Explain it: Cash Rates

Guest Author: ESYP

Introduction

The cash rate refers to the rate of which banks loan each other money in order to balance their ESAs (Exchange Settlement Accounts). To understand the cash rate, one must firstly understand the concept of the open market operations in Australia.

Open Market Operations

On the first Tuesday of every month, the RBA (Reserve Bank of Australia) board holds a meeting to set the target cash rate for the next month after which at 2:30pm, the target rate will be announced. This is also referred to the government’s monetary policy. Contrary to common belief, the rate does not immediately come in to operation but rather operates with a lag.

After this rate is set, the RBA will start open market operations, that is, they will start to utilise the selling or purchasing of government securities to and from financial institutions in order to reach that target rate. If the RBA board decides to increase the cash rate, in line with contractionary monetary policy, which is to decrease spending, the government aims to reduce the supply of money and thus increase the “cost” of money. To achieve this, the RBA will sell government securities such as bonds, at a discount in order to entice the purchasing of this bonds. As part of the law, the ESAs of every bank must be balanced. However the nature of the ESA is that it facilitates inter-bank monetary transfer. For example, if a customer of ANZ writes a cheque and gives it to someone who deposits the cheque at Westpac, this is an interbank transaction. In turn, along with the millions of other different interbank transactions, they must balance the differences between the banks. As the RBA pays an interest rate of -0.25 of the cash rate for excess funds and +0.25% of the interest rate for any shortages, there is an incentive for banks to loan each other this money. As such, after enough of the government securities are sold or bought, money must move between the institutions and the RBA.

When increasing the cash rate, the banks transfer their money from the ESAs to the RBA in exchange for the bonds and the RBA transfers money to the Banks’ ESAs in return for the bonds when a decrease is wanted.

Because of these transactions, there is an effect on the liquidity of financial institutions. When there is an increase in the cash rate, banks’ ESAs will now have less money and thus have to replace that money to avoid penalty and as such institutions will now have to compete for the limited cash available thus driving up the cash rate. In the event that there is a decrease in the cash rate, bank’s ESAs will now have more money and now want to get rid of this excess cash. Therefore institutions will compete to get rid of their surplus cash thus driving down the cash rate.

Because the cash rate is the wholesale rate that affects whole sale borrowing, retail interest rates will follow suit, be it with a difference to ensure the banks make profit.

 

Impact on you

You might be thinking, what’s this talk about banks and the RBA got to do with me? I’m not looking to borrow from the RBA? The key impact of the cash rate on the general population is the incentive to spend on credit. If banks decide to reduce their retail interest rates because of the lowered interest rates, interest repayments for mortgages or personal loans will drop and as such the final cost of buying that good will decrease. Additionally, reduced retail interest rates will decrease the incentive to save as your monthly interest payments from your savings accounts will decrease. This means that there is encouragement to spend!

As such, understanding the business cycle will be key in avoiding larger interest repayments than you have to. We’ll be covering that next time on Explain it!

 

 

 

 

 

 

 

 

Disclaimer: None of the information in this article is professional financial advice. The author(s) of this article will not be liable for any financial decisions made based on the information of this article.

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Explain it: The Business Cycle

Guest Author: ESYP

Introduction 

The baseline of all economic activity: the business cycle. This is the cyclical trend demonstrating the trend of economic activity. A typical business cycle lasts approximately 69-84 months. The business cycle has a few typical phases. Starting with an expansion as economic growth starts to build. When economic activity reaches a peak, it transitions into a peak. An extraordinary peak will be classified as a boom. Afterwards, as economic activity starts to slow and decrease, it transitions into a contraction. When economic activity reaches a low, it forms a trough. An extraordinary trough is a recession.

trade-cycle

Some of these terms may be familiar to you as media outlets frequently use terms like peaks and troughs, booms and recessions. But knowing the terms is just the start, knowing the impacts will help you be more aware and hopefully more successful.

How does this affect me?

It’s all good and jolly to know these terms but their implications are what separates your crazy uncle in his bomb shelter from the successful business people working at Wall Street. However speculating on the business cycle is not recommended due to the volatility of the finance sector and as such take large precautions if that is something you want to pursue. Luckily for Australians, we have never experienced a recession, measured by 2 consecutive quarters with negative economic growth in over 25 years as such the future outlook is bright.

You and me, we aren’t multimillionaires or owners of large businesses. Many of us don’t even have speculative assets, which are assets that have risk or losing outlay with the expectation of substantial gain eg. Stocks. Why does this business cycle thing affect us? The crux of the business cycle is that it allows you to see how the economy is performing as a whole and as such, gives you fair warning about your future.

Additionally the government uses the business cycle as one of the factors in setting the cash rate, which directly impacts the retail interest rates that banks are able to give us consumers. But we’ll go into that next time.

 

Tell us what aspect of finance you want covered next time!

 

Disclaimer: None of what we write is professional advice and as such the author(s) cannot be liable for decisions based on the presented info

Explore: The Great Ocean Road

Ask any Melbournian and they will recommend a visit to the Great Ocean Road, it’s a simple masterpiece. With a length of 243 km, the Great Ocean Road contains something new and exciting every turn of the corner, whether it be a different landscape, another vibrant coastal town or a forest. Starting in Torquay and ending in Allansford, the Great Ocean road covers hundreds and thousands of landmarks, towns and events. I will cover the major attractions that are along the Great Ocean Road and some advice for those who want to have a fun driving experience.

The most famous attractions lay beyond the Otways national park, but we will start our coverage of the top ten places to visit along the Great Ocean Road from the start (east end).

12 apostles

DSC_0003

Probably one of the most well known attractions along the great ocean road and would definitely need a visit. The 12 apostles, well actually only 8 now are giant limestone stacks that are just off the shore. They are an incredible site to see with their giant tall structures being crushed by the white waves, making it a fantastic piece to photograph and view. There is a dedicated discovery centre with lookouts and I would definitely recommend walking all the way down to the beach to view the 12 apostles. The stacks currently erode at 2cm per year due to the harsh nature of the southern ocean, hence I believe you must visit these mammoths before they all collapse and erode away.

Otways national park

The Otways national park is a fantastic national park along the Great Ocean Road and has some of the best roads to drive along. The national park itself contains 3 waterfalls which are a must visit and contain a huge range of different plant life, animal life and fungi. It is a perfect place for a picnic, mountain bike ride and camping. The Otways have a lot to offer which treetop adventures, hundreds of walking tracks and a seaside view at the edge of the national park. There are an abundance of lakes and rivers, making the Otways a photographers dream. Close to the Otways, there is a fantastic windy road which I would highly recommend any driver to visit, Turtons track. Make sure to have tyres with plenty of grip and are comfortable to drive on these windy roads. It is a fantastic drive with wonderful scenery and greenery that surrounds you, it truly is a magical experience.

London bridge

Remember the childhood nursery rhyme of London bridge is falling down? Well the London Bridge along the Great Ocean Road has in fact fallen down and has now taken on the name of London Arch. It is a natural arch caused by erosion and used to be connected to the mainland, however in 1990 the arch connecting the bridge to the mainland collapsed and thus now is called London Arch. It is still a fantastic natural arch to look at with and provides fantastic photography opportunities.

