Difference in business models of Facebook and Orkut

A social network service focuses on building and reflecting of social networks or social relations among people, e.g., who share interests and/or activities. A social network service essentially consists of a representation of each user (often a profile), his/her social links, and a variety of additional services. Most social network services are web based and provide means for users to interact over the internet, such as e-mail and instant messaging. Although online community services are sometimes considered as a social network service in a broader sense, social network service usually means an individual-centered service. Social networking sites tend to share some conventional features. Most often, individual users are encouraged to create profiles containing various information about themselves. Users can often upload pictures of themselves to their profiles, post blog entries for others to read, search for other users with similar interests, and compile and share lists of contacts.

Facebook and Orkut are two of the most popular social networking sites, with both offering very similar features and capabilities. Comparing FaceBook vs. Orkut from a market share perspective show that both are considerably behind orkut with Facebook owning just over 11.5% of the market share and Orkut having less than 1%. Facebook has become very popular in North America over the last few months whereas Orkut is extremely popular in India.

Social networks operate under an autonomous business model, in which a social network’s members serve dual roles as both the suppliers and the consumers of content. This is in contrast to a traditional business model, where the suppliers and consumers are distinct agents. Revenue is typically gained in the autonomous business model via advertisements, but subscription-based revenue is possible when membership and content levels are sufficiently high. The business model used is community model whose viability is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.

The differences between orkut and facebook business model can be categorised under the following headings :

How it select its customers
Facebook’s selection of customers is a very important part of the company’s business model.Orkut is  not very specific and has a variety of users. This fact is what makes Facebook’s selection of customers so important. Zuckerberg developed a personal niche for his site in making it specifically for high school (recently), college and university communites, primarily in the United States.

How it defines and differentiates its product offerings
The second aspect of a business model is how the company defines and differentiates its
product offerings. One of the key elements to Facebook’s success is differentiation,
particularly from the social networking giant, Orkut. What makes a student with an
existing Orkut account want to register with Facebook? The answer to this question
lies in how Facebook sets itself apart from other social networking sites. Facebook is the
only brand of these sites that is for students and students only. Also, to narrow down the
potential networks even more, members are mostly restricted to viewing detailed
information about students only at their school. As a result of this, more intimate
communities are created based on the school.

Facebook’s features are very similar to the features of Orkut. The major features include: profile, friends, groups, messages, wall, and photos. The profile is what makes up the users’ personal sites. Here they post information about themselves as well as a photo. The friends feature is one of the major ways that students are able to become connected through the site. Users can search the site and send friend requests to other users to acknowledge online friendships. The other way that the site connects students is through the groups feature. Students with particular interests, views, or hobbies are able to form and join online groups. The messages and wall features allow users to interact directly within the online community. Messaging is a private way of contacting members, almost like e-mail. Also, as an alternative to messaging, there is a “poking” feature, which is basically a way of saying “What’s up.” The wall acts as a sort of message board and offers more public
communication between users. The recently added photos feature is part of the users
profile in which they can post photos of themselves and others for people within their
college to see.

Utility for its customers
At first it was simply a site to connect college students but now it is becoming a staple in the college social scene. The utility that Facebook creates for its customers is essential in
creating traffic. Orkut has failed in the past for being too one-dimensional and unreal. Facebook was able to recognize these mistakes and capitalized greatly in forming a very real online social network. In theory, the services provided by these two companies are very similar. The difference is what makes the individual keep coming back to the site. Facebook is useful in a variety of ways including:

Forming study group
Finding roommates
Keeping in touch with friends at distant schools
Finding others with like interests
Keeping up with social events
Getting information on fraternities/sororities
Acquiring customers
Facebook is able to easily acquire and keep customers due to its increasing popularity.
Through groups and classes one can be connected to thousands of students. Networking
is very important in college and Facebook helps students to establish these with little
effort on their part. Facebook acquires customers as students realize their personal need
for online networking, a need that is becoming more and more necessary everyday. When
students meet they often tell each other to facebook them as a means of furthering a
friendship. Someone without an account misses out on this completely.
Keeping the customers is a very easy task once they are on Facebook. Users continue to
visit the site to partake in one of the newest activities, “facebooking.” Facebooking
defined is the act of simply browsing though facebook.com with no specific purpose.
More specifically, the verb “facebook” (as in “to facebook”) is used across campuses for
the looking up of a certain individual and:-

