Social Media, how they make money, markets and share
Running Head: SOCIAL MEDIA, HOW THEY MAKE MONEY, MARKETS, AND SHARE
SOCIAL MEDIA, HOW THEY MAKE MONEY, MARKETS, AND SHARE
Social Media, How They Make Money, Markets, and Share
Introduction to Social Media
Social media is an internet supported platform that enables people all over the world to share as well as exchange information and news. In most cases, the sharing of information is done regarding stories, pictures, and videos (Bench Craft, 2015). A person can now capture an event or a scenario happening currently and post it using one of the social media channels that connect him/her to millions of users from all corners of the world. Since social media communication is real-time people can view it immediately. The current advancement of technology in electronic gadgets such as mobile phones, laptops, and computers has supported the use of various models of applications that are web-based for efficient communication. The essence of this paper is to evaluate how social media platforms generate income seeing there are the dominating sites on the web.
Social Media Types
To better understand the concept of social media there is an importance in looking at the various forms that social media communications take place. Major types of social media are;
Micro-blogging these are the social media tools that allow users to post brief, sharp comments and website links and photos. Readers or visitors to the site have the ability to respond publicly to the posts with the same kind of short comments, links, and photos. Examples of such social media are Twitter, Facebook, and Tumblr. Posting these short comments and links has some benefits, key of which are the ability to converse with customers and the ability of your potential and current customers to keep track of the owner (Advice, 2011).
Blogs these are an extension to micro-blogs as they allow the user to conduct longer communications via writing longer content. Even though blogs can be used for corporate purposes, they are often more fruitful when the owner writes them with a personal touch and offers interesting views. Blog readers have an opportunity to leave comments and respond to the blog. Blogs are cheap and pre-designed templates are available for users to build quickly and host their blogs. Extensively used blogs are Blogger, WordPress, and Typepad (Advice, 2011).
Networking sites networking sites host consumer and business communities. They allow users to keep track of areas they most like and share this information with others. There is a wide variety of topic choices, and whichever is applied on the networking site, it will always get an audience because there will be a group of people interested in the information. Popular examples of networking sites are Facebook, LinkedIn, and MySpace (Advice, 2011).
Discussion Forums any website can come up with forums as they allow customers to partake in the discussion and even participate in other forums. If they are honest, discussion forums can be helpful in identifying complaints, customer questions or comments. They also aid in extending the sites online reputation as the owner can join other forums with the same product or service to offer advice and support to other customers (Advice, 2011).
Social Bookmarking these allow users to send emails to their friends in a bid to make them visit the website. Users mark interesting websites they visit and are given a chance to share them with others. This tool helps the user to get the online buzz, especially if they are launching a new product or service. Also, the website can get many visits if the online buzz is accomplished. Another advantage of this tool is that it avoids congestion in your mail inbox. Common examples are Stumbleupon, Reddit, and Digg.com (Advice, 2011).
How Social Media Platforms Make Money
In most cases, people use these social media services for free but for such a website to remain sustainable, it has to generate income to support it. There are various ways that social media makes money. The first method of income generation for social media companies is through the investment made at the initial stages of website development by venture capitalists. This is usually a one-time investment to support the website in creating its popularity that the helps it to make more money through other forms. Venture capitalists believe that the social media platform will succeed and in turn monetize their investment (Strickland, 2009). For example the most popular social websites such as Facebook and Twitter if it were not for the initial investors the founders would not have been able to popularize them as they are today. The major problem with this source of money for social media is that it is not sustainable since the investment is done for the social startup companies. Therefore, if the website is not making additional income through services like an advertisement, then it will fail. Of late, venture capitalists have become more cautious and picky as to which social media platforms they invest their money (Strickland, 2009).
Secondly advertising is the most prominent income generating activity for all social websites; this forms a regular income especially for the most popular social websites. With the digital revolution, most of the top corporations in the world have turned into digital marketing that utilizes such websites for marketing of their products and services (Bench Craft, 2015). These big companies place their ads at a certain fee and for a certain period as agreed upon with these websites and the price defers depending on the targeted users. This provides a great opportunity for these social media platforms to make a lot of money from advertising. For example in the year 2014 the income made by Facebook made $3.8 billion which was an increase from what the company made the previous year (Goldman, 2015).
Most of the advertising income comes from mobile companies that are attributed to the fact that more and more people using these websites access them using mobile phones creating a better opportunity for advertising the same products. The more popular social media is, the more it attracts big companies to advertise which means that the more money it makes from advertising.
Membership fees constitute another source of income for the social media. Many social websites, especially dating sites and professional networking websites such as LinkedIn withhold certain feature and only allow their access for a registration fee that is renewable after a certain period (Bench Craft, 2015). Some companies such as Facebook have developed applications that they allow website developers to participate in for a certain fee. This also forms an income source but in smaller proportions compared to other income sources.
