How Social Media and Advertising Came Together to Monetize the Online Experience

How Social Media and Advertising Monetize the Online Experience

Facebook reported in its 2014 results that it had surpassed 1.39 billion monthly active users worldwide. When compared to the current world population of 7 billion, that means close to 20 percent of people globally have a Facebook account. Facebook reports that more than 30 billion pieces of content are shared each month. These figures are just one way of describing the massive presence of social media on a global scale.

While social media sites have evolved since the early days of Myspace, a common thread weaves through their development: monetization. As the amount of shared information has increased, so has the desire of businesses to capitalize on these new forms of communication. Despite the billion dollar valuations social networks often receive, social media and advertising couldn’t succeed without obtaining the personal information of users.

The Evolution of Monetizing Social Media

Since the first versions of social networks began popping up in the form of message boards and chat rooms, there have been advertisements. But as time has passed, new forms of marketing have emerged. The following history of social networks shows the most important changes over time.

Early Forms of Social Networking

The infancy of social media can be traced back to BBS, or Bulletin Board Systems, which were online meeting places popular in the ’80s and early ’90s. Accessed via dial-up modems — you can hear the noise from here — these groups were often run by hobbyists who wanted a place to talk about technology-related happenings. BBS groups didn’t have advertisements, but they were among the first public movements to make the Internet social.

Perhaps the truest ancestor to today’s social networks is America Online. AOL allowed users to develop “member profiles” and join communities. These groups were often organized by interest. AOL was supported by subscription fees, but many websites and community hosts used banner ads and other forms of advertising as essentially copies of print advertisements you would see in newspapers and magazines.

Myspace: The First Modern Social Network

In 2003, Tom Anderson and Chris DeWolfe founded Myspace as an amalgamation of popular features from other growing social networking sites. The site quickly shot up in popularity and was purchased by News Corporation for $580 million in 2005.

Myspace was among the first to allow advertisers to try behavioral targeting with users. Advertisers could select who saw their ads based on the massive amounts of data Myspace collected. However, no matter how targeted ads on Myspace were, few users clicked on them. Fortune reported that Myspace’s click-through rates were 4 in 10,000 — far less than banner ads for non-social media sites. Myspace was a place where users wanted to interact with friends, and brands couldn’t reach users with banner ads alone.

How Facebook Became the Standard for Monetization

Facebook History Timeline

Mark Zuckerberg infamously began Facebook as a prank site for comparing Harvard freshmen on their physical attractiveness. But out of that joke, “The Facebook” was born in February 2004. The site was launched with limitations to Harvard students. After one month, more than half of Harvard students were registered. By semester’s end, the social network had spread to three other schools. In 2006, Facebook was opened to everyone age 13 or older. The rest is history.

Zuckerberg was able to learn from the mistakes of Myspace by developing a far more intuitive and innovative ad platform. The company allows advertisers to target user groups of any size, from thousands to millions. More importantly, the company’s ad platform is easy to use. Any business, from the local coffee shop to a large corporation, can use it effectively. With Facebook’s Open API (Application Programming Interface), marketers and advertisers can extract data easily and create better campaigns and ads. Facebook was among the first to become so open, which effectively changed the monetization landscape for social media and advertising.

Facebook also allowed brands to develop “pages” of their own to create a better relationship with customers. These brand pages operate almost identically to personal profile pages, as brands can post their own status updates and share photos or videos. This allows advertisers to gather more information about their potential customers and develop low-cost viral marketing campaigns.

Twitter Mobile Statistics

Twitter and the Growing Importance of Mobile

Founded in 2006, Twitter began as a “micro-blogging” service but has since exploded into one of the largest social networks in the world. Twitter differs from Facebook in its natural ability to work on the mobile platform. Of Twitter’s 300 million-plus monthly active users, 80 percent are active on mobile. Furthermore, according to TechCrunch, 38 percent of Facebook users are solely active from their mobile devices.

Twitter’s primary source of revenue — 85 percent — comes from native advertising. Only a portion of Facebook ads are displayed among other posts. This means that Twitter’s ads are not interruptive and truly integrate into the actions of potential consumers. This makes the ads far more successful. Also, 65 percent of Twitter’s 2013 ad revenue was generated from mobile devices, another differentiator from Facebook.

Instagram, Snapchat and Beyond

As more and more users are moving toward mobile platforms, the emerging social networks are almost exclusively on mobile. Mobile applications like Instagram and Snapchat are reinforcing that mobile nativity and advertising models will continue to be popular. While Instagram implements native marketing like Twitter, Snapchat is developing different channels for monetization.

As a video and image messaging application, Snapchat doesn’t offer the same real estate for traditional advertising that Facebook or Twitter do. Instead, Snapchat is resorting to more unique methods. “Snapchat Discover” allows brands to release content on a dedicated channel. Content producers then turn around and sell advertisements, with costs reaching as high as $750,000 for a day’s worth of advertising, according to Adweek. These profits are then split with Snapchat. This monetization approach is radically different from what other social media platforms are offering.

Analytics and Big Data

The key driver of social media monetization has been the immense amount of personal information available to advertisers. With users constantly sharing the details of their lives, brands can understand people’s likes and dislikes. Brands can properly target their advertising and gauge the success of their ads. The ability to assess and analyze the “big data” of social media is paramount to the success of monetization.

Digital Marketing Budget Social Media

Social Media Analytics

The sheer amount of information made available via social media requires complex sorting and analysis to find important and relevant trends. This process is known as social media analytics. Companies are able to identify interesting trends and use the information to shape their marketing strategies and tactics.

Social media analytics are becoming an increasingly important part of any marketing department. According to the Simply Measured company blog, 10 percent of the average digital marketing budget goes to social media, and that number will increase to 22.4 in the next five years.

Popular Social Media Analytics Tools

With so much data to sift through, powerful tools are necessary for brands to find the information they can use to implement effective marketing strategies. These tools allow companies big and small to maximize their social media engagement and make effective advertising buys on various social media platforms.

Hootsuite

Among the most popular, Hootsuite doubles as a dashboard and analytics tool. This allows professionals to manage their social media content and measure its effectiveness in the same place. Hootsuite actively listens to the social media chatter and gathers data from 70 million sources globally. While not as popular among enterprise customers, it is a good entryway into social media analytics.

Buffer

Not all social media posts need to be published at the same time, and Buffer specializes in helping brands optimize the timing of their social media postings and ads to maximize engagement and response. The company measures effectiveness and offers detailed plans to improve on what’s working and what isn’t.

Topsy

With a focus on the wider social web, Topsy offers a more holistic view of the social media landscape for companies. Its real-time search option allows for social analytics of just about any term. It specializes in following Twitter trends and has access to every tweet since Topsy’s inception in 2006.

The Future of Social Media Monetization

In the future, social media monetization should continue to evolve. Advertisers will likely continue to use information shared on social media for advertisements, and social media companies will sell that information to advertisers. Business professionals in all sectors of the economy will need to understand the importance of social media advertising.

Point Park University offers four fully online business programs designed for students seeking an associate degree, a bachelor’s degree or an MBA. The online programs educate students on the latest business topics, such as social media advertising, and give students the opportunity to maintain their current time commitments while gaining the tools and knowledge to advance in their careers. Learn more today.

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