Adding him/her as a friend
Sending him/her a message
‘Poking’ him/her
Writing on his/her ‘wall.’
These faetures bring about major opportunities for the communication that college students are looking for. Most new users go through a period of Facebook addiction sometime in their college career. The degree of which Facebook is used as a means of communication requires that it be checked on a daily basis. Throughout the course of the day one can get messaged, poked, or have their wall written on. Also, with the new photos feature, one can get tagged in a picture by one of their friends. There are so many places where something new to one’s profile can occur, and this makes it very addicting.

Distribution Strategy
Zuckerberg’s distribution strategy is the key element behind his idea, the internet.
Facebook provides a service that connects college students through a few clicks of the
mouse. This strategy is not new as it’s used by many social networking sites. In today’s
busy world, people don’t have the time and effort to put into physical networking with
others. Orkut uses this same idea which has been proven to be successful.

Promotion Strategy
Promotion hasn’t been a major issue due to Facebook’s instant success. Facebook has not
funded any major advertising campaigns in order to increase awareness because the
awareness was there from the start. Zuckerberg started Facebook as an online directory of
Harvard students and it was an instant hit. Within a month Facebook was available at
Columbia, Stanford, and Yale and by the summer it was available at about thirty different
universities. The promotion of the site has been mostly by word of mouth, as current
users rave to their friends about the site and its many features. Publicity in the media has
also helped the company’s promotion along. There have been a number of newspaper
articles as well as television interviews documenting the recent success story.

How it defines the tasks to be performed
The tasks to be performed were very simple from the beginning in creating Facebook.
Zuckerberg had a clear idea in his head of the service he wanted to provide the user with.
Essentially, it would be an online directory comprised of college students for their use
and benefit. Having been programming since the age of ten, Zuckerberg was able to
easily accomplish this task and took a few weeks to set up a website that allowed users to
interact. Through classes, groups, interests, and friends the site notifies the user how
he/she is connected. This feeling of connection is very important because that’s what the
general population of users are seeking. Another major task that Zuckerberg was faced
with was setting his social network site apart from the others. In order to demand traffic a
site must be unique in one way or another. This task was performed by making the site
exclusive to ones college, forming a more intimate community. Also, Zuckerberg added a
variety of features that the user could utilize while on the site such as messaging and
poking.

How it configures its resources
The major resources of Facebook are the servers that keep the site running despite the
heavy amounts of traffic. These servers are very essential because the services and
operations of Facebook depend solely on the website. A down server could result in the
loss of millions of page hits. With little funding at the beginning, Zuckerberg was forced
to keep Facebook relatively small because only so many servers could be purchased and
set up. However, the growing audience could not be contained and in the fall of 2004,
former Paypal CEO, Peter Thiel, invested $500,000 to buy servers to help support the
rapid growth. (Theil noted that this particular investments was one of the best venture
investments he’d ever made.) Facebook is able to create a more secure and efficient network by co-locating its servers, which is very important in the operations of the business.

How it captures profit
The big question behind Facebook and many other free online networking sites is: how
do they actually make money? The answer is mainly advertising. Advertisements on
Facebook are very valuable considering the amount of traffic the site is able to generate.
About 70% of its users log on the site daily and these users are all between the ages of 18 and 24. The advertising prospects are just too high for big companies to ignore.
Zuckerberg offers three different ways to advertise: banner ads, sponsored groups, and text announcements. Apple has its own sponsored group called “Apple Students” where it lists the hottest items, prices, and even gives away free stuff. Electronic Arts and Geffen
Records sponsor groups on the site as well. Text announcements, which are more geared
toward students who want to announce a party or event, are sold regularly for $9-$15 and
guarantee a certain number of hits. Banner ads are easily sold to many major companies
including the three listed above and Tiffany’s.

Conclusion
The main reason’s for users liking Facebook over Orkut are:

Simple and professional user interface
Explanation for being added as a friend
Unique groups or communities
Security of user’s profile and information
Many other fun applications