PESTEL analysis of Facebook
This is a detailed PESTEL analysis of Facebook. It attempts to evaluate some of the factors that affect the operations and strategies of Facebook. Facebook is an American technology company. It is one of the most popular social networking sites in the world.
Political factors that impact on Facebook
Facebook is a dominant social networking site in many countries. India, the USA, Indonesia, and Brazil are the leading countries in terms of Facebook audience size. However, Facebook faced temporary bans in some countries in the past.
Facebook has been widely used for political purposes since the beginning. In fact, many people accuse it of inflaming political discourse across the world. However, it has been working on changing its algorithm to decrease political contents in the news feeds of its users (Roose and Isaac, 2021).
Pressures on Facebook from different political persuasions are mounting. For instance, many liberals accuse that the network has been complacent and allowed hate speech, fake news, and misinformation to spread. On the contrary, others claim that the company is stifling free speech (Roose and Isaac, 2021).
Economic factors that impact on Facebook
The next issue to discuss in the PESTEL analysis of Facebook is the economic environment. Using Facebook is free for personal purposes; however, businesses need to pay to promote their posts/pages on the platform. Businesses can have their pages free; however, reaching out the wider audience requires them to pay.
Facebook’s revenue in 2020 was $86 billion (Tankovska, 2021). Its majority revenue comes form advertising. Therefore, when companies decide to reduce their advertising budgets due to economic crisis, Facebook’s revenue takes a hit.
Rapid economic growth in many countries should lead to Facebook generating more profits as more companies may choose it over other advertising platforms, and more users may purchase different devices to access its services. It is also likely that the company may expand further in many countries in terms of the number monthly active users.
Facebook has around 55,000 employees. It supports millions of jobs and generates billions of dollars for companies around the world. It has enabled people to connect with each other and businesses with no or minimal costs which boost economic activities. This shows the contribution of the company to the global economy.
Social factors that impact on Facebook
According to Parsons (2019) no other company ever in history was able to do what Facebook has done i.e. making instant communication between billions of people a reality. In fact, it has gone beyond communication and allowed people to build groups, run businesses, and play games.
There is no doubt that Facebook has connected people from around the world and made communications easier and cheaper. Many people are heavily reliant upon it for their social interactions. However, this reliance is not always helpful as numerous studies reveal that spending too much time on the Internet may cause the users to develop depressions and they may have fewer friends in real life too.
Facebook’s mission is: ‘give people the power to build community and bring the world closer together. That reflects that we can’t do this ourselves, but only by empowering people to build communities and bring people together’ (Facebook, 2021). However, many people complain that its activities are not consistent with its own mission statement as it is too focused on money generation with the users being inundated with ads.
Technological factors that impact on Facebook
A key element in this PESTEL analysis of Facebook is the technological environment. Facebook is all about technology. Sharing contents, watching videos, live streaming, messaging, and scrapbooking are some of its popular services. However, as users’ needs are constantly changing, Facebook must be in constant pursuit of innovations.
Facebook has taken over a number of tech companies e.g. Instagram, WhatsApp, and Oculus to meet the needs of its users. However, it faces a number of challenges. For instances, it had to remove 3.2 billion fake accounts between April and September 2019. Similarly, it spends around $5 billion a year on content moderation, safety, and security.
Environmental factors that impact on Facebook
People need tech devices to use Facebook. What perhaps some of them are not aware of is that carbon dioxide is emitted due to the energy needed to run these devices. Data centres are energy intensive as well. Therefore, Facebook has announced its commitment to reaching net zero emissions across its value chain by 2030.
Legal factors that impact on Facebook
The last factor to discuss in the PESTEL analysis of Facebook is the legal environment. As Facebook contains a lot of personal information of its users, it must abide by different laws in different countries. Examples include but not limited to the UK privacy law, the European Union’s General Data Protection Regulation (GDPR), and the Section 230 in the USA. In fact, Facebook, was fined billions of dollars in the past for breaching certain rules.
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Last update: 04 June 2021
Facebook (2021) FAQs, available at: https://investor.fb.com/resources/default.aspx (accessed 02 June 2021)
Parsons (2021) Facebook at 15: Five ways the social network has helped society, available at: https://metro.co.uk/2019/02/04/facebook-15-five-ways-social-network-helped-society-8433915/ (accessed 31 May 2021)
Rose, K., and Isaac, M. (2021) Facebook Dials Down the Politics for Users, available at: https://www.nytimes.com/2021/02/10/technology/facebook-reduces-politics-feeds.html (accessed 01 June 2021)
Tankovska, H. (2021) Facebook’s revenue and net income from 2007 to 2020, available at: https://www.statista.com/statistics/277229/facebooks-annual-revenue-and-net-income/ (accessed 03 June 2021)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.