Loch Ard Gorge

DSC_0107

Just situated 3 minutes away from the 12 apostles, the Loch Ard Gorge is gorgeous. Visitors are allowed to walk down the beach and see in beautiful beach in all its glory. It is fantastic on a warm day and also provides moody photos on a cloudy day. It was named after a ship with ran around on a nearby island, leaving on 2 survivors out of the 54 on board. The Loch Ard Gorge has served many purposes in film and media and will continue to be one of the most beautiful attractions along the Great Ocean Road. Make sure to bring your towel and bathers if you would want a dip! The water is crystal clear and I couldn’t resist dipping my toes in the water.

Apollo Bay

Apollo Bay is a coastal town situated before the Otways national park and definitely deserves a visit for a lunch stop. There is a lot on offer in this town with fantastic eateries, sea-side views and even the chance to catch a few whales. Southern right whales are known to breed in the area and there have been many sightings of humpback whales in the vicinity. Other towns to visit include, Lorne and Torquay. In fact, I would recommend stopping at as many coastal towns as possible as each has a different vibe, atmosphere and culture.

The Razorback

The razorback is another rock formation that is situated very closely to the Loch Ard Gorge. The name is given to this rock formation with the way it looks due to the wind and water erosion the rock has experienced over the many years. The walking path is a loop and you have a fantastic view of the other rock formations surrounding the Great Ocean Road.

The Blowhole

No surprises here, the blowhole spurts out water on the viewing flatforms and surrounding rocks. It is a fantastic way to cool down on a hot summer’s day and also creates some very interesting long exposure photography. The blowhole is located near the Loch Ard Gorge, but mind you the sea-spray on a calm day can be little to none. The area is also heavily vegetated, so please be careful when making your way to view the blowhole.

The Arch

DSC_0188

The arch, different to London Arch, is a natural formation of an arch located not too far away from the 12 apostles. There is now parking and access to the arch and is a fantastic thing to view no matter what time of the day. It is a quieter attraction which is good to take a breather here and there. There are stairs and walkways to get close to the arch, however getting very close to the arch does require going off roading (with your legs).

Bay of Martyrs

Situated closer to the west end of the Great Ocean Road, the bay of martyrs is one of the most beautiful sites along the great ocean road with plentiful bird wildlife. There are guided walks here and is a prominent sunset destination with its large open views with the limestone cliff edges, reefs and the sparkling water. Some have said the bay has better views than the 12 apostles and are less crowded. I would place this as un underrated spot to visit along the great ocean road.

Bay of Islands

The bay of islands, close to Warrnambool, has spectacular sights and is definitely worth the trip . Many tourists often miss the parts beyond London Arch, however I strongly recommend to travel further to these locations due to their fantastic views and low crowds, making it feel like a private beach. It is quiet and relaxing, a great escape from everyday life. Yet again, the locals have rated this higher than the 12 Apostles and I don’t blame them.

DSC_0103

When travelling along the Great Ocean Road, ensure to travel early in the morning to avoid large tour groups and parking can be limited so be prepared to park far away and walk for the most part. Ensure to pack plenty of water and snacks and definitely bring a DSLR if you have one. If you are unsure as to which DSLR to buy, refer to this guide. Make sure to put the Great Ocean road on your bucket list, you will not regret it. Summer, Winter, rain or shine, there is never a bad day to visit the Great Ocean Road as each climate has a different mood and different perspective.

Solution to Stolen Game Codes

Have you ever bought a hard copy of a game at your local electronics retailer, gotten home and tried to use the authentication code in the casing and have been greeted to an error saying “this game code has already been redeemed”? Well, you’re not the only one, it happens far too often.

Over the weekend, I bought my mate a brand new copy of Overwatch from ebgames after the new character, Doomfist was released. Upon activation of the code, we were greeted with an error that the code has already been used. We literally were like WTF, a brand new game and the code doesn’t work. The packaging wasn’t opened and everything looked new. Having faith in ebgames, we have ruled out that a customer has returned their disc after activating it and resold the game as brand new. We quickly jumped onto Blizzards live chat, which runs fairly often and we had a response time of 1 minute, which is pretty decent compared to other companies these days. After talking with the representative, we learned that our code had been redeemed back in 2016! I repeat, 2016! The game was bought on the 29th of July and someone had a lucky day inputting random codes back in 2016. We were shell shocked and was linked to the account of Melanie. So if there is a Melanie out there who used our code in 2016, you have stolen from us. (well now ebgames after we return the game).

This has been the case for many different people with their overwatch codes and also other games who sell hard copies of games. I personally have experience this on the PS4 with a few Helldiver expansion packs, which makes me wonder, why aren’t companies using different methods to resolve these issue. This clearly is a major issue online with many different key-gens available to download and the large amounts of forum posts of people complaining ( and literally crying!!) over their games. It is pretty devastating for the end consumer and especially the business as they essentially have their stock stolen from them. This renders an 80 AUD game useless, meaning that is essentially isn’t worth anything.

I propose a solution to end this madness, but a stop to online keygens and people bootlegging game codes, it’s time introduce two factor authentication. This refers to using two methods or two different codes to activate the game, meaning that there is a decreased chance in people stealing game codes.

Here’s how it could theoretically work:

The user purchases the game from in store, the store owners do not leave the keys inside empty cases and mustn’t allow employees to use the keys, and the buyer receives the game unopened and untouched. After installing the game, instead of redeeming through one code, use two codes that need to be entered. These two codes would have the same complexity as the original, but must be redeemed in a certain order. So we would have code 1 and code 2, this is like paypal authenticating your bank account. Once these two codes are successfully activated, the user can start playing their game, easy fix! This method would make it so much harder for hackers to find correct keygens, making sure that electronic retailers do not loose stock and the user is happy rather than complaining on different forums about a certain game. It is a terrible situation and it shouldn’t happen to anyone who has actively gone out and paid for the game. There are many other ways to do the second code verification, such as sending text to a mobile device with a code to type in, or answering a phone call with a code or typing in a smaller strong of code instead of using the same. These are all different ways game companies should be looking at to avoid having codes being used. Perhaps even creating a system that once the game has been scanned, the code instead the box goes live, which means there is less of a chance the key gens will re-create that code as it cycles through its loops. This could be a possible solution and it would also help catch out companies who are reselling used games to the consumer. 

Something needs to be implemented to stop this from happening to more and more customers, it’s purely up to the game companies in how they want to approach this, but this isn’t fair on the businesses that sell these games and the consumer. Perhaps you have not experience this before, but trust me, it’s a terrible feeling that sparks rage within you, knowing that someone out there, by chance, has taken your code.

Will Facebook acquire Twitter?

This report can be used as a basis for an extended essay for the international baccalaureate.  

Abstract

This report involves and analysis of the question “With Facebook’s recent acquisition of Instagram and Whats App to what extent may a horizontal integration with Twitter be an appropriate growth strategy?”

