the enterprise works” (Magretta). The hypothesis of this analytical phase, which is consistent with the narrative business model interpretation, is firstly to test the relationship between business logic and business narrative in the social networks context, re- marking if the “reversed” meaning generation cycle takes place and the potential effects of it; ultimately observing if narra- tives generate new meanings and how those new meanings are integrated into the business logic. BUSINESS LOGIC BUSINESS NARRATIVE MARKET The unit of analysis selected is composed by three generalist social networks: Facebook, Twitter, and Google+. Those are the most significant ones because of the richness of users and business narrative existing, and the trend setter position they are in today social environment. 39
ANALYSIS 3.1 Three case studies – Methodology of Analysis“The message of any media or technology is its change of scale or pace”Marshall McLuhanI analyzed Facebook, Twitter and Google+ longitudinally, test-ing the interaction of business logic, business narrative, anduser narrative, and their refle ction on the platform evolution.Firstly I analyzed each social network, year by year on the fourdimensions (BL, BN, UN, platform) to confront them paral-leled and observe how one interact with the other, withdrawinga longitudinal picture at the end.In a second phase I confronted the three social networksgeneral pictures trying to draw communalities, possible patternsand proves of my hypothesisThe tools used were:- Business Logic: the building blocks visualization diagramfinalized by A. Osterwalder and Y. Pigneur1 , to understandhow changes in a part of the business model would affect thegeneral picture- Narrative: I divided the analysis of the narrative in threemain fields, in order: what users say, what the market says andwhat the company (social network) says, gathering both textand visual narratives- Honey Graph: ultimately I analyzed the effect of the busi-ness evolution from the user perspective adapting J. H. Kietz-mann work “ the seven functional blocks of social media”2Other variables taken into consideration were the evolution ofnumber of users and revenues.Data CollectionTextual and Visual narrative data were collected both directlyand indirectly. The main direct sources were the social networkscompany page, on the social network itself and in some caseson other social networks (Twitter has its own page on Face-book as well)Indirect sources examined were technology online magazinesuch as Techcrunch and Mashable as well as blogs and author-ized books. TV, web TV interviews, shows participations andofficial video released by Facebook, Twitter and Google+ havebeen used as references as well. (Oprah’s show is a must)1 Osterwalder A., Pigneur Y., 2010, Business Model Generation. A handbookfor visionaries, game changers, and challengers, Wiley2 Kietzmann J.H., Hermkens K., McCarthy I. P., Silvestre B. S., 2011, Social me-dia? Get serious! Understanding the functional building blocks of social media,Business Horizons, Elsevier
ANALYSISTHE SEVENThe seven functional blocks of social media 3.1 FUNCTIONAL BLOCKS OF SOCIAL MEDIAAdopted from -Adopted from (Kietzmann J.H. et al.) (Kietzmann J.H. et al.)schema 7 extent to which users exchange, distribute, and receive content. There are two kind of sharing: one based onextent to which users objects of sociality extent to whichcommunicate with users have in common, users can formother users in a the other one consists communiteis andsocial media setting. in identifying new subcummunitiesBased on frequency objects that canand content of a mediate thier sharedconversation, interestsvelocity is the rateand direction of thechange in a conver-sation. The rate is thenumber of conversa- SHARINGtion and the directionis the continuity/discontinuity of theconversation CONVERSATION GROUPS USER IDENTITY extent to which users reveal their real identity in a social media RELATIONSHIP PRESENCE setting, can beextent to which users also related tocan be related to their location orother users, alias mood.they have some sort Often people tieof association that REPUTATION di erentleads them to share. identities to theDepending on how context of theusers are connected, di erent socialit determines the media platformswhat-and-how of extent to which users extent to which they useinformation can identify the users can knowexchange. standing of others. if other usersVariables of this are: Reputation can refer are accessible:-number of them both to people or where they are,-position in the their contents if status isnetwork, available,-kind of sources proximityinvolved-multiplexity,-strenght of relation-ship 41
