The Economics of Social Media

In my last post, I briefly touched on the economic aspects of the social graph. There are, however, much broader implications which exist vis-à-vis the relationship between economics - specifically in the areas of advertising and marketing - and social media, which I will attempt to cover in this post.

The emergence of social media is thought to represent a paradigm shift in the areas of online advertising and marketing. Most brands now make a concerted effort to maintain and manage an online presence in order to acclimate themselves to the current socioeconomic climate which, in many ways, is driven by social media. However, a mere website is no longer sufficient in ensuring a brand's successful promotion online; indeed, this was the case as recently as a decade ago. With the emergence of social media, companies must now cultivate their brands online through the use of any combination of social media tools such as Facebook, Twitter, and Google. This development and sustenance of a brand's online identity is achieved through what is called online presence management, the process by which companies maintain and draw traffic to their brands and their corresponding websites or webpages through a combination of several different online resources including web design and development; the utilization of any number of social media channels; and search engine optimization (SEO), wherein companies seek to optimize the visibility and accessibility a website or a webpage has in a search engine's (such as Google) "organic" search results. These resources, which lend themselves to the management of a company and its brands online presence, can be thought to keep social media, and the advertising channels which support them, afloat.

And yet, many businesses now depend on social media for new potential ad space. The relationship shared by many companies and social media outlets, however, can be considered a symbiotic one: they depend on one another if they hope to see profits. As businesses begin to gear their advertising models towards the new environment furnished by social media, virtually all social media outlets are beginning to indulge advertisers in order to realize the full potential of their profitability. Facebook, for example, has seen slower growth in its userbase this year than in past years - however, the company reported fourth quarter sales of $2.6 billion this year, up 63% from the same time last year. Over 90% of this revenue is reported to come from Facebook's ad sales, while overall ad revenue likewise rose 73% from last year. 

Moreover, we can look to an article found in Money Morning, titled How Do Social Media Companies Make Money? Money Morning E-Commerce Director Bret Holmes says that social media companies are "legitimate advertising websites, no different than, say, Google or Yahoo." He continues, "The same way Google made its money is the same way Twitter and Facebook will make their money."

The same article cites a 2013 Nielsen report which highlights some staggering findings: 89% of advertisers use free social media advertising and 75% use paid social media advertising, while 64% of advertisers expected that they would increase their paid social media ad budgets over the course of 2013. Another report projected that total social media advertising revenue in the U.S. would grow from $5.1 billion in 2013 to $15 billion in 2018. Simply put, this spells the potential of a tidy profit for both parties to the business arrangement: the social media profit from increasing ad sales, while the companies responsible for the ads benefit from exposure to new markets, a cross-section of an environment which encompasses dozens of different demographics, and overall, an altogether unique model by which to promote whatever it is they are selling.

Links:
http://moneymorning.com/2014/07/14/how-do-social-media-companies-make-money-2/
http://money.cnn.com/2014/01/29/technology/facebook-earnings/
http://en.wikipedia.org/wiki/Search_engine_optimization
http://en.wikipedia.org/wiki/Online_presence_management

The Social Graph

The term "social graph," as it relates to the Internet, refers to a graph - akin to a mathematical graph - which depicts connections and relationships between Internet users, specifically social media users. In this sense, one could think of a social graph as a map depicting links between different social media - a literal representation of a social network. In simpler terms, a social graph is a graphical representation of collected data which relates the links between different social media and their users. The following gif image, found on Wikipedia's article on the social graph, depicts an example:

This image not only depicts the different natures of the actions ("like," "listen," etc.) and relationships ("friend") which link Adam, Eva, and Kate, it also depicts the different media (Last.fm, Youtube, Peter's photo) on which the graph, and the relationships, are based.

Taken to its logical extreme, a social graph can be conceived as an all-encompassing platform for social media research, establishing links between users of such discrete social media as Facebook, Youtube, Last.fm, Instagram, and Twitter.

