Happy Birthday Facebook!

Facebook turned 10 years old in February 2014. And what an amazing first decade it has been for one of the world's most transformative companies.

Facebook's meteoric rise has been well-documented, but where this growth will continue to come from is less well known. This post discusses Facebook's rapid expansion into emerging markets, particularly in Latin America, and looks into its highly rational adoption of greenfield strategies to support its growth.

For a broader discussion of greenfield strategies and the factors that companies typically consider when evaluating this strategy, please read our earlier post

Facebook's growth by the numbers

First, let's review Facebook's impressive rise in worldwide users. As the following chart shows, Facebook grew from 100 million users in 2005 to well over 1 billion last year and the growth continues!

A closer look, however, tells an interesting story about Facebook's future: its growth in coming years is projected to occur almost entirely outside the North America and Europe. As the charts below show, Asia, Latin America and the Middle East -- where Facebook users and internet penetration rates continue to rise -- are now the fastest growing regions for Facebook in terms of new users, far ahead of North America and Europe whose growth has essentially stalled. Tellingly, India is projected to have more users than the United States by the end of 2014 and, in just two years, Brazil and Mexico together will also have about as many users as the United States.

Facebook's greenfield expansion strategy in Latin America

Since our focus is the Americas, we looked into how Facebook is growing in the region.

Faced with the prospect of sustaining its extraordinary growth rates in Latin America in the coming years, it is not surprising that, since 2011, Facebook has opened direct establishments in three of the region's largest population centers-- Brazil, Mexico and Argentina -- and is about to open up a fourth in Bogota, Colombia. See here

Facebook's decision to embark on rapid greenfield expansion in Latin America is somewhat of a no brainer. As an initial matter, having achieved unparalleled growth around the world in just a few years, who but Facebook itself could help extend its dominance in Latin America? Facebook's growth to dominance has been so fast and unabated that it has essentially invented the mold for a global social media platform. While it is debatable if this dominance will resist competition from players such as Twitter and Snapchat, it is still a safer bet for it to expand with its own internal staff, processes, and culture through wholly owned subsidiary companies than to acquire or partner with a third party. In addition, as one of the highest capitalized companies in the world, Facebook can easily afford the costs of opening a local office and staffing it to accomplish its business and sales targets.

While Facebook-owned offices are an obvious choice for the company today, there is no guarantee that Facebook will continue its expansion in this manner in other, smaller markets like Chile, Peru and some Central American countries. If growth rates moderate in the region, as they are projected to, it will not surpise us if management gives more serious consideration to alternative market entry strategies such as acquisitions, partnerships, or even outsourcing.

For a printable PDF version, click here

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Andres Snaider is a founding partner of Nextant, a consulting firm specializing in assisting companies expand their businesses in international markets, with a strong focus on Latin America. With a degree in law and experience working as an international attorney and businessman, Mr. Snaider has advised clients on a range of commercial matters and investments across the Americas. He is a graduate of the Harvard Law School and currently lives and works in Boulder, Colorado.

Email Andres at : asnaider@nextant.com

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Nextant has extensive experience in assisting leading clients through its Market Expansion and Business Optimization services. For more information on how Nextant can assist your company in socializing a market entry and initiating sales, please visit our website at http://www.nextant.com

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