Facebook is globally one of the most well-known social networks being the market leader in social networking for several years. However like many other industry leaders, Facebook is facing a number of pressures for change. In order to avoid losing market share to competitors such as WeChat, QQ and Snapchat, Facebook must adopt relevant future growth strategies. Facebook has a history of external acquisition especially horizontal integration.

Due largely to Twitters falling stock prices and market position, the media has focussed on the possibility of Facebook acquiring Twitter.

This report focuses on a range of secondary sources to help analyse this question, comprising empirical research of similar acquisitions previously, a review of academic journals which look at this type of growth strategy and the analysis of both Facebooks and Twitters internal and external environments. Furthermore, access to shareholder report provided important financial data. Specific business techniques included; Porters’ Five Forces, a STEEPLE and Strengths and weaknesses analysis and a quantitative analysis of industry trends allowing a 4 period moving average.

The body of this report, contains an analysis and evaluation of this question using both quantitative and qualitative internal and external information.

The final section comprises a conclusion based on information discussed previously; this being that management does need to at least consider a possible acquisition by Facebook. Supporting reasons for this include may be a favourable financial position and previous success of this strategy, although some possible issues are identified. However the conclusion also states that further management action is required for a more detailed conclusion along with a recognition of certain limitation in this analysis.

 

Part one

“To be successful and remain in business, both profitability and growth are important and necessary for a company to survive and remain attractive to investors and analysts[1].”

This quote is especially relevant as businesses turn to globalisation as shareholders/investors look for an increase in returns even with increasing worldwide economic volatility[2]. Growth essentially relates to expanding a business’s operations through elements of internal and/or external growth[3]. Selecting the most appropriate growth strategy is pivotal, especially as the financial risk of investment increases[4].

As of February 2016, Facebook held a 43.9% share of the Social networking market[5], being the global leader.[6] Initially founded in 2004 by Mark Zuckerberg, Facebook was privately funded until 2012 when they held an IPO[7]. They currently rank 10th on Forbes’ most valuable brands[8]. Their growth is due to former acquisitions and internal growth; a combination of external and organic growth. Facebook has acquired 57 companies with the last acquisition on October 5th, 2015[9], indicating the significance of the strategy.

According to Ansoff, their growth strategy is focussed around a combination of market penetration, market development and product development; expanding their user community, offering new products/services whilst increasing current user engagement[10].

However like many other global businesses, they face numerous external pressures such as developing global technologies, economic volatility, which could affect their returns and funding for investments, and changing customer needs; such as improvements in privacy and accessibility[11]. Technology quickly becomes redundant through advancements in mobile phone capabilities, software/hardware upgrades and storage capabilities[12]. For Facebook, the increasing expansion from global competitors is a major operating pressure.[13] WeChat has emerged from China and has seen millions of users flocking to use their platform.[14] WeChat aims to penetrate South East Asia, which also happens to the market which Facebook is expanding into.[15]

As an example of their acquisition growth strategy, in late 2012, Facebook acquired Instagram who was a major competitor that specialised in instantaneous photo-sharing[16]. It was also a ‘eat or be eaten’ decision for Mark Zuckerberg, driven by rumours of Google and Microsoft lurking around.[17] At the time, the culture of Instagram was also considered to be very similar to Facebook as their vision was “To capture and share the world’s moments”[18].

This acquisition was a form of horizontal integration, which involves acquiring other businesses or services that are at the same stage of production in similar industries, as both Instagram and Facebook are social media networks[19].

Interestingly, Zuckerberg claimed that “This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all[20]” Ironically this has not been the case as discussed later.

Looking at quantitative data alone, Instagram surpassed 400 million[21] MAU (Monthly Active User) in 2015, beating the second largest social media company, Twitter, by 31% in active user base[22]. Their growth has been supported by popularity in foreign markets and teenagers as Instagram offers a greater sense of privacy[23]. Ultimately giving Instagram a worth of $US35b in early 2016 and is estimated to earn $US3.2b in revenue for 2016.[24] Therefore, Instagram has been one of the stronger driving factors regarding Facebooks recent growth.[25] Furthermore, suggesting that Instagram’s corporate culture and employee motivation has not been heavily affected[26].

As another example of this strategy, Facebook acquired WhatsApp in 2014 in a deal valued at $US19.6b[27]. WhatsApp is globally the most popular free mobile messaging app with over a billion MAU[28]. Although being criticized for overpaying for a free service, Facebook gained significant access to a large new global user base[29]. Furthermore, it allowed Facebook to eliminate competition in the market and reduced the chance for another competitor to acquire Whatsapp[30].

According to Zuckerberg, Whatsapp and Facebook had a similar philosophy regarding customer charges, demonstrating their similar vision[31]. During the acquisition, founder Jan Koum was known to help his team navigate the acquisition to ensure WhatsApp maintained its culture and independence, as was with the case with Instagram[32].

More recently and continuing into 2016, rumours have surfaced regarding possible businesses acquiring Twitter, another leading social network[33]. In that mix is Facebook, largely due to their financial capacity and a rival. This timing is vital with Twitter’s shares plummeting significantly throughout 2015.[34]

Whether this occurs would be an important issue for a number of reasons. The huge cost of $US12b could potentially have significant consequences on Facebook’s survival and represents two of the biggest market players combining[35]. It also represents a huge issue in that if Facebook is seen to be unsuccessful in any purchase or return on investment, it could have a detrimental impact on their brand image, challenging their market strength.

Therefore my question is “With Facebook’s recent acquisition of Instagram and Whats App to what extent may a horizontal integration with Twitter be an appropriate growth strategy?” To explore this question, the focus is largely from Facebooks perspective. The following analysis considers a range of internal and external factors using relevant business analytical tools. In the context of “to what extent” the analysis looks at the possible financial implications in terms of market share and profitability together with a more cultural perspective in terms of vision, synergy, employees and management.

 

Part two

To tackle this report, I based my findings on secondary research through a combination of web based, academic sources/journals and the companies’ respective shareholders reports. Most sources came from within the last 4 years which covers Facebooks acquisition of Instagram in 2012.

Search engines such as Google and JSTOR combined with the ProQuest database, provided the focus of the research and sourced a range of both qualitative and quantitative data.

A range of business tools and techniques were used in the analysis such as a strength and weakness analysis, Porter’s 5 forces, trend analysis based on financial data, the Ansoff matrix and a STEEPLE analysis specifically for external related issues.

There are limitations within this report which do restrict a more comprehensive analysis. These limitations include unavailability of a key data base, privacy restrictions particularly relating to a lack of financial information. Where possible, largely objective sources were used, however some opinion pieces helped to give a range of views and contrast on specific situations. The challenge was to ensure that the information was valid when some sites had conflicting information.

 

Part three

To provide a more academic discussion behind this form of growth, J. Dunbar claims that acquisitions have become a common form of growth in a world fuelled by organisations fixated on growth[36]. Reasons include the intended synergy of the new structure and the increase in market share, market power and larger customer base[37]. Not only this, it is seen as a quicker method of growth especially in terms of protecting the survival of a business in a more competitive market[38]. Specifically, in the tech industry, horizontal integrations are becoming increasing popular according to Vossoughi in the Harvard business review[39]. Larger businesses may want a product/service another business has to offer, if the target business lacks funding to grow and develop what they offer, they often end up acquired[40]. This type of integration may equate to larger market share and greater market power/dominance[41].

