Deck 9: Facebook: Building a Business From the Social Graph

Question 1

Facebook allows application developers to charge for their wares, offer them for free, or even run ads.

Answer 1

True

Question 2

Facebook's phenomenal growth implies that it requires minimal infrastructure investment.

Answer 2

False

Question 3

Facebook is publicly accessible with search engines, like Google and Bing, being able to index all of Facebook content.

Answer 3

False

Question 4

Third-party Web sites can choose to accept a user's Facebook credentials to allow the user to access their content.

Question 5

Investor groups that provide funding in exchange for a stake in the firm and often, a degree of managerial control are called _____.

A) credit unions
B) venture capitalists
C) hedge fund managers
D) mutual fund executives
E) greenfield investors

Question 6

Facebook is mostly powered by open source software such as MySQL and Memcache.

Question 7

Facebook was one of the first social networking sites where users actually identified themselves using their real names.

Question 8

Why is Sheryl Sandberg considered to be the copilot of Facebook?

Question 9

When a firm issues an IPO, it is said to have:

A) been liquidated due to short selling.
B) gone public.
C) received government funding.
D) been liquidated due to switching costs.
E) issued a dividend.

Question 10

The earlier a firm accepts venture capitalist funding, the more control it exerts over its own functioning in the long run.

Question 11

Most Facebook applications are focused on businesses and educational services.

Question 12

When a firm _____, it sells stock to the public for the first time.

Question 13

Roughly one in every seven people on the planet has a Facebook account.

Question 14

Facebook's growing dominance has given rise to the fear that if increasingly large parts of the Web reside inside a single service, innovation, competition, and exchange may suffer.

Question 15

Which of the following statements is true about Facebook?

A) Global growth of Facebook is saturated with an excess of 85 percent of Facebook users outside the United States.
B) Approximately 20 percent of Facebook users reside in China.
C) Facebook is the most visited site in the United States.
D) Facebook now has more employees than Google.
E) In 2011, Facebook earned about $1 billion on $5 billion in revenues.

Question 16

In the context of Facebook's business strategy, the walled garden refers to the connections between individuals and organizations.

Question 17

A stock broker trades shares he does not own with an obligation of later repayment, and in the hope that the price of traded shares will fall. He then repays share debt with shares purchased at a lower price and pockets the spread between initial share price and repayment price. This attempt to profit from a falling stock price is known as _____.

A) insider trading
B) churning
C) arbitrage trading
D) short selling
E) going long

Question 18

Facebook is now the biggest photo-sharing site on the Web, ahead of Picasa, Flickr, and Photobucket.

Question 19

Write a short note on how Mark Zuckerberg has retained control of Facebook.

Question 20

Mark Zuckerberg, the founder of Facebook, ensured that he remained in control of the firm even after it went public by:

A) running the organization single-handedly.
B) valuing the firm at $15 billion, which exceeded investor expectations.
C) employing antitrust laws and limiting the investors' degree of control.
D) appointing 3 additional directors instead of 5.
E) retaining a majority of voting rights in the public company.

Question 21

_____ is the biggest photo-sharing site on the Web, taking in around three billion photos each month.

A) Facebook
B) Picasa
C) Shutterfly
D) Flickr
E) Photobucket

Question 22

Which of the following statements holds true for the term "free rider problem"?

A) It refers to a collection of resources available for access over the Internet.
B) It refers to adapting products and services for different languages and regional differences.
C) It refers to a situation when the value of a product or a service increases as the number of its users expands.
D) It refers to a situation when others take advantage of a user or a service without providing any sort of reciprocal benefit.
E) It refers to a closed network or a single set of services controlled by one dominant firm.

Question 23

Which of the following is a major problem encountered by Facebook as it embraces a more open approach?

A) Greater click-through rates
B) Higher switching costs
C) Ineffective paid advertising
D) Smaller developer base
E) Weakened strategic assets

Question 24

Which of the following statements holds true of network effects?

