The business models of all major social media platforms require a profit, and they generate that by being wholesalers of eyeballs.
They do not do it for free, any more than your wholesalers of produce at the city markets provides their service for free.
Social media platforms fight for the attention of users, then sell the users attention to advertisers, attracted by the ability to slice and dice the audience in ways almost unimaginable a decade ago.
However, at the foundation level, little has changed since the dark ages of print media, just a decade ago, when profitability depended on content being sufficiently attractive for buyers to purchase a newspaper or magazine, offering the opportunity to advertisers to show them their advertisements. The only difference is that the media is now run by algorithms and often crowdsourced content, rather than journalists and typesetters.
The objective is unchanged, creating the situation where advertisers are willing to pay for eyeballs.
The fight for this wholesale market share also has not changed much. Newspapers over the years consolidated and generated profits by a combination of scale delivering low cost, and regional eyeball oligopolies, often monopolies.
Now the digital platforms are playing the same game.
Facebook has once again tightened the screws on brand marketers by reducing the eyeballs that will go to their pages. They talk about enhancing the experience for their customers, i.e. those who use Facebook, not the advertisers who are trying to reach users. Controlling access to the newsfeed is a way of controlling supply, and every economics 101 student knows that the intersection of the supply and demand curves is the price. Build demand, restrict supply, Goldmine.
Microsoft’s purchase of Linkedin for $US 26 billion last month (June 2016), an eye-watering amount, is a similar play for eyeballs, and seems great value when compared to Facebooks purchase of WhatsApp which was still just a startup, for $US19 billion in early 2014. Microsoft had a big hole in their grip on their business customers, now filled by Linkedin. So it seems that even more than ever, Facebook will be the social platform for socialising, and Linkedin, which includes the Slideshare platform purchased for what now seems a paltry $US119 million back in May 2012, the social platform for business. Given Microsofts power elsewhere in the digital ecosystem, with the ageing cash cow ‘Office’ platform, their enterprise offerings, and Xbox for consumers, it is a logical hole in their range of eyeballs.
All of this leads to the simple conclusion that the marketing priority of businesses should be the building of their own eyeball platform, their website and own ecosystem that leverages the wholesalers to your benefit, not just theirs. In your own home you can do pretty much what you wish, instead of being at the mercy of the landlord as you are when you rent.
If there wasn’t already a (defunct) music blog of the same name, you could have called this article “Slicing Up Eyeballs”…. I’m interested on what fallout there might be from Microsoft’s acquisition of LinkedIn, or Facebook’s re-calibrated newsfeed algorithm? Do you see any attempt by/opportunity for 3rd party platforms to capture/fragment markets “below the line” of the social media wholesale behemoths? For example, Amazon is making more moves into B2C retail, and PayPal is building more SME solutions, both of them leveraging transaction data, merchant accounts, customer profiles and other content.
Good question.
I think the opportunity is in the niches that have, and will continue to emerge, rather than in the continued spreading of the existing behemoths.
Any market where there are a few large, dominating players creates activity on the fringes, bits of which will become mainstream. Amazon was once a fringe player, as was Paypal and Facebook.
I do not know which ones will come through, but am confident that some will.
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