However, acquisitions have major drawbacks such as redundancies, conflict and loss of control. Rina Steynberg claims “A culture clash between the integrating organisations is consistently cited as one of the top ten reasons for M&A failure”[42]. Potential disagreements arise from possible Job losses due to savings or repeat jobs and management teams may feel a loss of control when restructuring. Veldsman and Steynberg claim people integration drive acquisition failures.[43] The culture clash is often due to an unshared common vision and/or leadership style, meaning those co-ordinating the acquisition often overlook people integration[44]. Steynberg claimed “M&A failure results in the closing down of organisations…….. People… and the wider community… shareholders, are impacted.”[45] Communication and form also drive acquisition failures, communication between management and employees. These issues all affect the success of an acquisition[46].

Lynn Jekkals, managing director at Aon Risk Solutions claims: “(businesses) were buying companies out of bankruptcy and really bought troubled companies that weren’t making it through the tough times,”[47] Suggesting that acquiring a dying company may be high risk.

A recent Harvard Business report suggests that the acquisition failure rate sits between 70% and 90%. This extremely high figure assures this method of growth is high risk[48].

However, despite the above “criticisms”, the number of acquisitions are on the increase. Deloitte conducted a survey in which they collected data from 2,500 US executives from both companies and private equity firms in April 2014[49]. Staggeringly 84% of respondents are expecting to maintain or increase their acquisition activity over the following two years. Furthermore, 60% of the respondents forecast to acquire targets in foreign market, diversifying their customer base[50].

Any analysis of this strategy includes looking at their past record of acquisitions, but also needs to involve a study of, where possible, similarly positioned businesses. Certainly research reveals a number of both successes and failures.

In 2014, Microsoft bought Nokia for $US7.6b[51]. Nokia was once the market leader in the mobile phone market peaking at 62.5% market share, but fierce competition drove its share down to 3% (2016)[52]. According to Robert Cringley, the motive behind this acquisition was for Microsoft “to compete better with Android and iOS (as major competitors) & also to take full control of its smartphone destiny.” However, “It was a mistake to begin with,” claimed Jack Gold, principal analyst at J. Gold Associates[53]. It was deemed a failure in 2015 where Nokia had struggled to regain lost market share and is Microsoft’s biggest write off, cutting 7,800 jobs with 18,000 cut the year before[54]. Frank Gillett, an analyst with Forrester Research claimed that “It’s the last disappointment of the previous generation of Microsoft’s leadership,”[55] This shows how different the leadership styles were as well as cultures, considering both companies were founded in different countries[56].

Equally, the horizontal integration and takeover of Mojang in 2014, a company producing computer games, by Microsoft has been seen as a relative success[57]. This has opened Microsoft to a new younger demographic and when combined with their existing products, saw a significant increase in sales. Subsequently under Microsoft, Mojang is selling 10,000 games a day[58]. Matt Booty explained. “These two things can come together at their best to deliver an amazing game with forward-looking technology that required deep resources to build…..It highlights how these two companies can come together and build something that didn’t exist before.[59]” This success is due to their similar visions.

 

Part four

The analysis which follows needs to take into account the current growth, opportunities, the relative position and financial capabilities of Facebook to maintain this strategy in the social networking market. Utilising the Boston matrix[60], Facebook is in a high growth market and has a high market share.

31% of the world’s population use social media which is 2% from last year[61]. Furthermore 1.97 Billion people access their social media through mobile, again a significant increase over the 1.65 Billion in 2014/15[62].

Facebook

As previously stated, Facebook is the social network market leader with 43.9%, whereas Twitter has 5%[63]. (Figure 1)

Figure 1: Leading social media websites in the United States in February 2016, based on share of visits. 

Facebooks strong market position and growth can also be seen from looking at the constant increase in monthly active users (figure 2). In figure 2 as of ‘Q4 2015, Facebook had 1,591 million active users, a growth of 14.21%; ‘Q4 2014 being 1,393 million active users.[64]

Figure 3 highlights this trend using a four period moving average of their quarterly data base which demonstrates their consistent increase.

Year Period Users (Millions) 4 period moving average Centering Variation
Q1 2010 1 431
Q2 2010 2 482 517.75
Q3 2010 3 550 580 548.875 1.125
Q4 2010 4 608 644.25 612.125 -4.125
Q1 2011 5 680 706.75 675.5 4.5
Q2 2011 6 739 766 736.375 2.625
Q3 2011 7 800 821.25 793.625 6.375
Q4 2011 8 845 875.25 848.25 -3.25
Q1 2012 9 901 927 901.125 -0.125
Q2 2012 10 955 979.75 953.375 1.625
Q3 2012 11 1,007 1032 1005.875 1.125
Q4 2012 12 1,056 1072 1052 4
Q1 2013 13 1,110 1117.5 1094.75 15.25
Q2 2013 14 1,115 1160.5 1139 -24
Q3 2013 15 1,189 1202 1181.25 7.75
Q4 2013 16 1,228 1252.5 1227.25 0.75
Q1 2014 17 1,276 1292.75 1272.625 3.375
Q2 2014 18 1,317 1334 1313.375 3.625
Q3 2014 19 1,350 1375.25 1354.625 -4.625
Q4 2014 20 1,393 1418.5 1396.875 -3.875
Q1 2015 21 1,441 1467.25 1442.875 -1.875
Q2 2015 22 1,490 1516.75 1492 -2
Q3 2015 23 1,545 1570 1543.375 1.625
Q4 2015 24 1,591
Q1 2016 25 1,654

Figure 3: Four year moving average on Facebook’s quarterly user base[66].

Figure 4: Facebook’s revenue and net income from 2007 to 2015 (in million U.S. dollars)[67]

Facebook’s worldwide growth has also generated a large increase in revenue almost exponentially over recent years (Figure 4), (43.79% increase from 2014 to 2015). Figure 5 also highlights this through a trend analysis using moving averages. Referring to their shareholder report (Appendix 1&2) [68], their long-term debts situation has also improved markedly. (2013 – $1.5 billion / 2015 – $0). Possibly indicating the necessary financial stability to acquire Twitter.

Year Period Revenue (Millions) 4 year moving average Centering Variation
2007 1 153
2008 2 272 794
2009 3 777 1683.5 1238.75 -461.75
2010 4 1974 2887.75 2285.625 -311.625
2011 5 3711 4661.5 3774.625 -63.625
2012 6 5089 7284.5 5973 -884
2013 7 7872 10681.25 8982.875 -1110.875
 2014 8 12466
2015 9 17298

Figure 5: Facebook’s revenue four year moving average based on Figure 3

Other sources also emphasis the power of Facebook[69] . Around 62% of Americas get their news off social media sites, were Facebook holds responsibility for 44% of that[70].

 

 

Twitter

Twitter has had very stagnant growth over the last few years with very minimal user growth, suggesting the company has reached saturation.

