The business models of social media enterprises
Small businesses to global organisations, everybody is looking to benefit
from social media to increase their trade
and promote their business. One of the main attractions of numerous social
media sites is the fact that they are free, which is pretty astonishing seeing
as Facebook alone has over 500 million users. As
you can imagine, creating effective software that performs faultlessly on this
scale is a demanding task needing
a full team of individuals. Since these social media sites are free, the clear
question then becomes how do these corporations stay afloat, let alone turn a
good yield?
Like many new businesses, social media sites are often supported
by a set of entrepreneurs that put down a good-sized investment with the belief
that the business will produce large dividends in the future. For social media
sites, this investment often comes from other ingrained internet sites, such as Google’s multi-million dollar investment in Facebook a few years ago. This trend still
doesn’t answer the question as to where the sites’ actual revenue comes from….that
all comes down to advertising.
Advertising
Local and national newspapers survived for many years on
advertising, but it’s no secret that the demand for print ads is declining. But
with social media and their constant stream of people—most of who make known a treasure
of personal information—social media sites offer businesses an exceptional
means for target marketing. As you can visualise, this type of targeted
advertising is more efficient and cost-effective than other, more traditional, methods.
And not only do these sites offer finely-tuned advertising campaigns,
each page feature a flood of common advertisements on the sides as well.
Paid Applications
Charging a fee is virtually impossible for a social media site
because of the astounding level of rivalry. Instead, social media sites often
charge the developers of applications a small fee in order to be verified by
the site. For example, Facebook charges £375 to evaluate and, if acceptable, authenticate
an application for use
on their site. Although this is certainly a nice stream of profits for
companies, the vast majority of funds are still generated through
advertisements.
As you will notice that most of the examples above come
from Facebook,
that’s because they’ve been the most popular in turning their
online forum into a profitable enterprise. One of the ongoing jokes in the
social media world orbits around that fact that Twitter has yet to find an
effective way
to integrate ads to their site and produce steady income. But that looks as if
that may be about to change. Tweetup, an
ad platform and search engine tool from Twitter, is looking to finally
turn a profit for the site by offering people options to make their Tweets more
relevant in searches. Recently, the company publicised that they were acquiring Twidroid and Popurls, two popular services which can be
used in conjunction with the Tweetup feature.
In
just a few years, social media sites have become staunchly ingrained in our culture,
and it doesn’t appear that they will be going anywhere soon. The test in the
future will be for the sites to find a balance between providing an
easy-to-use, valuable networking and the need for advertisements to produce a
consistent stream of revenue. One thing is for certain however: all of these companies are repeatedly
at work to improve and perfect their advertising promotions.
Really enjoyed reading the first link from the BM alchemist, his blog was well structured and easy to understand. Sadly though, the second link for marketing was a full length report which used a lot of abbreviations and reported that the survey was carried out amongst 18-22/3 year olds, although these students could go on to be very well known businessmen / women I felt the second link did not give me a true overall understanding with it's relation to the Business Models of Social Media Enterprises, but, a well written blog with a really good first link.
ReplyDeleteHave to agree with Martha, the second link was too long of a read but like Martha said, the BM Alchemist was much easier to understand and made for an interesting read but really well written blog.
ReplyDeleteVery good read on the business models of social media enterprises, the first article was a good read on information, but the second website was very hard to follow like the comments above say. Very good image describing the topic too. This blog was well written too Louise.
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