A) It refers to a collection of resources available for access over the Internet.
B) It refers to adapting products and services for different languages and regional differences.
C) It refers to a situation when the value of a product or service increases as the number of its users expands.
D) It refers to a situation when others take advantage of a user or a service without providing any kind of reciprocal benefit.
E) It refers to a closed network or a single set of services controlled by one dominant firm.

Question 25

Most Facebook applications are focused on:

A) education.
B) business.
C) entertainment.
D) arts and science.
E) information.

Question 26

How are News Feeds a source of value for users on Facebook?

A) They help users keep track of their contacts and friends' social lives.
B) They are innovative and Facebook is the only social network to offer the feature.
C) They are effective in protecting a user's personal information from others.
D) They allow developers to create applications that are appreciated by users.
E) They offer cross connectivity for users across several social networking sites.

Question 27

Facebook has offered a system where Web site operators can choose to accept a user's Facebook credentials for logging in. Web site operators appreciate this feature because:

A) they can charge users for accessing their content and hence, generate revenue.
B) they can afford to spend less on Web site maintenance.
C) users are keen on accessing content on these Web sites without signing up.
D) Facebook's advertising programs offer better revenue for viewed content.
E) they can associate their offerings with the Facebook brand.

Question 28

Software that is free and whose code can be accessed and potentially modified by anyone is referred to as _____.

A) shared source files
B) proprietary software
C) available files
D) licensed documents
E) open source software

Question 29

Systems distributed throughout the Internet that help improve the delivery speeds of Web pages and other media, typically by spreading access across multiple sites located closer to users are known as:

A) Internet exchange points.
B) private clouds.
C) colocation centers.
D) content delivery networks.
E) cookies.

Question 30

Which of the following is also known as Metcalfe's Law?

A) Network effects
B) Crowdsourcing
C) Localization
D) Switching costs
E) Free rider problem

Question 31

The term "social graph" refers to:

A) user-generated content that is shared by a broad community of users.
B) an online community that allows users to establish personal profiles.
C) the global mapping of users and organizations, and how they are related.
D) the sum total of the economic and social value created by a network of individuals.
E) the effects that emerge from individuals who use the same products or services.

Question 32

Which of the following factors suggests that Facebook can offer Google greater competition in the search engine market?

A) Facebook's $100 billion valuation, owing to its going public
B) Much of Facebook's content being inaccessible to standard search engines
C) Facebook's banner ad model which generates more revenue through targeting than any other Web site
D) Facebook's tie-up with Microsoft's Bing to offer Web search results
E) The greater volume of user data that Facebook has access to, which can potentially offer better search capabilities than Google's search algorithm

Question 33

The dark Web refers to:

A) peer-to-peer file sharing networks that are used to illegally share copyrighted material.
B) seemingly innocent Web sites, containing malware that infects computers.
C) sites that cannot be indexed by Google and other search engines.
D) networks that allow only mutually trusted peers to participate in file-sharing activities.
E) Web sites that advocate violence toward people of a specific race, ethnicity, or religion.

Question 34

Which of the following factors has helped Facebook build up trust among its users?

A) Superior technology compared to rivals
B) Mutual approval of friend requests
C) Free nature of applications available to users
D) Low switching costs
E) Availability of venture capital funds

Question 35

How has Facebook been able to gain a share in the photo-sharing and video-sharing markets at the expense of established firms?

Question 36

One of Facebook's key resources for competitive advantage is:

A) technology.
B) network internalities.
C) open source software.
D) high switching costs.
E) low venture capital investment.

Question 37

Which of the following statements is true of the term "cloud"?

A) It refers to a collection of resources available for access over the Internet.
B) It refers to the phenomenon of adapting products and services for different languages and regional differences.
C) It refers to a situation when the value of a product or service increases as the number of its users expands.
D) It refers to a situation when others take advantage of a user or a service without providing any sort of reciprocal benefit.
E) It refers to a closed network or a single set of services controlled by one dominant firm.