Twitter’s revenue surprisingly increased 62% between Q2’ 2014 to Q2’ 2015, annual revenue for 2015 being $US2.2b. However investors were not confident after Twitters shares plummeted over 2015[75]. In 2015, the stock price traded at $52.87 at its April peak fell to $22.47 dollars in August. Furthermore, in 2016, fell to a staggering $14.01 in May[76].

 

Part five

An effective analysis needs to focus heavily on Facebook’s previous history with their acquisitions strategy with a range of current and possible internal and external factors. This needs to also draw upon aspects of Twitters operating environment.

The previous chapter indicates Facebook’s relative growth hence why Facebook is regarded by many analysts to be one of the likely companies to acquire Twitter.

Current strength and weaknesses

Strengths

As stated, the acquisition cost of Twitter will be approximately $US12b[78]. In 2015 Facebooks financial reports (Appendix 1&2) revealed $US18b revenue, approx. $US4b net profit, $US22b of current assets and only $US5b in total liabilities. Facebook has $US44b in shareholders equity and no long term debt[79]. These reports have shown financial stability in recent years and may indicate a financial capacity to acquire[80]. (Table 1)

Another strength of Facebook is undoubtedly their success in using this strategy in the past with Whatsapp and Instagram being referred to previously[81]. (Table 1)

As of February 2016, Facebook already has a market share of 45.5% including Instagram[82], Indicating significant market leadership. Acquiring Twitter could create a staggering 50.5% of the US market share. (Table 1)

Additionally within the industry, Facebook is seen to have a very strong and innovative culture, enabling them to take on more products. Harry McCracken described Facebooks culture as, “fabulously successful working environment that Zuckerberg devised in the early years”[83]. (Table 1)

Weaknesses

There is some suggestion that there may be an element of saturation in this market (Eldon, “Facebook Started Saturating the US Market In 2011”[84]), especially with new competitors. Figure 2 previously does suggest a slowing in rate of growth. (Table 1). Integrating Twitter’s algorithm into Facebook could possibly be a solution. However, it may be more viable to acquire a start-up that has a much larger potential compared to company who has not seen growth nor large amounts of profiting years (Twitter).[85]

Furthermore around 80% of Facebooks revenues come from advertisements on its social network[86]. However, the revenue is dependent on the growth of users which eventually, may hit saturation in certain markets[87]. Therefore Facebook may rely too heavily on one revenue stream which is subject to change with new competitors emerging in the market. (Table 1)

 Table 1: Strengths and Weaknesses of Facebook

Strengths

1.     Financially, large Increase in revenue streams and market share[88].

2.     Strong record of successful acquisitions[89].

3.     Recognised to have a digital face to face connection with customers[90].

4.     Strong and innovative culture[91].

 

Weaknesses

1.     Some markets at reaching the saturation point for Facebook.[92]

2.     May heavily rely on one revenue stream[93].

 

 

Porters’ Five Forces analysis is another useful tool to also help analyse the possible acquisition by assessing its competitive position.

Porters Five Forces

Threat of new entrants

The social networking is open to new competitors as the market is deregulated (e.g. see figure 1). Hence Facebook continually faces new entrance[95].

Threat of Substitution

With the increase in the range of competitor’s service in the market, many consumers have started to use multiple social networks. This is a major threat to Facebook especially with international social networks such as WeChat and QQ whom grow at faster rates[96].

Supplier Power

In this element, Facebook holds a strong position as they own servers[97].

Buying Power

Consumers having more choice through developments in technology, advertising and changing needs leads to high customer power.

Rivalry among existing competitors

Even though Facebook has acquired some of its competitors such as Whatsapp and watched competition fail such as Myspace, there is still significant rivalry particular in terms of Google +, Snapchat and WeChat[98].

General conclusion

So even though Facebook is the market leader, using this technique does suggest that increasingly they are in a more competitive market that does require innovative strategies that will retain or grow their user base as well as revenue streams[99].

 

A steeple analysis also provides a number of external considerations as to whether this acquisition should take place.

 

STEEPLE

Table 2: Steeple analysis

  Opportunities Threats
Political ·       The further opening up of US’ connections with other countries can provide further market development (Ansoff). ·       Uncertainty of the upcoming US presidential election may impact on investor confidence[100].

·       Regulations in China can impact on the global success especially with Chinas fast growing market[101].

Economic ·       The forecasted growth of the US Economy may provide further advertising revenue to help fund this acquisition of Twitter, may provide investor confidence. (Refer to Figure 11) ·       The threat is that if the market remains volatile with less growth than predicted than the acquisition may not be as successful.
Social ·       Customers who use both or just one can integrate together which helps their mission statement of bringing everyone together. ·       Facebook is seen to even gain more powerful which could be a public concern.

·       Acquisition doesn’t provide the consumer with significantly different services.

Technological ·       Use of global technological advancements to help their applications and synergy of the systems. ·       Rival companies may develop new innovative services this acquisition doesn’t really provide.
Legal ·       Facebook able to patent twitters systems and devices, therefore protecting intellectual property and restricting other business usage. ·       US antitrust law prohibits any acquisition or merger that would have the tendency to lessen competition or create a monopoly.
Environmental

And Ethical

·       With an increase in public and media focus on businesses being socially responsible, Facebook can benefit Twitters recognised stance ·       Possible community backlash through possible redundancies.

·       Media’s portrayal of this acquisition may affect brand image.

 

Other considerations

A strength already discussed is Facebooks seemingly strong financial position, (high revenue low debt), which could cover the $12b cost, especially given it would only be a two thirds the price of the Whatsapp acquisition. Furthermore, they do have past success in this strategy, however with concerns about the volatility of the economy, perhaps there is greater risk in the timing of this strategy. Also, as identified previously, the potential acquisition may have consequences on their brand image, from the perspective of an increase in market power and negative ethical issues[103].

Even if the financial side was viable, the STEEPLE analysis previously did identify US antitrust law prohibiting any acquisition or merger that would have the tendency to lessen competition or create a monopoly[104]. Also a pre-acquisition notification must be filed with the US Department of Justice and the FTC (Federal Trade Commission)[105]. Considering the size of this acquisition, it could take time before it passes through, thus tying possible funds.

Certainly a big consideration would be whether the leadership styles of both Facebook and Twitter and culture are compatible. From evidence, they seem to be a similar, however there needs to be more research from management to see if the cultures are compatible[106]. From past examples, Whatsapp and Facebook had similar visions and integrated with synergy.

Zuckerberg (CEO of Facebook) has shown an appetite to acquire other businesses despite at times saying things on the contrary after the acquisition of Instagram. Showing Zuckerberg’s immaculate leadership and management skills to create these successes.

A big consideration is the possible impact directly on the staff of Twitter and also on the possible job security of existing loyal staff at Facebook. Whatsapp had only 55 employees when acquired, leading to a seamless transition. As of December 2015, Twitter had 3,900 staff located around the world[107]. Integrating 3,900 employees situated around the world takes time. This highlights how there will be issues regarding staff that work as management in software, technicians, marketing and accountants as these areas appear as jobs with similar functions in both organisations. If Twitter was left as subsidiary, at least in the short term, then job losses may not be limited.

