In a recent Forbes article published online, “What Are You Worth To Social Media Stocks? It Must Be More Than Advertising”, the question is raised about the money being invested into these social media companies and why. The article asserts that;
Most Social Media stocks rely on advertising revenue. And ad dollars dedicated to Social Media are growing. As emarketer recently reported, “Social media continues to be an area of focus—and uncertainty—for marketers, as they continue driving up spending on the digital format. In August 2013, social marketing spending accounted for an average of about 6.6% of marketer budgets. Within the next year, that share was expected to rise to 9.1%, and in the next five years, marketers expected social to account for 15.8% of spending.”
For this to be true there must be a legitimate reason as to why there is such an effort for social media companies not only t keep their users happy but retain them from an immense surplus of new social media startups. The profitability of these companies to earn money off their users is a giant incentive for investors to move towards digital startups as opposed to traditional investing in what now seems like mom and pop like ventures.
It is interesting as well that not long ago (before my generation inhabited the web) there was a time where social media did not exist. As Alfonso begins the conversation in his last post about life before YouTube, I cannot help but to wonder had it not been for social media where the Internet would be, what its purpose would be if not for the idle and constant procrastination driven use of Facebook.
Yet the true incentive perhaps lies in the reality of the self-serving world of investors not only to produce things for consumption, but to learn more of the consumer in order to sell to them more efficiently. As the article also focuses on that these social media companies sit in a position of power from which they hold the gold of the digital world, knowledge, data on its users who voluntarily hand it over simply to keep using products and services. If it is not for this these companies cannot remain successful, so in fact it must be in their interest to value its users further than just the appeal of a first impression.