Question 38

Facebook was conceived as a place for:

A) musicians to reach out to unknown users and make them their fans.
B) any user to modify content created by others within a Web browser.
C) reinforcing the preexisting contacts of the users.
D) media discovery, bringing together users with similar tastes.
E) business users to update their details as they change their jobs.

Question 39

_____ is a term that refers to a closed network or single set of services controlled by one dominant firm.

A) Walled garden
B) Cloud
C) Network effects
D) Free rider problem
E) Localization

Question 40

Developers who make applications create _____ that have the potential to add value to Facebook beyond what the firm itself provides to its users.

A) switching costs
B) distribution channels
C) one-sided markets
D) complementary benefits
E) sugging channels

Question 41

Facebook's key resources for competitive advantage are the sophisticated technological tools it provides to its users.

Question 42

A(n) _____ is a collection of resources available for access over the Internet.

Question 43

_____ is considered to be the most persuasive and valuable method of promoting products and services.

A) Online advertising
B) Vertical integration
C) Sugging
D) Word of mouth
E) Search marketing

Question 44

_____ refers to a link between nodes in the social graph.

Question 45

"Users want some semblance of control over their personal data, even if they are not bothered to manage it." This is often known as:

A) the paradox of privacy.
B) crowdsourcing.
C) Metcalfe's Law.
D) uncertainty of decisions.
E) free rider problem.

Question 46

Facebook's Beacon effort was a failure because it was "opt-out" instead of "opt-in."

Question 47

What is the News Feed feature offered by Facebook and what was the controversy caused by it? How has Facebook used News Feeds to its advantage?

Question 48

Opt-in schemes guarantee the largest possible audience for a firm that wants to collect data to improve the user experience.

Question 49

Discuss the controversies that were caused by Facebook's Beacon program and the new terms of service. What implications did these incidents have for the firm?

Question 50

What can managers expect to learn from Facebook's feeds fiasco?

A) Users are always reluctant to adopt newer technologies.
B) When new features are offered, they should be offered as "opt-out" rather than "opt-in."
C) Firms should engage users on new initiatives and take steps to protect user privacy.
D) Users generally get used to the idea of a new technology only if they are given adequate time.
E) Firms should refrain from claiming ownership of user data without their consent.

Question 51

How has Facebook managed to leverage the advantages of network effects to enhance the value of its offerings? What are the features of Facebook's incarnation as a platform?

Question 52

How has Facebook dominated the link-sharing market?

Question 53

When others take advantage of a user or service without providing any sort of reciprocal benefit it is called a _____.

Question 54

_____ refer to programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data.

Question 55

Describe the two strategic resources that are most critical to Facebook's competitive advantage.

Question 56

_____ are systems distributed throughout the Internet (or other network) that help to improve the delivery (and hence loading) speeds of Web pages and other media, typically by spreading access across multiple sites located closer to users.

Question 57

Which of the following is a strategy adopted by Facebook?

A) Facebook's "no-beta" culture does not tolerate gaffes.
B) Facebook avoids the reinforcement of negative perceptions regarding the firm's attitudes toward users, notifications, and their privacy.
C) Facebook considers word of mouth the least effective method for promoting products and services such as Beacon.
D) Facebook avoids initiatives and policy changes that raise public and governmental concern.
E) Facebook encourages developers to release innovations before they are perfect.

Question 58

What is Facebook's motivation for offering new features under an opt-out scheme?

A) It gives users a sense of control of their online activities.
B) It is easier for users to manage, as opposed to complex opt-in programs.
C) It ensures a larger audience, and helps enhance network effects and data advantages.
D) Internet laws stipulate that all new features offered by social networks should be based on an opt-out format.
E) Users are seldom bothered about managing their personal data and tracking of their online activities.

Question 59

With the Beacon effort, Facebook hoped to:

A) identify the most frugal users and get them to spend more shopping online.
B) improve the accuracy of its targeting algorithm to match users with appropriate ads.
C) grab consumer activity at points of purchase to post to a user's profile via News Feeds.
D) avoid the problems of content adjacency and user attention in order to promote advertising.
E) improve the interconnectivity between firms of similar businesses.