As previously discussed, the anticipated future growth of the US economy is estimated to be around 2-3%. Kimberley Amadeo, an US economy expert, claims that this is ideal growth rate that is sustainable in the future, again making this a good time for the acquisition[108]. However, if this growth did not occur, any slowdown may reduce the advertising revenue streams which Facebook heavily relies on (Table 1), ultimately negatively impacting their position on acquiring twitter. Furthermore if the market is reaching saturation as discussed previously, the risk involved could also increase. Given that Twitter uses essentially the same revenue streams, the acquisition perhaps would not help Facebooks revenue sources.

A further argument is that Twitter possibly provides what Facebook needs. This is the area of having a strong mobile base whereby consumers have real up to date information of world events. This is supported by a global survey conducted by the organisation “we are social”.  This may allow Facebook to more actively confront their rivals which do this effectively such as Snapchat and WeChat[109]. There is a definite threat towards Facebook as international competition grows at an increasing rate, such as WeChat. Even though Facebook is still clearly the market leader, it cannot afford to wait for this position to be lost or challenged.

Interestingly, Kara Swisher at Re/Code, paints Facebook as a Disney-like media giant[113], and actually feels that Facebook may be better off developing their own twitter like[114] service, which may come at a lower cost. However, Charlotte lee highlights Facebooks failures[115] in attempting to build their own mirror like services, suggesting it may be better to acquire than to waste time and resources to “re-engineer” an already performing product[116]. However, this claim requires more research.

Furthermore the timing might be right for the acquisition especially after the rumours about News Corp acquiring twitter which sent Twitters share prices soaring up until the rumours were disproven, sending the prices back down[117]. If Facebook did acquire Twitter, this could impact their share prices positively. Furthermore Facebook having access to Twitters user data gives Facebook the ability to directly target their advertisements.

Another possible strength of any acquisition is the similarity of target markets according to figure 16. [118] This shows that for both business their primary target market is of the ages of 30-49, possibly their general marketing focus may be similar already.

 

Part six

In conclusion, this analysis suggests that it would in the management of Facebooks best interests to at least consider the possibility of an acquisition of Twitter as a growth strategy. This is accentuated by the evidence that has been collected suggesting that the global social networking market has become increasingly competitive and if Facebook desires to stay as market leader, it is required for them to grow.

All sources suggest any business must continually change and adapt to the consumer’s needs; without adaptation, they will not survive.  It may not be Twitter, but Facebook may be well positioned to acquire another business.

Previous analysis has identified many possible favourable conditions in favour of an acquisition at this point in time, this includes a steady increase in revenue, stable financial position[120], excellent innovative culture and strong leadership and management teams. Facebook has a proven history with acquisitions, certainly have shown they can plan and adopt successful strategies. However, there are some issues for management to consider further, this includes the consideration of the possible impact of the upcoming US presidential election on the US economic stability, investor confidence, US antitrust laws and community backlash.

A more detailed analysis is required due to imitation such as confidentiality issues regarding financial information relating to both Twitter and Facebook, potential subjectivity of some secondary sources, time and word constraints, and lack of access to primary sources. Also management must consider this question on a more global perspective as this essay focuses primarily from a US perspective. Furthermore there is a need for much more detailed research on the cultural compatibility on both Twitter and Facebook. As such, no definitive statement can be reached in this report about the suitability of any acquisition until more detailed research is undertaken.

 

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[2] Ibid

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[23] Lang, N. (2016). Why teens are leaving Facebook: It’s ‘meaningless’. [online] Washington Post. Available at: https://www.washingtonpost.com/news/the-intersect/wp/2015/02/21/why-teens-are-leaving-facebook-its-meaningless/ [Accessed 30 Apr. 2016].

[24] Griffith, E. (2016). Instagram Could Bring in $3 Billion This Year. [online] Fortune. Available at: http://fortune.com/2016/01/25/instagram-3-billion-business-this-year/ [Accessed 12 Mar. 2016].

[25] Facebook dying? Survey suggests teens prefer Instagram and Twitter more. (2014). [online] Tech Times. Available at: http://www.techtimes.com/articles/17682/20141011/facebook-dying-survey-suggests-teens-prefer-twitter-and-instagram-more.htm [Accessed 28 Mar. 2016].

[26] Kiss, J. (2015). Instagram CEO Kevin Systrom: ‘We’re working on time travel’. [online] the Guardian. Available at: https://www.theguardian.com/technology/2015/oct/02/instagram-kevin-systrom-interview-working-on-time-travel [Accessed 30 Apr. 2016].

[27] Deutsch, A. (2015). WhatsApp: The Best Facebook Purchase Ever? | Investopedia. [online] Investopedia. Available at: http://www.investopedia.com/articles/investing/032515/whatsapp-best-facebook-purchase-ever.asp [Accessed 29 May 2016].

[28] WhatsApp: number of monthly active users 2013-2016 | Statistic. (2016). [online] Statista. Available at: http://www.statista.com/statistics/260819/number-of-monthly-active-whatsapp-users/ [Accessed 30 Apr. 2016].

[29] Lieberman, D. (2014). Did Facebook Overpay For WhatsApp?. [online] Deadline. Available at: http://deadline.com/2014/02/did-facebook-overpay-for-whatsapp-686378/ [Accessed 30 May 2016].

[30] Newman, J. (2014). Facebook’s WhatsApp Acquisition Explained. [online] TIME.com. Available at: http://time.com/8806/facebooks-whatsapp-acquisition-explained/ [Accessed 30 May 2016].

[31] Telegraph.co.uk. (2014). Facebook buys WhatsApp: Mark Zuckerberg explains why. [online] Available at: http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-media/10650340/Facebook-buys-WhatsApp-Mark-Zuckerberg-explains-why.html [Accessed 30 May 2016].

[32] Spiegelman, P. (2014). How to Keep Company Culture Alive After an Acquisition. [online] Entrepreneur. Available at: http://www.entrepreneur.com/article/238168 [Accessed 28 Mar. 2016].

[33] Ingram, M. (2016). Buying Twitter: Here Are Some Likely—and Not So Likely—Candidates. [online] Fortune. Available at: http://fortune.com/2016/01/22/buying-twitter/ [Accessed 29 May 2016].

[34] Alexander, T. (2015). Twitter is in trouble and has uncertain future – Koffee-O-Matic. [online] Koffee-O-Matic. Available at: http://koffee-o-matic.com/business/twitter-is-in-trouble-and-has-uncertain-future/ [Accessed 12 Mar. 2016].

[35] Ingram, M. (2016). Buying Twitter: Here Are Some Likely—and Not So Likely—Candidates. [online] Fortune. Available at: http://fortune.com/2016/01/22/buying-twitter/ [Accessed 29 May 2016].

[36] Dunbar, J.K. 2013, The role of organizational leadership capability in mergers & acquisitions, University of Pennsylvania.

[37] ibid

[38] Investopedia. (2015). What strategies do companies employ to increase market share? | Investopedia. [online] Available at: http://www.investopedia.com/ask/answers/031815/what-strategies-do-companies-employ-increase-market-share.asp [Accessed 30 May 2016].

[39] Today’s Best Companies are Horizontally Integrated. (2012). [online] Harvard Business Review. Available at: https://hbr.org/2012/12/todays-best-companies-are-hori [Accessed 30 Apr. 2016].