The Current Market Share In the Social Media
The use of social media platforms, in general, has experienced tremendous growth over the year since the digital revolution that has enabled efficient access to information. Many of the trends in the business world have integrated digital technology to fish out customers since a large number spend most of their time on social media sites. The assessment of the value of a market share of different social media platforms is based on the number of users per website. The current U.S market share in the social media see fig. 1 as at October 2015 shows that Facebook still dominates with 45.4% followed by YouTube with 22.2% and Twitter at only 4.8% (Statista, 2015). The dominance of Facebook is owed to the fact that it provides a wider range of services compared to other platforms thereby attracting more visitors compared to other social media sites like Twitter. The size of the market share is directly related to the amount of money generated by the site through advertisement sing companies use these websites with huge numbers of followers to place their advertisements.
Competition in social media
Currently within the media industry there exists a stiff competition across the globe among the major players in that market. The most common competitive strategy being used is differentiation that is coming from the user generated contents. For example, a dating site and a video sharing site like YouTube target the same set of customers, but their content differentiated to serve different consumer needs thereby segregating the market according to consumer preferences (Bench Craft, 2015).
Criticism of the Social Media
As much as social media is considered an important aspect of communication, with its use there emerges both good and bad effects of the same. Some of the most common negative effects of social media are;
One of the major disadvantages of social media is that it causes addiction. Once a user is addicted to social media, they spend a lot of valuable time on social media instead of using the precious time well. Students and teenagers are affected more in that they are less motivated to learn practical knowledge as they tend to rely on the internet for most of their learning (Ali, 2015).
Cyber bullying is yet another negative effect of social media. People target other users for cyber harassment and bullying. Many people have fallen prey to online attacks and they bring misery and tension to those being harassed. Laws are in place to tackle such occurrences, but attackers have grown smarter and cant be caught (Ta, 2014).
Social media also leads to societal moral degradation, especially when small children are permitted access to social media. The main reason is that social media consists of people from all walks of life. Others have bad intentions and will post immoral things like sexual material or materials that propagate violence on the sites. Hence, kids who view these materials will more often than not try to emulate them. As a result, kids will become spoilt and immoral as they wont uphold acceptable societal norms (Ali, 2015).
Intellectual property shared on social media can pose a major threat to the owners. People post a lot of information on social media sites, some of which are original. Even though security measures are in place to protect intellectual property owners, it is hard to guarantee the safety of intellectual property on social media sites. Other users can easily download stuff for free and some end up personalizing the information without crediting the information owner (Ali, 2015).
Individuals privacy in the social media platforms is at most times limited whereby in some cases others could access personal information without their consent that may lead to fraud. People who post their personal information on social media sites are vulnerable to information theft like stalking and identity theft. Alarmingly, some companies conduct an internet background check on their prospective employees. Therefore, if the prospective employee posted something negative on social media, their chances of employment are thwarted (Ta, 2014).
It has also affected the interpersonal relationships between individuals in that most people are glued to the social media platforms especially Facebook for news and updates from other users end they tend to forget the real impact that face-to-face interactions have on the lives of human beings. Romantic relationships are also harder to maintain because once you post negative comments on social media, your partner can view them and react negatively (Ta, 2014). This has led to increased cases of depression and loneliness among individuals.
Social media has evolved and become the custom in this day and age. Almost everyone has a social media account. It has come with great help to people, the most vital aid being ease of communication between people. Social media has had a major impact on businesses as those who have embraced the technology have gained a lot. Social media marketing has made companies reach customers easily and quickly. It has transformed the world into a 24-hour economy as revenue flows all day long. If companies and businesses use the right social media marketing strategies, they will gain a lot of profits gained. An increase in profit dictates an increase in market share; therefore the company will have a say in the business sector. Not only has social media helped businesses, individual users have also gained a lot. People are networking easily and advancing their careers. Also, people share ideas online and build on them. Indeed, social media is here for everyone to embrace.
Advice, Y. M. (2011, October 26). Understanding the Different Types of Social Media. Retrieved from Yell Business: https://business.yell.com/knowledge/understanding-the-different-types-of-social-media/#
Ali, I. (2015, June 25). Positive and Negative Effects of Social Media on Society. Retrieved from TechBead: 2015
Bench Craft, C. (2015, July 25). How Do Social Media Companies Make Money? Retrieved from Bench Craft Ads: http://www.benchcraftads.com/p/how-do-social-media-companies-make-money.html
Goldman, D. (2015, January 28). Facebook is growing — so are its costs. Retrieved from CNN Money: http://money.cnn.com/2015/01/28/technology/social/facebook-earnings/
Statista. (2015, April 15). The Statistics Portal. Retrieved from The Statistics Portal: http://www.statista.com/statistics/265773/market-share-of-the-most-popular-social-media-websites-in-the-us/
Strickland, J. (2009, July 10). How do social networking sites make money? Retrieved from How Stuff Works – Tech: http://computer.howstuffworks.com/internet/social-networking/information/how-social-networking-sites-make-money.htm
Ta, J. Q. (2014, August 13). What Impact Has Social Media Truly Had On Society. Retrieved from Business 2 Community: http://www.business2community.com/social-media/impact-social-media-truly-society-0974685#C3mrKkSYzarv5r7i.97
Percentage market share facebook youtube twitter reddit pinterest tumblr linkedin instagram yahoo! Answers google+ 0.45500000000000002 0.222 4.8000000000000001E-2 4.4299999999999999E-2 1.6500000000000001E-2 1.3599999999999999E-2 1.34E-2 1.32E-2 1.2800000000000001E-2 8.9999999999999993E-3