How do social media make money, share and market?
What is social media? How do social media giants such as facebook, twitter, snapchat and instagram produce revenue when their services are free? Are these companies kept running by private investors? In the age of technology and fast paces cultural trends it is important to ask these questions when everything seems to be influenced by social media; the landscape of the internet has evolved due to the rise of social media compared to its predecessors. We will consider how the birth of a simple social media site such as 'Six Degrees' gave rise to our media giants. It is also important to see how investments by Venture capitalists allowed for earlier ideas to get traction into becoming the current sites we have now, for example twitter would not been possible withouth its private investors. Also with added profits through advertisement companies by posting on sites like facebook, snapchat, twitter etc to increase their marketing reach, social media is now meant for something more than socializing.Now facebook and similar websites have become a new form of online business. Lastly, we will look into the future of social media. Due to fast paced evolution of technology which has increased our connectivity and information sharing, will the current form of social media become obsolete or keep growing exponentially?
1.What does Social Media mean?
In the age of Facebook, Twitter, Snapchat, Reddit etc. the word social media gets blurred and almost any of these sites can be called a social media,even though Reddit is a type of forum where people interact with one another via posts. The term gets thrown around so much that we consider getting on social media as logging onto Facebook and posting a status, life events, new jobs, acheivements etc., but this thought can be applied to the other platforms which dont consider themselves a 'social media.'Instagram and twitter don't have the extended features that facebook does since instagram is a media where you post pictures with a caption and twitter is a media for microblogging. Even Wikepedia can be considered a form of social media. Then we must ask, what exactly does the word 'Social Media' mean? According to the experts in the field
the word 'Social' means to "to interact with other by sharing information with and receiving this information"(Nations, 2017, para 6-7);whereas the word 'Media' means an instrument of communication such as the internet.
By combining these two words we understand that social media means sending and receiving information via an instrument such as the internet. What started the era of online socialzing? To understand this, we must look the first social media site called 'Six Degrees.'
Widely consindered the first of its kinda, Six Degrees, created by Andrew Weinreich, was the first social networking site. It encompassed basic features that can still be seen on sites like Facebook, such as "creating profiles, friends lists, and school affliation in one service" (CBS,2017.) This website allowed users to make profiles and send friend requests to other users, even non-registered users but it still failed to thrive due to the lack of accessibility to the internet by millions other possible users. Eventually the company was sold in 2000 (CBS, 2017. Few years after being bought out, MySpace, the social media giant of its time took the scene and shaped online socializing as we know it now.The site was valued at a whopping $12 billion dollars in 2007 and claimed the seat as the no.1 website. Soon after media sites such as LinkedIn and Facebook followed suit and increased the social media competition and the war of pulling in new user base. Currently, in 2017, Facebook has paved the way as the top contender as the best social media website.But how do these social media sites make money? Howdo they pay their workers or keep their business thriving? There are costs associated with running a powerful social media but for many, such as advertising companies and venture capitalist, the investment is a fraction of the cost comparedto the returns
Over the years, the marketing industry has shifted from attracting consumers via magazines, new papers, commercials to social media platforms, and this is where social media sites make their money. For example, with an astounding user base of 1.2 billion users, Facebook is a gold mine full of consumers who the media companies want to target. How do they do this? They rent out your eyes and your clicks. Facebook allows this companies to post on their site but at a rate of cost, specifically cost per clicks. Facebook charges media companies or even local businesses on the type of ad they are marketing, the size of their audience, quality of the ad and lastly the type of industry (Marsan, 2016). The prices per click can vary from as low as $0.16 to $1.00 depending on the type of industry and other in depth criterias (Marsan, 2016). For advertising companies that want to expand their target audience, this cost can be hundreds of millions, but to them it's worth the cost. Large advertising companies spend a considerable amount of time testing and fine tuning their ads so they can release successful marketing ads until the cost of the intial investment decreases over time and they start seeing the returns (Marsan, 2016).
Venture capitalism is another driving force that gives some of these new social media sites some traction during their intial stages. In basic terms, venture capitalists are private investors who aid small startups or businesses in their pursuit of establishing their trade. Typically, these investors invest in companies that will show 25 percent annual returns within one to five year, or they could ask for more ownership and decision making in the startup (businessdictionary, 2017). One example of a social media site that received aid from venture capitalist is Twitter. As stated in Huffpost, after the failure of his podcasting company called Odeo, Evan Williams called it quits with the businesses and began juggling the idea of creating a microbloggin website. He wanted people to microblog in 140 character or less and that's it. There was no roadmaps, no revenue modelor business plan established for Twttr(Twitter's name during intial stage), but Mike Maple, a venture capitalist and former colleague to Evan Williams, invested in the company (Quora, 2016). Evan Williams figured why not have small microblogs throughout the day with ten million users rather than writing a whole blog that might have one million users. After the inital launch of the idea in SXSW, Twitter was an instant success and Mike Maples along with Evan Williams started seeing fruits of their idea.
Facebook dominates the competition in the social media world and holds the crown in the most revunes produced via the cost per click for advertising companies,and an expert will say that this is how you gain your market share. By defintion, market share means the portion of a market controlled by a particular company or product, and with this defintion one can say that facebook, along with other social medias, gain their market share through Advertisments, cost per click, increasing user base profiles, investors, stock etc. Facebook's immense popularity in social media platforms has been so successful that it hold a whopping 38.77% market share by the end of July 2017 (Kallas, 2017).