[40] Curtis, G. (2006). Trademarks Of A Takeover Target | Investopedia. [online] Investopedia. Available at: http://www.investopedia.com/articles/stocks/07/takeover_target.asp [Accessed 29 May 2016].

[41] Renaud, R. (2006). Why do companies merge with or acquire other companies? | Investopedia. [online] Investopedia. Available at: http://www.investopedia.com/ask/answers/06/mareasons.asp [Accessed 29 May 2016].

[42] Steynberg, R.P. & Veldsman, T.H. 2011, “A comprehensive, holistic people integration process for mergers and acquisitions”, SA Journal of Human Resource Management, vol. 9, no. 1, pp. 1-16.

[43] ibid

[44] ibid

[45] ibid

[46] ibid

[47] Weick, R (2014). Business mergers and acquisitions for strategic growth are on rise. [online] Available at: http://www.grbj.com/articles/print/80107-business-mergers-and-acquisitions-for-strategic-growth-are-on-rise [Accessed 29 May 2016].

[48] Today’s Best Companies are Horizontally Integrated. (2012). [online] Harvard Business Review. Available at: https://hbr.org/2012/12/todays-best-companies-are-hori [Accessed 30 Apr. 2016].

[49] M&A Trends Report 2014; a Comprehensive Look at the M&A Market. 1st ed. Deloitte Development LLC, 2014. Print.

[50] ibid

[51] Fiegerman, S. (2015). Microsoft subtly admits the Nokia deal was a failure, 7,800 employees lose their jobs. [online] Mashable. Available at: http://mashable.com/2015/07/08/microsoft-layoffs-nokia/#7plAePwX5Sq5 [Accessed 30 Apr. 2016].

[52] N. Ramachandran. (2016). A STUDY ON NOKIA’S FAILURE IN THE GLOBAL MARKET AND CONSUMER PREFRENCE LEVEL TOWARDS NOKIA INTRODUCTION OF THE STUDY. [online] Available at: http://www.academia.edu/14433835/A_STUDY_ON_NOKIAS_FAILURE_IN_THE_GLOBAL_MARKET_AND_CONSUMER_PREFRENCE_LEVEL_TOWARDS_NOKIA_INTRODUCTION_OF_THE_STUDY [Accessed 30 May 2016].

[53] Keizer, G. (2016). Microsoft writes off $7.6B, admits failure of Nokia acquisition. [online] Computerworld. Available at: http://www.computerworld.com/article/2945371/smartphones/microsoft-writes-off-76b-admits-failure-of-nokia-acquisition.html [Accessed 6 Jun. 2016].

[54] Fiegerman, S. (2015). Microsoft subtly admits the Nokia deal was a failure, 7,800 employees lose their jobs. [online] Mashable. Available at: http://mashable.com/2015/07/08/microsoft-layoffs-nokia/#7plAePwX5Sq5 [Accessed 30 Apr. 2016].

[55] Fiegerman, S. (2015). Microsoft subtly admits the Nokia deal was a failure, 7,800 employees lose their jobs. [online] Mashable. Available at: http://mashable.com/2015/07/08/microsoft-layoffs-nokia/#7plAePwX5Sq5 [Accessed 30 Apr. 2016].

[56] Arthur, C. (2014). Elop was ‘wrong man to lead Nokia’ says new book on phone company’s downfall. [Online] the Guardian. Available at: https://www.theguardian.com/technology/2014/oct/08/nokia-stephen-elop-operation-new-book [Accessed 29 May 2016].

[57] Owen. (2016). Yes, we’re being bought by Microsoft. [online] Available at: https://mojang.com/2014/09/yes-were-being-bought-by-microsoft/ [Accessed 30 May 2016].

[58] Staff, D. (2016). Minecraft selling a whopping 10,000 copies a day | Dispatch Tribunal. [online] Dispatchtribunal.com. Available at: http://www.dispatchtribunal.com/minecraft-selling-a-whopping-10000-copies-a-day/21145/ [Accessed 30 Apr. 2016].

[59] Gaudiosi, J. (2016). More Minecraft Coming Your Way. [online] Fortune. Available at: http://fortune.com/2016/03/01/how-microsoft-just-changed-minecraft/ [Accessed 29 May 2016].

[60] Owen. (2016). Yes, we’re being bought by Microsoft. [online] Available at: https://mojang.com/2014/09/yes-were-being-bought-by-microsoft/ [Accessed 30 May 2016].

[61] Digital in 2016 – We Are Social UK. (2016). [online] We Are Social UK. Available at: http://wearesocial.com/uk/special-reports/digital-in-2016 [Accessed 18 Apr. 2016].

[62] Ibid

[63] Figure one

[64] Digital in 2016 – We Are Social UK. (2016). [online] We Are Social UK. Available at: http://wearesocial.com/uk/special-reports/digital-in-2016 [Accessed 18 Apr. 2016].

[65] Graph sourced from Statista. (2016). Number of Facebook users worldwide 2008-2016 | Statistic. [online] Available at: http://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-worldwide/[Accessed 18 Apr. 2016].

 

 

[66] Graph sourced from Statista. (2016). Number of Facebook users worldwide 2008-2016 | Statistic. [online] Available at: http://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-worldwide/%5BAccessed 18 Apr. 2016].

[67] Graph sourced from Statista. (2016). Facebook: annual revenue and net income 2015 | Statistic. [online] Available at: http://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income. [Accessed 24 March 2016]

[68] Facebook, Facebook Reports Fourth Quarter and Full Year 2015 Results. 2016. Print.

[69] Gottfried, J. and Shearer, E. (2016). News Use across Social Media Platforms 2016. [online] Pew Research Centre’s Journalism Project. Available at: http://www.journalism.org/2016/05/26/news-use-across-social-media-platforms-2016/ [Accessed 28 May 2016].

[70] ibid

[71] ibid

[72] Graphed sourced from Statista. (2016). Twitter: number of monthly active users 2016 | Statistic. [online] Available at: http://www.statista.com/statistics/282087/number-of-monthly-active-twitter-users/ [Accessed 26 May 2016]

[73] MAU is an abbreviation for Monthly Active Users

[74] Graph sourced from Roettgers, J. (2015). Can Jack Dorsey’s Twitter Revolution Save the Company? [online] Variety. Available at: http://variety.com/2015/digital/news/jack-dorsey-twitter-ceo-new-1201621233/ [Accessed 29 May 2016].

[75] Lynley, M. (2016). Twitter’s dysfunctional Wall Street relationship. [online] TechCrunch. Available at: http://techcrunch.com/2016/05/01/twitters-dysfunctional-wall-street-relationship/ [Accessed 30 May 2016].

[76] Saintvilus, R. (2016). Twitter Stock Falls after Two Top Executives Leave (TWTR) | Investopedia. [online] Investopedia. Available at: http://www.investopedia.com/articles/insights/052716/twitter-stock-falls-after-two-top-executives-leave-twtr.asp [Accessed 30 May 2016].

