Social Media: The Market
Making a profit and staying connected are perhaps two of the few things humans have tried to do since the beginning of civilization till modern day, it was only natural that they eventually adapted to combine the two and make a profit of keeping people connected. The very first social media website was created in 1997, with the number of websites rapidly increasing each year since, however these platforms did not start making a profit until the early 2000s. Since then social media has become an extension of peoples identities skyrocketing its success and revenue to an all time high. Facebook the most eminent of the social media sites it is the fourth highest grossing website on the entirety of the internet pulling in an annual revenue of about $17 billion(Dunlop, Micheal) . So how does a company based on something as frivolous as profile pictures and “likes” reach to be one of the most profitable websites of our decade? Yes its true, advertising; although the key to any profitable website is their ability to harness their advertising power, premium options and special promotions are still a relevant part of the formula. The process of creating the perfect combination of startup, execution, and marketing to create a successfully monopolized social media platform is rare, complicated, and worth it.
History: Social media has been around for an extremely short time and yet an extremely long time as well. The way you define the term "social media" is what determines when the history truly began. Some people categorize social media as the use of an object or service to communicate with another person, for example letters and telephones would fit this definition. Therefore the history of social media would date all the way back to 550 BCE when letters were first being delivered across great distances. For the majority of people this definition is irrelevant and has little to no connection with the social media that has in one way or another consumed their daily life. This infectious type would be defined as "the ability to use the internet to share and communicate instantly with others, even across great distances"(Hendricks,Drew). The Internet itself was created 20 years after the invention of the computer in 1940, from 1980-1990 home computers were becoming normalized and things like email and IRC's (primitive version of chat rooms) were becoming more prevalent. The first website to be indisputably categorized as a social media platform was called Six Degrees, it was released in 1997 lasting till 2000 when it was bought for $125 million. By 2000 the internet was everywhere, in terms of social media it was the era of chat rooms and blogs, the next few years would lead to more sophisticated social media platforms and the beginning of social media as a market.
Different Social Media Platforms: In the next 16 years the internet and social media itself grew rapidly and aggressively, the ability to monopolize their websites drove competition to an all time high. Since there were so many competitors I will narrow down our discussion to four major websites. Two that are considered the "grandfathers" of social networks Friendster and Myspace, and two that are relatively new and widely successful Facebook and Twitter. Friendster was founded in 2002 and was one of the first sites to reach over 1 million users, the history of this site is riddled with stories of triumph and defeat. Created by Peter Chin, Jonathan Abrams and Dave Lee, the group wanted to create an innovative way to connect people through the internet given that the idea of social media was still extremely novel. By 2003 the site was ready to move on from its start-up phase having been funded a $12 million investment by Kleiner Perkins Caufield & Byers, Benchmark Capital. The success of Friendster made social networking acceptable and mainstream, so much so that they were offered a buyout in 2003 from google which they declined. While the site spurred many social networking sites in its time like Dogster and Elfster one stood out from the rest, Myspace and though they did not know yet it would ultimately lead to its downfall. Friendster managed to stay afloat as a social media site up until 2011. Much of this was done via its initial investor and later ones like DAG Ventures, IDG Ventures and MOL Global. In addition the fact that Friendster was the grandfather of social media meant that they had acquired numerous patents of interest in the social media world. By 2009 many sites were coming to Friendster to buy the patents off of them, Facebook purchased 18 of which for 39.5 million. Myspace and later on Facebook ultimately led Friendster to lose their users especially in the US forcing them to convert to social gaming site in 2011 with its users being located mainly in Asia. In 2015 the site suspended their services and has not made any notice of returning since. Myspace was created in August 2003 by Chris DeWolfe, Brad Greenspan, Tom Anderson and Josh Berman who were all employees of eUniverse an Emarketing company; the concept was developed after they saw the potential in Friendster's model. Repurchased in 2005 for $580 million dollars by News Corporation myspace was the largest social media site in the world and even surpassed google as the most visited website until 2009. In its prime Myspace made $800 million in the 2008 fiscal revenue and had over 1,600 employees. Myspace was revolutionary because it combined social media with music and pop culture. Myspace created success not only for its own brand name but also for companies like Zynga (gaming interface with over 20 million users daily) and Rockyou. Between then and 2011 Myspace was repurchased for $35 million, its revenue was reduced to $109 million and its staff to 200 employees. Facebook overtook Myspace in the Alexa rankings around 2009 and since then Myspace has declined in users annually, some blame its "portal strategy" based on building an audience revolving around music while other sites continued to update their marketing techniques. Facebook the most popular social media network to this day was developed in February 2004 by two Harvard students Marc Zuckerberg and Edwardo Saverin. During a period of extreme competition in the social media world Facebook had a unique approach and identity. Much of Facebooks success can be credited to Marc Zuckerberg's sheer conceitedness, he had an idea and he went with it, he did not spend months and years creating a prototype he created the code for Facebook in a week, he was confident it would work, and it did. The site began by focusing its target market towards Ivy-league students in the Boston area, this exclusivity made the site extremely popular extremely fast. By 2004 the demand was so high that they incorporated all universities in the US and Canada. In 2005 over 2000 colleges and 25000 high schools globally were added to the Facebook network and by 2006 Facebook was open to everyone 13 years and older with a valid e-mail address. Up until 2008 Facebook main form of finance was through investments via companies like Microsoft after which they decided to switch to advertising as their main source of income. Today Facebook is the highest grossing social media network in the world and 56% of its revenue is from advertising alone. Twitter is a news and social media network that allows users to post updates called tweets. Twitter was originally created in March of 2006 by Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams who worked for a company called Odeo. The main premise of Twitter was the idea of status, a way for users to broadcast what they were up to or thinking about whenever and wherever. Around 2012 is when Twitter started to gain a copious amount of traction and reached over 100 million users and an average of 340 million tweets posted per day. Twitter's main revenue streams come through data licensing and ads. Since its launch, twitter has accumulated a lot of investmemt money however, it still remains unprofitable and has actually lost a staggering 2 billion dollars in the past two years. The future of Twitter is decidedly a question mark. Twitter has not grown significantly in the past few years and Facebook now has five times its users. As of now Twitter is steadily treading water and probably will be for awhile.
How Social Media platforms Start-up and Monopolize: Before the Advertising strategies, special promotions, useless widgets, and games like FarmVille social media sites almost always start off with funding from a Venture Capitalist. Investors are always ready and willing to invest into something that they see a huge payoff down the road and with such success stories like Facebook they are more willing then ever. From there the goal is to either monetize the company or sell it to a larger company for profit. The more complicated of the two options is monetizing. Before a company is eligible to move to this phase succesfully they need at the very least a million users. With a million users with millions of commercial wants and needs the natural choice to make a profit would be e-commerce and advertising. Advertising companies are willing to pay more for online advertising these days then most other forms. Social media sites go as far as tracing your searches on google and making sure ads related to your interests show up on your page. The next common technique to make is profit is promotional options, LinkedIN is the best example for this as they charge users a fee to upgrade their profile to seem more attractive to employers. Social media sites can acquire money through Data licensing, for example news channels and articles continuously use "tweets" as a part of their broadcast, in order to do so they need to pay twitter for the right to use the information that is legally theirs.
The Future: I see social media sites monetizing data even further for people personal gain, forcing them to pay for memories that they have shared with the rest of the word. I see social media forcing their users to pay to see the memories of others. I see social media becoming the advertisers instead of just a host for them. I see them selling products they create themselves based on research they obtain illegally. I see social media taking over our personal lives and not in a pleasant way. Consider the strides it had taken in the past 16 years the idea of what it could be in the next 16 years makes me uneasy.