Question 60

What is the biggest problem confronted by Facebook in the wake of the Beacon fiasco?

A) Managers are unlikely to sign up for Facebook's future experiments.
B) New users are reluctant to sign up for the network's services.
C) Loyal users are migrating to rival networks with better protection of user privacy.
D) Facebook stands to lose the huge troves of user data it has aggregated over the years.
E) The sophisticated software used to power Beacon and News Feed might be outlawed.

Question 61

For years, which of the following is the only major media category that has seen an increase in spending?

A) Online advertising
B) Radio jingles
C) Television ads
D) Print media
E) Telemarketing

Question 62

CPM refers to:

A) each instance of an advertisement being viewed by a user.
B) cost per thousand impressions.
C) a concept where advertisers do not pay unless someone clicks on their ad.
D) the maximum amount of money advertisers are willing to pay for each click on their ads.
E) the number of users who clicked an ad divided by the number of times the ad was delivered.

Question 63

Facebook doesn't sell banner advertisements.

Question 64

Banner ads are charged on _____.

A) clickable numbers
B) frequency tracking scores
C) quality scores
D) cost per thousand impressions
E) the relative popularity

Question 65

_____ refer to a promotion technique popular with social media that attempts to get consumers to interact with an ad, and then shares that action with friends.

A) Impressions
B) Rich media advertisements
C) Cookies
D) Interstitials
E) Engagement ads

Question 66

Users of Google and other search engines are said to be on a hunt because they:

A) have a rough idea of what they will encounter.
B) want to explore and look around.
C) are there to collect information to drive a specific action.
D) allocate time for activities such as looking for news and friend updates.
E) are unwilling to leave the Web page when they are having conversations.

Question 67

The term "content adjacency" refers to:

A) placing advertisements to reach consumers based on various traits such as demographics and purchase history.
B) a technique used by online publishers to increase the effectiveness of their campaigns.
C) advertisements that are targeted based on a user's query.
D) a concern that an advertisement will run near offensive material, embarrassing an advertiser and / or degrading their products or brands.
E) problems associated with advertisements that run before a user arrives at the home page of a Web site.

Question 68

The bulk of Facebook's revenue comes from:

A) data aggregation services.
B) application development.
C) subscription fees.
D) data harvesting.
E) advertising.

Question 69

In terms of revenue model, Facebook is radically similar to Google.

Question 70

_____ was a Facebook program conceived as a giant word-of-mouth machine to grab consumer activity at the point of purchase to put into the News Feed and post to a user's profile.

Question 71

Facebook enjoys significantly higher click-through rates than Google.

Question 72

Which of the following factors prevents social networking sites from monetizing advertising effectively?

A) Low marketing budgets
B) Inflation
C) DNS cache poisoning
D) Phishing
E) Content adjacency

Question 73

Advertisers on Facebook are charged only on a pay-per-click basis for banner ads.

Question 74

Brand advertisers largely consider user-generated content as low-quality, brand-unsafe inventory for running advertisements. This can be attributed to:

A) content adjacency.
B) audience matching.
C) collaborative filtering.
D) search engine marketing.
E) negative keyword usage.

Question 75

Users tend to be more task-oriented when using Google as compared to Facebook.

Question 76

Firms spend more advertising online than they do on radio and magazine ads.

Question 77

In terms of generating ad revenue, information and news-oriented sites do much better than social networking sites.

Question 78

Which of the following is true about advertising and Facebook?

A) Facebook sells banner advertisements to the online community.
B) Google serves three times more display ads online than Facebook.
C) Facebook ads do not engage consumers to comment on content or RSVP to an event.
D) Facebook executives argue that people remember ads better and are more likely to make purchases when their friends endorse products.
E) Facebook users can endorse products by clicking on the "like" button, but they cannot turn off firm messages if they "unlike" a firm.

Question 79

What was the user reaction to Beacon?

Question 80

The bulk of Facebook's revenue comes from revenue-sharing agreements with application developers.