The practical - or rather, technological - application of the social graph is exemplified in the Facebook Platform, described as a "software provided by Facebook for third-party developers to create their own applications and services that access data in Facebook." Simply put, this means that the Facebook Platform utilizes Facebook's social graph in an attempt to encourage third-party web developers to produce content which caters directly to Facebook users by accessing their data, thereby integrating that content into the larger "Facebook experience," as it were. Examples of this include third party applications on Facebook, Facebook's ubiquitous "like" and "share" buttons appearing on dozens of different sites across the Internet, as well as the option to log in or register to several sites using one's Facebook login information.

There is a significant economic aspect to social graphs, as well. Companies such as Facebook often monetize the data collected in their social graphs using methods such as database marketing (direct marketing which involves databases of potential costumers, and the personalized promotion of products to these would-be costumers) and social commerce (a form of electronic commerce which focuses on social media as a means by which the buying and selling of products or services can take place). In this way, a sizable social graph - such as that of the Facebook Platform - can be seen as an economic advantage to competitors. Further, social graphs and the data they contain may also be privatized by the companies which claim ownership of them - something of a "trade secret."

In 2010, at Facebook's annual F8 conference, co-founder and CEO Mark Zuckerberg spoke about his intention to connect different parts of the Internet with the common thread being Facebook, as part of what he called the "open graph." The idea, in Zuckerberg's own words, was to "take [the separate maps] of the graph and pull them all together," in an effort to "create a Web that's smarter, more social, more personalized, and more semantically aware."

The "open graph protocol," then, can be described as a means by which Facebook has allowed developers to integrate their content into Facebook's own social graph, enabling any integrated webpage or application to become a rich and functional object in the graph, and providing it with the same capabilities as other graph objects (such as newsfeed/stream updates). An example of this is the ability of Facebook users to remotely post that they've finished reading a book through the website/application Goodreads to their Facebook profiles. The "open graph" approach has allowed countless online businesses and applications access to Facebook's massive social graph, which is mutually beneficial for businesses or services with smaller audiences, and Facebook, in being able to expand its social reach - "cast a wider net," so to speak.

The implications of the "open graph," in my opinion, are numerous, chief among which is the possibility of an absolutely integrated social graph, wherein "social media" can be viewed as a single, uniform platform encompassing most, if not all, of the social Web, rather than its current fragmented nature. The idea of the open graph may prospectively open doors towards full collaboration between different, competitive social media platforms - and we may already be seeing the beginning of this now (for example, through the partial synchronization of Facebook and Twitter).

Links:

http://en.wikipedia.org/wiki/Social_graph

http://en.wikipedia.org/wiki/Facebook_Platform

https://developers.facebook.com/docs/opengraph/overview/
http://www.cbsnews.com/news/facebook-one-social-graph-to-rule-them-all/

Who uses social media?

It's no secret that social media has had a staggering impact on the world since its advent; simply put, it has completely revamped the popularly conceived notion of "connecting" and interacting with one another, as well as how we share information with one another, and in many ways, how we perceive the world. As such, social media has had subsequent effects on society and popular culture, especially in the Western world.

To describe social media in such grandiose terms, though, is - in some sense - to take the "easy way out." An important question which is rarely addressed with regards to the profound impact that social media has had on society at large is, "Who has social media affected?"

In other words, who are the people who frequently use social media? How many people has it affected? If we were to posit that social media has had such a drastic impact on society, then it should follow that the people who make up society have felt the effects of social media as well.

An article on eMarketer published last year claims that the reach of social networking is increasing exponentially by year. According to the report cited in the article, "the number of internet users who use a social network site via any device at least once per month" has increased by 13.4% since last year; the number now stands at around 1.97 billion people across the globe, or around one in four people on earth. The report further claims that the number could climb as high as 2.55 billion people by 2017.

The same report also lays claim that emerging markets in Asia and Africa will be "huge drivers of social user growth" in coming years, and that the reach of social networking has been increasing globally since at least 2011, throughout dozens of countries in Africa, Asia, the Americas, and Europe.

An infographic on Mashable, which charts research carried out by the Pew Research Center, provides a "breakdown" of the most well-represented demographics with regards to social media usage. Some of the most notable statistics are as follows: 

• The highest percentage of social media usage occurs among the youngest demographic (18-29 year olds) with 83%, with less usage as age increases (77% among 30-49 year olds, 52% among 50-64 year olds, etc.)
• Social media usage among women is 9% higher than that among men, with 71% and 62% respectively
• People living in cities are responsible for the highest percentage of social media activity by population density, with 70%, as compared with suburbanites with 67% and those living in rural areas with 61%

The most common demographics are 18-29 year olds, those earning a household income of $30,000 or greater, city people, college students, and white people.

