Social Media Business Models

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Questions and Answers

What are the four components of a business model?

Revenue, Profit, Expenses, Assets

Product, Price, Place, Promotion

Value creation, Target market, Sources of competencies, Revenue sources (correct)

Marketing, Sales, Operations, Finance

What are the three main revenue models for social media companies?

Freemium, Premium, Enterprise

Advertising, Subscription, Transaction (correct)

Product sales, Services, Licensing

Donations, Grants, Investments

The 'dotcom crash' in 2000 was caused by the failed promise of the 'new economy' which emphasized growth over profits.

True

Which of the following is NOT a source of competencies for social media companies?

Customer service Signup and view all the answers

What is a 'brand bubble', and how does it relate to social media companies?

A 'brand bubble' refers to brands that have achieved a significant level of recognition and desirability, often with a premium pricing strategy. Companies like Louis Vuitton and Apple are examples. Social media companies, especially luxury brands, utilize these strong brand bubbles to establish themselves and generate revenue. Signup and view all the answers

What is the main revenue source for Facebook? How is it generated?

Facebook's main revenue source is display advertising. Revenue is generated through an auction-based system where advertisers bid to display their ads on Facebook's platform. The highest bidder gets their ad shown to the targeted audience. Signup and view all the answers

Who benefits from the 'passive' job seeker approach used on LinkedIn?

Both job seekers and recruiters Signup and view all the answers

What two types of advertising strategies are used by LinkedIn?

LinkedIn uses two primary advertising strategies: cost per click (CPC) and cost per mille (CPM). Signup and view all the answers

Which of the following best describes the value creation of Twitter?

Facilitating real-time information sharing and trend analysis Signup and view all the answers

The majority of Twitter's user base reside in the United States.

False Signup and view all the answers

What is the main advantage of TikTok's algorithm over other social media platforms' algorithms?

It prioritizes content based on user engagement and virality Signup and view all the answers

Social media companies can only rely on a single revenue stream to achieve sustainability.

False Signup and view all the answers

What does 'network externalities' refer to in the context of social media companies?

The value of a network increases proportionally to the number of users Signup and view all the answers

What is the significance of TikTok's 'interest engine' in terms of user experience?

TikTok's 'interest engine' plays a crucial role in delivering a personalized user experience. It analyzes user behavior and interests to identify potential content that aligns with their preferences and helps generate recommendations that drive engagement. Signup and view all the answers

Study Notes

Dotcom crash of 2000 marked the "new economy's" failure.
Internet businesses face questions of profiting over growth.
Key questions include consumer willingness to pay for online content and services.
Sustainable business models for social media companies are needed.

Business Model

A business model is more than just a revenue model.
Business models should not solely focus on financials.
Four important components of a business model are:
- Value creation (solving a problem)
- Target market (who to serve)
- Sources of competencies (who to create)
- Revenue sources (how to make money)

Value Creation

Firms create value through products/services, scope of offerings, distribution, and positioning.

Target Market

Customer types: B2B, B2C, and C2C. (B: business, C;consumer)
Segmentations by geographic areas (local, regional, national, international) and interaction requirements.

Sources of Competencies

Core competencies include technology, marketing, supply chain management(raw material), (value chain)networking, ventures, strategic alliances(Samsung & Google's strategic partnerships), resource leveraging(control supply->others find hard to get, and branding: Brand Bubble(Apple's and Louis Vuitton's branding).

Revenue Sources

Revenue sources (Credit card: data, transactions, and interest.
Pricing strategies are also crucial.

Social media revenue models primarily depend on advertising (90% of social media revenue).
Subscriptions are a way for users to pay for services.
Transactions (e.g., in-app purchases) are a source of revenue.
Daily social media usage is approximately 2.5 hours.

Average daily time spent on social networking has increased from around 90 minutes in 2012 to over 150 minutes in 2023 worldwide.

Critical Mass

Products or services need more than 15% of the population to adopt them to become successful. Ideas or beliefs might need less (10%).
A curve illustrates adoption rates from innovators, early adopters, the early majority, the late majority, and laggards.

Facebook/Meta (founded 2004), LinkedIn (founded 2006, acquired by Microsoft 2016), Twitter/X (founded 2006, acquired by Elon Musk 2022) are discussed.

Facebook/Meta

Value creation involves social networking, sharing, easy interfaces, real-name use(initially), and one-stop communication/entertainment.
General public as target market (first launched in Harvard University in 2003)
Sources of competency include its enormous network, strategic partnerships with other firms, mobile platforms, and photo/video sharing (e.g., Instagram).
Revenue comes from advertisements 98%, with mobile advertising generating 91%. Commerce (virtual items) is also a source of income.

Value creation is centered on professional networking, user control of professional identities, and information on job openings and candidates.
Target market includes professionals, job seekers, and companies: attractive for advertising(94% for Fortune 100 companies have LinkedIn pages), availible in 26 languages
Sources of competency include focusing on a profitable professional market, providing professional networking and services like Pulse, and making passive job seekers visible to recruiters through ads.
Revenue sources include paid subscriptions(user), and advertising revenue (business)(e.g., per click CPC or per 1000 impressions CPM), hiring solutions (B2B, 40% of revenue).

Twitter/X

Value creation focuses on its real-time information network and news dissemination.
Target market is the population, with aggressive international 80& outside US targeting and 30+ language support.
Sources of competency include timely information, decentralized news, real-time search (less delay), mobile optimization, and popularity among celebrities/public figures.
Revenue comes from advertising (cost per engagement): promoted tweets/trends/accounts (push up/down), subscriptions, syndication(reuse your data):search engine partnerships, and plans to become a super-app.

Network externalities' effects(network size matter): The more people who join a network, the more valuable it becomes.
Revenue streams (e.g. Big: Advertising/PR/CRM, subscriptions, transactions/digital goods )(byproducts/content from social media, indirect user monetization, and complementary services, timeliness/richness of social media contents), are numerous.

Future of Digital Start-Ups

Trending topics on social media affect user behaviour.
User interest helps recommend content (Interest Signals).
New social media applications can arise from user-generated content.

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Description

This quiz explores the key components of business models in the context of social media industries. Topics include value creation, target markets, and the challenges businesses face after the dotcom crash. Assess your understanding of sustainable practices and profitability in the digital landscape.