How Does Facebook Make Money?1 2016-10-19T09:14:20-07:00 Sophie Stoltman 0e990f82ea5a19f69cfb5bf84baf13184ebf4ae8 11880 6 plain 2016-10-19T10:58:02-07:00 YouTube 2012-02-29T04:54:13.000Z KQUPrd5Qfks Mark Lukach Amanda Villarreal 8f41ba2aef2e7898c61130f6f7bf89a8ef24b293
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Money and Social Media
How different social media platforms make money off of their users and how users can make money through social media.
In the business world the motivation for almost everything is to make money. The social media world and the business world are more interconnected than the average user might think. Sure most services on Facebook, Twitter, Instagram and Tumblr are completely free but they do come at an underlying cost. All of these social media platforms use promotions and different types of adds to make a profit off of the user’s viewing experience.
Sometimes it can be difficult to notice adds because they can look like regular posts just with “promoted” labeling. For example, on twitter and Tumblr, the promotions are interconnected with what is normally on the user’s feed making it easier to view and not notice that it is an advertisement. This is possible because all different social media platforms track what you like, share, reblog, retweet, and search in order to get a better understanding of the content you would like to see in the form of adds. Facebook is known for being extremely good at tracking it’s users and putting up advertisements on the side that are eerily relevant to the user.
When companies try to promote on social media demographics’ and target markets can easily be reached without having to pay for irrelevant advertising. For example, a teenage boy would never see a promoted advertisement for Playtex on any of his social media feeds.
Social media sites make their profit by selling the space for these advertisements directly to the companies trying to promote their good or service. It makes sense that companies would take advantage of social media considering that globally there are over 2.3 billion active social media users. Social media is a huge part of the branding and promotion for any particular brand. In fact, 91% of retail brands use two or more social media channels.
The social media advertising system proves to be very profitable for the social networks, earning around $8.3 billion from advertising in 2015. More and more companies are choosing to spend more of their budgets on social media promotion which is a great strategy since 96% of people that discus brands online didn’t follow the brands in the first place. This means that these users are being exposed to the brans through advertising.
Social media also created a new way for consumers to communicate with brands. For example, if a consumer finds a product unsatisfactory they could tweet at that brand and normally get a timely response. This is great for users who need help with products or have suggestions and it helps businesses see how their products are doing.
Advertisements are meant to appeal a product to a potential buyer. A great challenge has been reducing the amount of wasteful advertisements. A wasteful advertisement is when an ad is shown to somebody who would have no interest or possibility of buying. An example of wasteful advertisement is, advertising on a webpage or social media platform, earrings to somebody who doesn’t have their ears pierced, or contact lenses to somebody with perfect eyesight, or even a high heel shoes to a man.
A solution that has come to be recently is targeted advertisement. Targeted advertising is a form of advertising that bases its ads on the traits and interests of the user. This includes recent searches, views of items, and visits to webpages to see what the user has been interested in in order to narrow down the potentially more effective advertisements. If the user has spent a fair amount of time on the Macy’s webpage and searching for jackets, that user is more likely to find an advertisement on a Macy’s sale or even similar jackets to what was viewed previously.
These advertisements are called Behavioral Ads, which will have certain advertisements appear based on your purchasing and browsing habits, and these advertisements don’t just appear on the platform for free. The largest source of income of these social media platform is actually the payment from other companies to put these advertisements on their platform. Other forms of advertisements are Search Engine Ads, which will have advertisements show up based on your browsing history. For example, if you type “lawn mowers” into a search engine such as Google or Bing, then you might see more advertisements for lawn mowers. According to a MSNBC article, users will click on these ads up to 10% of the time.
The final type of advertisement, and perhaps the most important, is Social Networking Ads. Facebook is the biggest user of these types of ads. These ads are the ones that you will see on the side of your page while on Facebook or another platform, and they will appear based on a number of different things based off your account, including your friends. Many of these ads will have a “like” button and if you press that button then a friend of yours will see it on their feed with it saying that you liked it below the ad. If enough people that you are in contact with over Facebook like this ad, then it may appear in your main feed. Another piece of information they use is your status. If you change your status from “single” to “in a relationship,” then you might see more ads for jewelry and things for your newly found partner.