ANALYSIS 3.1 Facebook - historyMark Zuckerberg wrote Facemash, the predecessor to Face-book, on October 28th 2003, while attending Harvard as asophomore. The site represented a Harvard University ver-sion of Hot or Not, and according to The Harvard Crimson,Facemash “used photos compiled from the online facebooksof nine Houses, placing two next to each other at a time andasking users to choose the ‘hotter’ person”To accomplish this, Zuckerberg hacked into the protectedareas of Harvard’s computer network, and copied the houses’private dormitory ID images. Harvard at that time did not havea student directory with photos and basic information, andFacemash attracted 450 visitors and 22,000 photo-views in itsfirst four hours online. That the initial site mirrored people’sphysical community—with their real identities—representedthe key aspects of what later became Facebook.The site was quickly forwarded to several campus group list-servers, but was shut down a few days later by the Harvardadministration. Zuckerberg was charged by the administrationwith breach of security, violating copyrights, and violatingindividual privacy, and faced expulsion. Ultimately, however, thecharges were dropped. Zuckerberg expanded on this initial pro-ject that semester by creating a social study tool ahead of an arthistory final, by uploading 500 Augustan images to a website,with one image per page along with a comment section. Heopened the site up to his classmates, and people started sharingtheir notes.In January 2004, he began writing code for a new website; hewas inspired, he said, by an editorial in The Harvard Crimsonabout the Facemash incident. On February 4th 2004, Zuck-erberg launched “Thefacebook”, originally located at theface-book.com.Just six days after the site launched, three Harvard seniors,Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra,accused Zuckerberg of intentionally misleading them intobelieving he would help them build a social network calledHarvardConnection.com, while he was instead using their ideasto build a competing product. The three complained to theHarvard Crimson, and the newspaper began an investigation.The three later filed a lawsuit against Zuckerberg, subsequentlysettling.Membership was initially restricted to students of HarvardCollege, and within the first month, more than half theundergraduate population at Harvard was registered on theservice. Eduardo Saverin (business aspects), Dustin Moskovitz(programmer), Andrew McCollum (graphic artist), and ChrisHughes soon joined Zuckerberg to help promote the website.In March 2004, Facebook expanded to Stanford, Columbia,and Yale. This expansion continued when it opened as well toall other Ivy League schools and Boston University, New YorkUniversity, MIT, and gradually most universities in Canada andthe United States.Facebook incorporated in the summer of 2004 and the entre-preneur Sean Parker, who had been informally advising Zucker-berg, became the company’s president.In June 2004, Facebook moved its base of operations to Palo
Alto, California. Facebook received its first investment laterthat month from PayPal co-founder Peter Thiel. The companydropped The from its name after purchasing the domain namefacebook.com in 2005 for $200,000.Facebook launched a high school version in September 2005;but by invitation only. Later that year it expanded member-ship eligibility to employees of several companies, includingApple Inc. and Microsoft as well. On September 26th 2006,Facebook opened to everyone of ages 13 and older with a validemail address.In October 2007, Microsoft purchased a 1.6% share of Face-book for $240 million, giving Facebook a total implied valueof around $15 billion. Microsoft’s purchase included rights toplace international ads on Facebook.In October 2008, Facebook announced that it was to set up itsinternational headquarters in Dublin, Ireland.In September 2009, Facebook claimed that it had turned cashflow positive for the first time. In June 2010, an online market-place for trading private company stock reflected a valuation of$11.5 billion.Traffic to Facebook has increased steadily since 2009. Morepeople visited Facebook than Google.com for the week endingMarch 13th 2010.Facebook has also become the top social network across eightindividual markets in the region, Philippines, Australia, Indo-nesia, Malaysia, Singapore, New Zealand, Hong Kong andVietnam, while other brands commanded the top positions incertain markets, including Google-owned Orkut in India, Mixi.jp in Japan, CyWorld in South Korea and Yahoo!’s Wretch.cc inTaiwan.45
ANALYSIS 3.2 Facebook – 2004Product EvolutionThe following parts were implemented:- personal profile- wall- universities networks- group application- possibility to “poke”- wirehog work in progressfBusiness Logicschema# schema 8 -implement the Network website co-creation -deal with server A place to Ivy league overloading collect info and Stanford -PR with about students and universities ourselves to sta be shared with our friends, -harvard email platform to -theface account host user book.com -opensource generated -personal referral software contents -wordofmouth -users behaviour datas hosting server ADV: colleges and local businesses banner and special promotion page