Social Media, How They Make Money, Markets, and Share

Social media is a perfect platform to attract customers, sell goods and services, gain and lose reputation. Using paid and free services and creating live communication with customers enables to enlarge profit and customer’s loyalty.

History of Social Media

From the beginning internet was just a platform for communication between ordinary people. Tom Truscott and Jim Ellis created Usenet in 1980. It was possible just to share messages with other users and send messages. The wide usage of corporate pages and e-commerce started relatively recently. It differs from User Generated Content. Web 2.0 with Adobe Flash, RSS (Really Simple Syndication) and AJAX (Asynchronous JavaScript and XML) were a platform to develop social media to that state we know them.

Nowadays when you search information about some company in Google, you will find not only its official website but also their pages in social media and customer’s reviews. It became difficult to control the image of company or brand. If earlier companies sent mass media only the strategically measured information that was favorable to them, now they can hardly control the information that customers spread about their company or brand. No one can prevent users give both positive and negative reviews about a product or person. Some rivals even purposely write nasty comments about their competitors to ruin their reputation. Of course, if the reputation tainted, it will take a lot of time and effort to restore it. However, managers can prevent the destruction of the reputation by using social networks. The latter are an ideal way for reputation management.

The Role of Social Media in the Marketing of the Leading Companies

Many social networks have come and gone, only a few of them got to the top, and now are involved in the dissemination of advertising, and  PR. According to recent reports, leading companies  have special departments to communicate with customers.

Booz & Company and Buddy Media believe that Facebook, Twitter, and YouTube are now cornerstones in the majority of SMO-strategies of large companies. 94% of respondents said that Facebook is their favorite site, Twitter is the second - 77%, and YouTube - the third with 42%, although this percentage is without a doubt increasing as the popularity and importance of online and mobile video continues to grow.

Not surprisingly, social networks are most often used for advertising and promoting products and services, PR and customer relations. Companies are also using social media for market research, commerce or sale, promotion of a product, internal calls, and more. Since social networks are implemented in various spheres, more SEO-companies over time recognize their importance. 

According to a survey compiled a list of "success factors" within the company, which raises the popularity of social media campaigns. The ability to quickly react and adapt, with a clear leader and open verbal support from the authority of the company was in the first paragraphs of this list.

Among the business areas in which social networks have given the best results were given such as the promotion of the brand, and building interactive live communication. Despite this, respondents also noted that social networks can offer the consumer the unique information, the availability of this information, and almost half of the most famous products. Over 90% of companies evaluate the involvement and participation of customers so that their campaigns were more successful. Another popular metric includes accessibility, promoting and information. Only 38% of companies can link ideas and sales campaigns with their social networks.

The Income from Social Networks

According to the data, which the company has filed for the Securities and Exchange Commission (SEC), Facebook makes almost four and a half dollars a year for a single user. It is the most popular social network; almost every eighth citizen of Earth is its users. Edition of the CNN Money divided the profit of several major Internet companies (data was collected in one quarter at the end of December 2011) in the number of users. They found that only microblogging site Twitter and Microsoft earn from their audience less than Facebook - less than a dollar. Google receives the most money of all.

Until the last quarter of 2010, more than 90% of Facebook's profit came from advertising. In the fourth quarter of 2011, advertising revenue accounted for 83% and the remaining 17% were brought by payments from companies that develop paid applications (such as games) on the platform of social networks. In 2011, the game Farm Ville (Virtual Farm) brought the company 12% of its profit.

 

According to Emarketer, almost half of all online advertising in the United States accounted for the top five social media: Facebook, Google, Yahoo, Microsoft, and AOL. In 2011, Facebook's market share was 14%. Facebook is leading in the market of media advertising, says the director of strategic planning and marketing of Traffic agency, Julia Udovenko. The largest number of advertisements is on Facebook, - said the expert, noting that the company became the leader just in a year.

