Social Media, How do they make money?
Social media has been around for over a decade, with many users on a single platform. Take for example, Facebook. There are a record-setting 2.45 billion people on Facebook! There are so many users on Twitter in fact, that they will delete un-active accounts at the end of this year. The reason for this is because the UI is very friendly, helps people find a possible job, lets families connect, all for free. Starting at the beginning of the decade, users also started to begin to shift from using the TV most of the day to being on social media! With this many people, there must be a way social media creates revenue. In this paper, we will discuss how social media has become a staple in society through how social media’s generate revenue, how its users capitalize on this and generate their own revenue, and lastly ways to get involved on social media.
Social Media has many ways to generate revenue - this can be done in many ways; venture capital, advertising, and eCommerce. Venture capital is being able to invest early on into an investment that has great risk. A prime example is Facebook, Facebook needed a venture capitalist to be able to create a community of users. In 2004 when Facebook began, it initially was given $500,000 by a venture capitalist. Over the years it continue to gain funding but in 2011 when Facebook had been established, many venture capitalists like Goldman Sachs invested $500 million to garner the success we see today. With investments like this, it gave Facebook the resources it needed to expand; Mark Zuckerburg did just this and expanded to other regions of the world such as Russia and China. There are no guarantees on whether an operation of this magnitude is successful but this is how social media startups gain traction.
Have you noticed that whenever you are online, you cannot escape ads - even with an adblocker? Do you wonder if they are accurate? They should be - this is from data collected on you. Many social media sites collect data on you whether you know or not; this information is crucial. This could be as simple as liking a post from Nike. Liking a post like this tells advertisers multiple things. It could tell them that you are into active clothes, that you are looking for shoes, and the list goes on. You then begin to like pictures of athletes sponsored by Nike and eventually are shown an ad about the athletes shoes, This is marketing at its finest . Advertising has become so popular that revenue for ads was set a record of $51.3 billion and is expected to grow 10% annually.
Companies who noticed these statistics have capitalized on this. Ecommerce is similar advertising but there are some differences. While advertising deals with search engines and the internet to generate revenue, eCommerce is given more leeway by using more ways to generate revenue. This is done through the internet, ATMs, and credit cards. After doing some research, I found this statistic from SocialMediaToday: “ 90% of businesses are expected to use social media by 2020”. Businesses have realized the use of online shopping is growing than ever and are utilizing E-commerce. With E-commerce, customers feel a sense of attachment to companies by following their posts, following similar higher-ups on social media, all to push their products a bit more.