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Social Media as the Moneymaking Machine


You are thinking about buying a product. It could be anything. A music file from iTunes store, or a new book, or a guitar, or a computer, or even a TV. Whatever it may be you are probably going to do some research about it. What kind of music this band plays? How engaging or exciting is the author? Does the computer function fast and are its hardwares up to date? You might go to expert reviews or check out blogs. I tend to be a bit obssessive about the products that I buy doing a lot of over-research. For example, I purchased a TV few weeks ago. I went on every imaginable tech review sites and blogs to learn about the latest TV technologies and how they function, what brands are reliable and what functionalities do I need and not need. The thorough research did help me, but in the end it really came down to listening to some experiences my friends had with specific TVs. I think this may be the case for a lot of people. What your friends–or people who you know and trust–tell you can be very convincing source of opinion in infuencing what you end of purchasing.

In comes social media. I am still unsure which company or which method of social media I want to concentrate on for my next travelogue, but I am thinking along the lines of Facebook, or Foursqure. For now, I will start my journey with Facebook. Facebook is literally gigantic in its reach. If your friend that you know to be a fashionista is a fan of Paul Smith, you might be more likely to become a fan of Paul Smith and buy his clothes. It is a very insteresting concept. Or if you see a lot of comment about this new band on your friend’s wall, you might be interested to check them out. “Facebook is expected to reach $435 million in 2009 and $605 million in 2010.” Mark Zuckerberg had thought that social media is not going to be able to generate as much ad revenue as search engines or display publishers, and in the current scale of thing, he is probably right. Google made almost $20 billion in revenue, and Facebook’s $0.6 billion looks tiny in comparison. However, it is generating crazy investments from private equity firms and corporations and private investors. If it does go public, the stock prices will soar. Clearly, something is going on and people are interested in it and it could be a money making machine. I want to explore and travel into this spectrum. See how this is being done and what the prospects look like for the future.

More specifcally, where is social media marketing heading? Business speaks in numbers and dollars. In this case, you see the dollars Facebook is making, but it is more difficult to see the dollars coming out for companies using Facebook as advertising medium. How is this world going to change? How do you quantify and numerically reason and explain the marketing activities on Facebook? In other words, how do you measure the buzz and return on marketing investment?

I know we weren’t supposed to use Google, and YouTube sort of is Google. OK, I failed the challenge, but here is a thought to leave you with from two years ago on 60 Minutes (a lot has changed since then. They are making money like crazy):
YouTube Preview Image

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3 Comments

  1. mushon 00:11, Feb 1st, 10

    This is an interesting one and I’m sure you’ll be able to add to it from your own personal perspective in advertising. I am interested in this centralization models, it seems online advertising has been devoured by companies that can give you a wide perspective of the consumer market. In a way Google has monopolized this winning on volume vs. cost. What is the advantage Facebook still holds on the subject? How do their models differ? How does Facebook turn against privacy fit into that? What do the users have to say about this? (if anyhing)

    OhI have no clue what your embedded video is about and I hope the rest of the class won’t be tempted to play it too… Shame on you!

  2. HoniehBarak 19:22, Feb 1st, 10

    I have the same problem as you do Dan, as far as researching is concerned. I have been researching the SAME digital SLR for the past 4 months. I want to make sure that this camera is worth my money, will be able to do the things I want, and is top of the line. I search nextag, cnet, you name it I obsess over it…

    With that said..

    I think this topic is fascinating, probably because I am in *somewhat* similar line of work. I used to work for an email marketing company, and we would buy up keywords, and ads, incorrect spellings of domain names etc… I would always wonder, how were these people making money. Now I am in the mobile marketing industry and use almost the same process, but I wonder are these ads really worth that much? I also wonder, how is Facebook making all this money. What does this online community have that so many people are interested in. How do we place a monetary value on Facebook.

    Also, we have to factor in mobile devices which are bringing in revenue for these site.

    Check out this article, it states that Facebook usage jumped 600 percent after its introduction into mobile use.

    http://www.fiercemobilecontent.com/story/facebook-mobile-usage-jumps-600-percent-2009/2010-01-26

    I am excited to see what you will come up with!

  3. Ryanverost@yahoo.com 01:33, Feb 2nd, 10

    Dan,
    I can tell that your undergrad degree in economics has served you well. This topic appears to fit inside that framework in addition to this class. I think a great addendum for this investigation could be the social gaming embedded into Facebook like the farming game that they have and how it has helped them to generate even more revenue. I recently saw something about this in Yahoo news. This isn’t the exact article that I saw but I think it would inspire you to maybe give it a thought:

    http://www.gamasutra.com/view/news/27035/Analyst_Social_Game_Revenues_To_Hit_13B_In_2010.php

    Good luck