Behavioral and Targeted Advertising

One of the most successful forms of advertising in social networks is behavioral or targeted advertising, which provides the user with the goods and services depending on the settings in a profile and search requests. For example, if the girl changes the status in a profile from "Single" to "Engaged", banner ads with a proposal of bridal salons will start to appear on her page.

Facebook knows what you like, what you listen, see, where you drive, what you eat - said Inga Foksha, notes a senior analyst at Arbat Capital. With properly selected criteria, Facebook estimates its accuracy of hitting the target audience of 90% at 35 % average in the market. Advertising companies cannot help but appreciate it, not to mention the fact that they are inspired by the amount of time that users spend on the social networking site. 20 % of the total time users spend on the Internet, they spend on Facebook, said the expert. According to the data of the site in December 2011, all Facebook users spend on the site 9.7 billion minutes each day.

According to some studies, the average Facebook user has 229 "friends”. If the user makes a note "like" the page of a product or service, a chance that his "friends" will remember this item (a message that the user "liked" the product will appear in their news feed) is increased by 60%, considers the Nielsen Company.

When a user is searching for something on the Internet, he spends a little time on each page - less than a minute, explains Julia Udovenko, and when it comes to the personal page in a social network, a user spends a lot of time on it and pays attention to everything, including advertising. The level of response to advertisements posted on social networks is higher, - said the expert.

Learn about harmful and useful features of social media in article "Life Without Social Media"

Paid and Free Services

"VKontakte” has the largest number of users in the Russian network. It uses the Western model, experts explain, that is, the number of paid services is at a minimum. A network of "Odnoklassniki" (another Russian social network) in contrast, offers a special place for the evaluation of user photos for 20-35 rubles that is not expensive.

The most important thing is to balance paid and free services, says Julia Udovenko. If you do many paid services, the audience will be not interested in it. It is important not to scare them, - explains Udovenko. If you make many free options per contra, the administration fee would not make sense, the expert adds.

In 2008, the site introduced a paid registration. This proved inconvenient not only for those who do not want to pay for the creation of the page in the "Odnoklassniki", but also for the already registered users, who limited themselves in communicate because their friends did not want to register online for the money. As a result, developers have moved away from this method of registration. Now in Russia, "Odnoklassniki" is the second network by the number of users after "VKontakte" (daily attendance of 33 million users). In "My World" (a part of Mail.ru Group), there are 4,9 million users every day (end of 2011).

In "Discover", there are 18.3 million users a day, but there, in contrast to the "VKontakte" and Facebook, advertisers almost do not talk with their audience - there are no groups of companies, products or services. On this platform, you can make a special project, which covers a wide audience. Users of "Odnoklassniki" exist for a longer time and live in more regions. Facebook or "Vkontakte" advertising projects are planned for a year or two, and their audience lives in big cities.

Julia Udovenko tells, advertisers who want to communicate more with Russian audience, usually select first Russian social network and duplicate the group on Facebook "for the future", realizing that it is access to a global audience. Russian network sometimes surprises western advertisers who do not believe their eyes, seeing how many people are in groups, taking into account the lack of development of the market, the expert said. However, this is due to the fact that more than half of users in the group of major brands are the bots. In April, General Director of "VKontakte" Ilja Perekopskij said that, for example, on the corporate page of "Rollton" noodle, 76% of users are the bots, in Adidas group - 59% of bots, Coca-Cola - 37%.

Reputation Management of the Brand

When a company creates a corporate page on social media, it is vital to respond to all users’ comments, good and bad, quickly, politely and constructively. The customer should feel he matters to the company, and his opinion is very important. Moreover, the company should indeed take into account his opinion. Good relationships with consumers are the key to success. Experienced PR manager can even use the criticism to promote the brand. Some of the customers have found a mistake in the description of the product or in the corporate pages in social networks – it is a wonderful idea to give him a gift for attentiveness and following company’s news. 

Proper usage of social media may bring prosperity and long life for the brand.

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