The Economics of Social Media

Ben Rubenstein

About me

Senior Manager, Social Media & Online Community at TechTarget

Past:

Not a guru, ninja or sage (or an economist)

Overview

The (current) business of social media Existing business modelsExpectations for the market

Social media as a tool for other businessesHow companies are using social media to

build businessChallenges for businesses and users

New business modelsSharing/collaborative consumption examplesThe future?

Web 2.0 = social media?

Wide reachData-drivenUser-centricPerpetual

betaMultiple

devices

How ‘the long tail’ applies to socialWide range of content availableParticipation is spread out along a scaleNiche communities are just as important as

the mainstreamTargeted recommendations (human or

machine) drive action

The (almost) current landscape

Social media: A good investment?

Social Media: Hype or Hope?

Highs and Lows• 2010: Rejects

Google’s $6 billion offer

• 2012: $5.8 billion valuation

• 2013: $7.3 billion valuation

Highs and Lows• 2013: Rejects

Facebook’s $3 billion offer

• 2014: Snapchat hacked

• 2015: ???

Business models (not mutually exclusive)

AdvertisingVirtual GoodsFreemiumSubscription

AdvertisingLeveraging the Long TailNative or not

Virtual goodsReal money buys fake things within the

free experience

FreemiumBase product is free, extra features (or

fewer ads) will cost you

Subscription (Premium)You have to pay to play

Freemium vs. Premium

How do Facebook/Twitter make money?

What model(s) does Facebook use? What about Twitter?

What opportunities are there to expand? What are the risks?

The ‘real’ product

A social network’s real value = Number of users?

“If you’re not paying for the product, you are the product” – Anonymous internet pundit

Why am I seeing these ads?

Why am I seeing these ads?

You are being watchedData mining based on your

profile + postsRetargeting from sites you’ve

visitedBuying a coat? Buying a car?

Facebook knows all

“Facebook has collected the most extensive data set ever assembled on human social behavior.”

You make yourself a target

You make yourself a target

Your friends make you a target

For Advertisers

The power of the social graph

Take a break

Visit your favorite social network:What ads do you see? What are they for? How did they get there?

The “thank you” economy

Who participates in this new economy?

Businesses – you don’t exist if you’re not on social media

(Content) Marketers – every brand is now a publisher

Customer Service – problem solving

Data AnalysisCustomers – what makes

it all work

Every network is a new opportunity for…

Marketing

Every network is a new opportunity for…

Sales

Every network is a new opportunity for…

Entrepreneurship (and Self-Promotion)

Every network is a new opportunity for…

Cut out call centersCreate a ‘human’ face for the brand

Customer Service

Every network is a new opportunity for…

Understand what people care aboutBuild new business from that data

Data Mining

Every network is a new opportunity for…Data Mining

Every network is a new opportunity for…#Fail

Every network is a new opportunity for …So Much #Fail

Every network is a new opportunity for…Scamming

Every network is a new opportunity for…Scamming

Brands have both more and less control

Owned vs. earned vs. paid mediaOwned: Created/controlled by businessEarned: Shared by press and publicPaid: Sponsored content/advertising

“If [Facebook’s] News Feed is the thing that everyone sees and it controls how information is disseminated, it’s controlling how information is revealed to society, and it’s something we need to pay very close attention to.”

Can businesses and users coexist?

Pressure to make money = more advertisingIf users leave, no more business opportunity

Business objectives

User experience

Your turnFind a brand you like on social media.

What marketing efforts do you see? What’s their persona?

Are they successful? How can you tell?Why would you follow them? Deals, customer

service, humorous content?

Social creates new business models

How does social media support the “collaborative consumption” economy?

What new opportunities and challenges does this economy create?

What are some examples of participants in this new economy?

Peer-to-peer sharing

Microtasks

Social deals

Location-based deals

Crowdfunding/Crowdlending

????What social business opportunities have yet to

be realized?

RecapLots of hype, but some hope for social

media businessesSocial supports existing business models –

with good executionSocial creates new business opportunitiesWith every opportunity, there is a tradeoff

Thank youhttp://www.benrubenstein.netlinkedin.com/benrubenstein@ben_rubenstein