Social Media Articles

Creative Network-Marketing Research Institute
17 Apr 2017

The Economics Of Social Media


Every day, billions of people post, share, comment, and chat on online social media platforms. More and more, they are replacing traditional means of not only communication but also socialising with friends and family.

Because of social media, it has never been so easy to keep in touch with people who live thousands of miles away. It also moves significant amounts in advertisement budgets as companies have realised their audience is moving online.

The truth is that by moving into social media, people also brought the worst parts of human behaviour into the platforms and even the main networks are struggling to deal with it. Fake news is rising, and trolls/haters have been a roadblock in companies’ ability to attract more investors into the businesses.

Just like traditional media, social media makes money through advertisement. The more activity it has within its networks and the more people using it, the more companies want to advertise their services and products with them.

Wired magazine wrote in 2014 that 52 trillion words are written every day on social media, which equates to roughly 520 million books. With every click, bounce and page view being monitored, it’s easier for a social media network to analyse what to invest in, in order to get more users and, therefore, more traffic and more money from advertisement.

Revenues from advertisement have massively increased for social media in the last three years. While in 2014 all social media generated a total of $17.9bn from advertising as well as games and apps within the platforms, the amount jumped to $25.1bn in 2015. According to eMarketer, the estimate is $32.9bn for 2016 and $41bn for 2017.

It is estimated that, by the end of this year, social media advertising will be a total of 34.5% of the total global digital ad spending.

Being the Product

Besides advertisement, social media also sees users as a product. As social media collects incredible amounts of data about users – what they like, what they don’t like, who they talk to and how they talk – that data is valuable for companies who wish to target certain niches of the population with their products or services.

Whenever a user signs up for a social media account, he’s giving up the data of everything he does within the platform. The more people interact with each other, the more data social media has to collect and sell to the highest bidder. This means that smaller companies who cannot make money from advertisement can still monetize their business by selling user data.

In that sense, it’s in social media’s interest to keep its users occupied. It adds features and adapt content the user sees to what they believe the user will enjoy seeing.

Power of Mobile

Mobile is changing the social media game and forcing platforms and marketers to adapt their content and their ad campaigns to the growing mobile audience. A comScore study shows that in 2015, the smartphone was responsible for more than 60% of all the time spent in social media. If tablets are added to the equation, the percentage goes up to a total of 79%.

n that sense, it isn’t surprising that companies are looking more and more into tailoring their ads to the increasingly mobile audience while social media platforms work on developing their apps to accommodate new users.

In fact, mobile users will likely increase in the next few years. With only 2.8 out of 7.2 billion people on the planet connected to the internet, it’s easy to see there is enormous growth potential for mobile since the devices are cheaper than a laptop or desktop. Only half of China’s population is online. In India, it’s only 30%.

But even if those two countries are taken out of the equation, Western countries already have an internet penetration of roughly 80%, according to the Internet World Stats. It’s not hard to see that the biggest potential comes from emerging markets where only a tiny amount of the population is connected to the internet.

t’s no surprise that Facebook’s CEO Mark Zuckerberg is developing drones and balloons to bring free Wi-Fi to countries that have limited access to the internet.

With some smartphones being sold for only $40, there is enormous growth potential for social media to grow in popularity and user base.

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