The question of whether social media is "the same" for all of these demographics is directly related to the question of which social media platform is being discussed. The same Mashable infographic says 67% of online adults are Facebook users (Facebook is arguably the most popular social media platform), whereas only 6% of online adults are Tumblr users. Elsewhere, the infographic shows that Instagram, for example, is most appealing to African-Americans, Hispanics, urban residents, 18-29 year olds, and women, whereas Pinterest is most appealing to rural residents, women, white people, people with some level of college education or higher, and people of middle or higher income. Clearly, the extent of ones exposure to social media - the expanse of ones "social mediasphere" - differs from demographic to demographic, and is rarely, if ever, consistent across the board. Where a transcendentally popular platform like Facebook has universal appeal to both younger and older people (and perhaps has had such broad and widely-felt impact as a result of this), "smaller" platforms such as Pinterest take more of a niche approach to social networking.

I am of the opinion that a social media platform's importance correlates, at least to some extent, to its reach or the size of its audience. We are continued witnesses of a popular example of this, with arguably the two most impactful and influential platforms to emerge following the "social media boom" of the mid 2000s: Facebook and Twitter. They also happen to have the greatest amount of users of any social network, with 1.28 billion users active monthly (as of March 2014) and 274 million users active monthly (as of July 2014), respectively. Their importance can only be measured by their immense bearing on popular culture, and their default roles as "lenses" through which people continue to study social media's growing impact on society.

Links:
http://www.emarketer.com/Article/Social-Networking-Reaches-Nearly-One-Four-Around-World/1009976
http://mashable.com/2013/04/12/social-media-demographic-breakdown/ 

What is Social Media?

"Social media" is undoubtedly a broad and loosely-defined term. Wikipedia's article on social media defines it as "the social interaction among people in which they create, share, or exchange information and ideas in virtual communities or networks." This definition, albeit a brief one, provides a set of criteria for social media:

1. Social interaction among people is a definitive characteristic of social media;
2. It involves the creation, sharing, or exchange of "information and ideas"; and,
3. It focuses on the spread of information and ideas throughout virtual communities or networks.

It is then perhaps reasonable to postulate that any medium which exists online, provides a platform for social interaction among people, and lends its focus to the creation, sharing, or exchanging of information throughout the subsequent communities which would then form around such a platform, would qualify as social media.

What differentiates "social media" from other forms of media is its emphasis on interactions between people. A dedicated site may introduce other elements (commercial, for example), but they will always be built around the impetus of networking among users, and the proliferation of information throughout the communities built by these users.

Social media has become so ubiquitous, that elements of it have begun appearing even on non-social media sites, such as in the form of comment sections, forums, and the option to "like" a magazine article.

Having skimmed over Wikipedia's list of social networks, and the list of services supported by ShareThis, I've found that virtually every site or service listed, from Facebook to OUTeverywhere (an LGBT community) to WAYN (a community concerned with travel and lifestyle) to Digg, is dedicated to the creation of a community of people who share similar goals, interests, or lifestyles, or who otherwise wish to "network" with others online. Some sites are characterized by more interactivity than others, and some by less of a focus on sociability than others.

Speaking of Wikipedia: it is itself ostensibly a social media platform, especially since it is edited and moderated by a community of users. All of Wikipedia's content is, essentially, user-generated, and it is frequently modified and discussed on forums by users.

Some examples of "clearly social" media include Facebook, Twitter, Instagram, and Tumblr. These sites are unambiguously focused on the "social" aspect of social media - interaction among users. Examples of "clearly not" social media include strictly commercial sites which do not allow user commentary. Without any semblance of user interaction, social networking or user-generated content, a platform cannot be considered a social medium.

Links:

http://en.wikipedia.org/wiki/Social_media
http://www.sharethis.com/publishers/services-directory#sthash.3kLlGeLJ.yVSSSMvH.dpbs
http://en.wikipedia.org/wiki/List_of_social_networking_websites