These social media platforms will look at a lot of your information in order to see what the most effective advertisements will be to show you. Some people think of this as an invasion of your privacy and do not particularly like it, but it does happen and they are getting better and better at it.
Not only did the social media companies gain revenue, but the users began to take advantage of moneymaking and this set a new trend. The first website to start the movement of money making for it’s users was Google, with AdSense. Almost over a decade ago, AdSense was launched by Google and was a “prolific ad-revenue-sharing service”. Many other companies saw the success of AdSense and tried to copy the website, but later did not find success.
The process of AdSense is one that is still used today and is easy for most users. The way this program works is a user can incorporate the right type of ads for their sites through AdSense. These users can customize where the ads will appear on their sites and get to watch as advertisers bid for the advertising space on the website they created. Finally, as Google says “Leave the money stuff to us.” They will handle the billing to the ad provides that win the bidding and appear on the site. The site contributors gain money for a number of times the ad is viewed or clicked on by site viewers. AdSense was just the start of the money movement on social media, but it started a trend across social media platforms.
Twitter, Facebook, and YouTube are all social media outlets that swept through the world and have become widely popular. As an example, the active users alone for Twitter are nearly “645 million with over 58 million tweets daily”, and for Facebook there are about 1.31 billion users who are active daily.
Users on Facebook can gain a large amount of friends and use this platform to market the products they have, which can bring in new customers and income. Facebook is all about networking, and business owners can use this to their advantage. Selling online is as simple as showcasing the products or services on a business profile and using whichever payment method maximizes the online sales. A key in getting desirable customers is having content on the profile that pulls in users and keeps the customers interested and buying. The algorithm used by Facebook is the determining factor is what shows up on a user’s News Feed and is based on the number of times a user clicks on certain pages or ads. Getting the company’s information out there on Facebook is a way to generate revenue and expand the customer base.
Recently, Twitter has begun to include more ads into its news feed, and similarly to AdSense it has started to be a revenue service. One way a user can make money on Twitter is through crowdsourcing, which is a way of getting idea sand contributions from followers. Similarly, to Facebook, Twitter is a platform where users can advertise and sell their products. Another way to make money on Twitter is by sponsoring tweets. If a user’s account is highly followed, sponsors will pay them to Tweet about their products.
YouTube, another very popular social media channel has grown into a form of occupation for some users. Users who are seeking to make money on YouTube enable their channel for monetization and need to gain a community of followers behind them with entertaining and enjoyable videos for their viewers. YouTube may be a source of money making, but this is one of the more difficult social medias to make an income off of. The majority of You Tubers profits are generated from the ads. There are multiple types of ads that are shown during a YouTube video. Auction display ads are the ads that have a banner at the bottom of a youtube video where a viewer can exit out of the ad or click to get more information. Another ad style are the videos before the YouTube video that a view can skip after a certain number of seconds or learn more about the ad. Similarly, there is another ad type that plays before the YouTube video that viewers can not skip. All of these ad forms can get the YouTuber money, but only when the viewer clicks on the ad and ads only shown upon their videos about half the time, this is why it is more difficult to earn money on YouTube. YouTube has als been a platform for users to become YouTube famous and lead to careers. This is something that is more difficult to achieve but can lead to a great job with different experiences and travels. Certain music artists that are very popular today were discovered through YouTube and there are famous YouTubers that get to do live shows or tour around the world. Making money on YouTube is a process, and the key to making more is having the largest fan base a user can obtain.
Social media outlets have great ways to get your services and products out there. These forms of communication are a new way of making money and expanding customer base.
Social media has evolved into a money making machine that once, never was anticipated. Social Media Sites, Companies, and users/ content creators have been able to gain profits through the highly efficient advertising model. Social media was the first place where personalized, specific advertising took place, changing advertising in a big way. The money of social media is the underlying controller of social media that the average user might have never realized.