[77] Data sourced from Google.com. (2016). Twitter Inc.: NYSE:TWTR quotes & news – Google Finance. [online] Available at: https://www.google.com/finance?q=NYSE:TWTR [Accessed 04 May 2016].

[78] Ingram, M. (2016). Buying Twitter: Here Are Some Likely—and Not So Likely—Candidates. [online] Fortune. Available at: http://fortune.com/2016/01/22/buying-twitter/ [Accessed 30 May 2016].

[79] Facebook,. Facebook Reports Fourth Quarter And Full Year 2015 Results. 2016.

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[82] Leading social media websites in the United States in February 2016, b. (2016). U.S. top social media sites visit share 2016 | Statistic. [online] Statista. Available at: http://www.statista.com/statistics/265773/market-share-of-the-most-popular-social-media-websites-in-the-us. [Accessed 30 May 2016].

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[88] World Finance. (2016). Benefits of Mergers and Acquisitions. [online] Available at: http://finance.mapsofworld.com/merger-acquisition/benefits.html [Accessed 5 Jun. 2016].

[89] Kang J. (2016). Facebook gets the last laugh as savvy acquisitions start to pay off. [online] Available at: https://www.thestreet.com/story/13530777/1/facebook-gets-the-last-laugh-as-savvy-acquisitions-start-to-pay-off.html [Accessed 5 Jun. 2016].

[90] Forbes.com. (2016). Forbes Welcome. [online] Available at: http://www.forbes.com/sites/theyec/2012/12/24/5-ways-social-media-takes-customer-relationships-to-the-next-level-2/#7ca0de2e5c54 [Accessed 5 Jun. 2016].

[91] Jana R. (2016). Facebook gets the last laugh as savvy acquisitions start to pay off. [online] Available at: https://www.thestreet.com/story/13530777/1/facebook-gets-the-last-laugh-as-savvy-acquisitions-start-to-pay-off.html [Accessed 5 Jun. 2016].

[92] Jackie T. (2016). Will Facebook Marketing Reach Saturation Point?. [online] Available at: http://www.business2community.com/facebook/will-facebook-marketing-reach-saturation-point-01113296#YakLqrg6z24k46c7.97 [Accessed 30 May 2016].

[93] Popper, B. (2015). More than 70 percent of Facebook’s $3.54 billion revenue is now mobile. [online] The Verge. Available at: http://www.theverge.com/2015/4/22/8470633/facebook-q1-2015-earnings-report [Accessed 5 Jun. 2016].

[94] Sourced from Cgma.org. (2016). Porter’s Five Forces of Competitive Position Analysis – CGMA. [online] Available at: http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx?TestCookiesEnabled=redirect [Accessed 24 May 2016]

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[97] Brodkin, J. (2013). Who needs HP and Dell? Facebook now designs all its own servers. [online] Ars Technica. Available at: http://arstechnica.com/information-technology/2013/02/who-needs-hp-and-dell-facebook-now-designs-all-its-own-servers/ [Accessed 4 Jun. 2016].

[98] Albergotti, R. (2016). Rival Social Networks Gain Users, but Facebook Captures More Attention. [online] WSJ. Available at: http://blogs.wsj.com/digits/2015/01/09/rival-social-networks-gain-users-but-facebook-captures-more-attention/ [Accessed 30 May 2016].

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[101] Horwitz, J. (2016). The only way Facebook enters China is as a tool of the government. [online] Quartz. Available at: http://qz.com/644588/the-only-way-facebook-enters-china-is-as-a-tool-of-the-government/ [Accessed 30 May 2016].

[102] Graph sourced from Statista. (2016). United States – Gross domestic product (GDP) growth rate 2020 | Statistic. [online] Available at: http://www.statista.com/statistics/263614/gross-domestic-product-gdp-growth-rate-in-the-united-states/ [Accessed 23 May 2016]

[103] Daniel T. (2016). Are big mergers bad for consumers? – BBC News. [online] Available at: http://www.bbc.com/news/business-34666150 [Accessed 30 May 2016].

[104] Baker & McKenzie. 2007, “A Legal Guide to Acquisitions and Doing Business in the United States”

[105] Baker & McKenzie. 2007, “A Legal Guide to Acquisitions and Doing Business in the United States”

[106] Doherty, Rebecca, Oliver Engert, and Andy West. How The Best Acquirers Excel At Integration. 1st ed. McKinsey & Company, 2016. Web. 6 June 2016.

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[109] Vincent, J. (2015). Beme is a social media app that wants to engineer authenticity. [online] The Verge. Available at: http://www.theverge.com/2015/7/17/8989001/beme-app-casey-neistat-authenticity [Accessed 30 May 2016].

[110] Digital in 2016 – We Are Social UK. (2016). [online] We Are Social UK. Available at: http://wearesocial.com/uk/special-reports/digital-in-2016 [Accessed 18 Apr. 2016].

[111] Graph 1 sourced from Digital in 2014 – We Are Social UK. (2014). [online] We Are Social UK. Available at: http://wearesocial.com/uk/special-reports/digital-in-2014 [Accessed 18 Apr. 2016].

 

[112] Graph sourced from Digital in 2016 – We Are Social UK. (2016). [online] We Are Social UK. Available at: http://wearesocial.com/uk/special-reports/digital-in-2016 [Accessed 18 Apr. 2016].

[113] Newman, J. (2014). Facebook’s WhatsApp Acquisition Explained. [online] TIME.com. Available at: http://time.com/8806/facebooks-whatsapp-acquisition-explained/ [Accessed 30 May 2016].

[114] Curry, D. (2014). Facebook Is Still Copying Twitter—This Time with Its ‘Trending’ Feature – ReadWrite. [online] ReadWrite. Available at: http://readwrite.com/2014/01/16/facebooks-new-trending-feature-takes-another-page-out-of-twitters-playbook/ [Accessed 30 May 2016].

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[116] Levy, A. (2016). The Most Recent Twitter Feature That Facebook Is Copying — The Motley Fool. [online] The Motley Fool. Available at: http://www.fool.com/investing/general/2015/09/29/the-most-recent-twitter-feature-that-facebook-is-c.aspx [Accessed 30 May 2016].

[117] McAlister, M. (2016). News Corp should follow Google instead of buying Twitter. [Online] the Guardian. Available at: http://www.theguardian.com/media-network/2016/feb/02/twitter-news-corp-google-investment-strategy [Accessed 30 May 2016].

[118] ibid

[119] Sourced from Sourced from Gottfried, J. and Shearer, E. (2016). News Use across Social Media Platforms 2016. [online] Pew Research Centre’s Journalism Project. Available at: http://www.journalism.org/2016/05/26/news-use-across-social-media-platforms-2016/ [Accessed 28 May 2016].

[120] Seetharaman, D. (2016). Facebook Revenue Soars on Ad Growth . [online] WSJ. Available at: http://www.wsj.com/articles/facebook-revenue-soars-on-ad-growth-1461787856 [Accessed 28 May 2016].

[121] Facebook,. Facebook Reports Fourth Quarter And Full Year 2015 Results. 2016.

[122] Facebook,. Facebook Reports Fourth Quarter And Full Year 2015 Results. 2016.

facebook and twitter