What most people don't understand about Social Media

We've seen several reports recently of popular social media sites that are struggling to be profitable, like Twitter and Tumblr.

Profit? Most social media users see their accounts as a free service.  What's going on?



In my mass communication classes, including Media Management, this is one of the things I need to (gently) hammer away at.  All media is a business and exists to make money.  It serves its audience as a means to an end.  The end goal is not serving the public.  It is revenue to keep owners and investors happy.

Back around 2000, there were a huge number of Internet tech companies that went out of business.  They generally had really cool functions, but many had no income from users.  Their operating revenue came from investors and venture capitalists, but when that money ran out, they were in trouble.  Fundamentally they had no business plan, or at least a one-sided plan that was filled with expenses but no way to pay for those expenses.  Some were able to restructure and create income, but many collapsed.

The idea of giving something away for free and then getting people to spend money is old.  It is the basis for newspaper, radio, and TV advertising; shareware; premium memberships; pay for more cloud storage; unlock additional features; Public TV pledge week; and endless variations.

But social media still needs to produce income.

For example, when Facebook started, it was small potatoes and needed little income. As it grew, the cost of the hardware, bandwidth, programmers, and other things, resulted in the need for more and more income, so we started getting advertising. Eventually, in 2012, Facebook issued stock and is now owned by investors, who all expect dividends and increasing stock prices.  So Facebook's planning is now balanced -- how do we service the audience better, and as a result get them to spend more money?

Quality of content is not the first objective.  It is Return on Investment (ROI). That is why your favorite TV shows get canceled due to low ratings.  It is why social media platforms, like Vine, close their doors.  If media is not providing a sufficient ROI, after a reasonable amount of time, it downsizes (usually painfully) or simply shuts down.

What does this mean for consumers?

I know that we generally dislike advertising and resent intrusions on our personal use of social media.

But social media surviving as the result of profitability means that we need to be prepared to support our favorite social media sites in ways that relate to money.

It could mean not blocking advertising.  It could mean PAYING for that premium membership.

Remember -- your favorite social media platform is a business that needs to make money.  It is NOT entertainment provided to you for free, with no obligation on your part.

If social media does not make money, it no longer exists...and you should be concerned about some of your favorite social media platforms.