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Why is Facebook so popular

Facebook membership has surpassed 900 million users according to a Form S-1 filed with the Securities and Exchange Commission on April 23, 2012. Specifically the filing states “We had 901 million MAUs as of March 31, 2012, an increase of 33 percent as compared to 680 million MAUs as of March 31, 2011.” Since March 2009 Facebook reports its monthly active users have increased from 92 million; however, of the 901 monthly active users, only 526 million or 58.4 percent use the service on a daily basis.

A membership level as high as Facebook’s is equal to 13.16 percent of the global population. However, Facebook also has business accounts, duplicate accounts and automatic mobile device updates which according to Facebook upwardly skew the monthly and daily activity numbers. Facebook’s Form S-1 states approximately 5-6 percent of accounts are duplicated despite its effort to combat such practices. Furthermore, its estimate of the number of duplicated accounts is itself based on a sample and consequently subject to inaccuracy.

Since Facebook has registered to become a public corporation it is likely its market capitalization will increase. Following such capitalization further expansion of Facebook’s membership is possible. Facebook’s stated strategic goals include additional acquisitions and these acquisitions should enhance Facebook’s product capabilities. For example, TechCrunch reports Facebook’s acquisition of Instagram turns a competing software application into enhanced product capabilities for Facebook. Such improvements add value to the corporation’s brand and have the ability to retain existing membership as well as attract new members.

Despite Facebook’s strategic plans the company and its membership levels are not without challenges. Lawsuits, security, competition and marketability are all variables that can substantially sway the company’s financial strength and market positioning. Business Week details several of these business risks, one of which is that 12 percent of Facebook’s revenue is derived from its games developer Zynga, Inc. Additionally, according to Mercury News, enterprise software, an alternative to social media, has exhibited recent appeal among investors.

Also of relevance to Facebook’s membership is Google Plus, which has substantial capacity to restrain Facebook’s growth due to the size and presence of Google in the marketplace. To illustrate, according to ars technica Google increased its membership in Google plus by 45 million users to 90 million in just three months; it also has an 80 percent weekly activity rate per the report. Moreover, Google Plus’ is not even a year old and its growth rates are comparable to that of Facebook in 2009, five years after its launch.

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