The Social Media Industries

Alan B. Albarran

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136325182
• Edition: 1
• Topic: Languages & Linguistics
• Subtopic: Communication Studies
• Index: Languages & Linguistics

This volume examines how social media is evolving as an industry—it is an extension of traditional media industries, yet it is distinctly different in its nature and ability to build relationships among users. Examining social media in both descriptive and analytical ways, the chapters included herein present an overview of the social media industries, considering the history, development, and theoretical orientations used to understand social media. Covered are:

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• Business models found among the social media industries and social media as a form of marketing.

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• Social media as a form of entertainment content, both in terms of digital content, and as a tool in the production of news.

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• Discussions of ethics and privacy as applied to the area of social media.

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• An examination of audience uses of social media considering differences among Latinos, African-Americans, and people over the age of 35.

Overall, the volume provides a timely and innovative look at the business aspects of social media, and it has much to offer scholars, researchers, and students in media and communication, as well as media practitioners.

1

INTRODUCTION

Alan B. Albarran

This chapter, as well as this volume, centers on the complicated and fascinating topic of social media examined from an industry perspective. There is a growing body of books and scholarly literature on social media. On the practical side, many of the early works discuss how to use social media in areas such as marketing and public relations, ideally to help a business reach existing and new customers (e.g., Li & Bernoff, 2008). On the scholarly side, early research on social media has concentrated on areas such as uses and gratifications, psychological impact, and communication patterns and preferences (e.g., Ellison, Steinfield, & Lampe, 2007; Hargittai, 2007; Pempek, Yermolayeva, & Calvert, 2009).

Missing from the literature is scholarship addressing social media from what can be called an industry perspective. That is the goal of this volume and the contributors whose work is published here—to look at social media using a different set of lens. Our goal is to consider social media as an evolving and unique communications-based industry, one that is dynamic and growing, and one that has generated a number of interesting markets of activity. To begin this approach, we should first have clear definitions as to the topic at hand in order to guide our exploration in examining social media from an industry perspective.

Key Definitions

boyd and Ellison offer a widely-cited definition of social networking sites. The authors identify social network sites (SNS) as:

web-based services that allow individuals to (1) construct a public or semipublic profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system.

(boyd & Ellison, 2008, p. 211)

This early definition was helpful in understanding the role of social networks, although the emphasis was on the construction of a public profile. There is, of course, a differentiation that now exists between the broad content-sharing applications such as YouTube, Flickr, Reddit, and Pinterest, compared to relationship-building applications such as Facebook, Twitter, LinkedIn and Google+.

Utilizing the boyd and Ellison (2008) definition for social networking sites, how then do we define social media? A search on the Internet and trade literature will generate hundreds of definitions for social media, offered by bloggers, industry analysts, and various types of wikis. For the purposes of this volume, social media represents the technologies or applications that people use in developing and maintaining their social networking sites. This involves the posting of multimedia information (e.g., text, images, audio, video), location-based services (e.g., Foursquare), gaming (e.g. Farmville, Mafia Wars), and many aspects explored throughout this volume.

This book is about the social media industries. An industry is traditionally defined in a business and economic sense as a group of sellers offering related products and services to buyers in different markets (Albarran, 2002). In looking at social media from an industry perspective, these “sellers” are represented by the individual companies such as Facebook, Twitter, LinkedIn and YouTube, while the “buyers” are a combination of consumers who create their sites with social media technologies and advertisers, who purchase access to these audiences with the hopes of selling their own products and services. While most people may think of social media as a 21st-Century phenomenon, the roots of social media actually are deeper. In Chapter 2, Goff details the history of the social media industries.

Buyers and sellers interact with one another to exchange goods and services in a market. Traditionally, markets determine the price for products, and are based on supply and demand characteristics of the market. Markets have evolved over time across the communication industries. While markets used to involve physical transactions, today many markets, including the social media industries, function via the Internet and digital platforms (Albarran, 2010b).

The traditional hybrid market structure—offering the same product (social media or social networking sites or platforms) to audiences and advertisers—is known as a dual product market, and is found in many of the “traditional” media industries, such as newspapers, radio and television broadcasting, and magazines (Albarran, 2010a; Picard, 1989).

The social media industries follows this hybrid approach, with businesses trying to reach consumers (e.g., Facebook as a platform attracting new users), and businesses transacting with other businesses (e.g. advertisers like Dell buying online advertising from Facebook and other sites). Social media also adds another dimension involving consumers directly able to reach other consumers. These markets are further detailed in Table 1.1.

The three markets in Table 1.1 all have the ability to generate revenue, but advertising is the dominant business model. One of the biggest challenges for the social media is how to monetize their efforts, the topic of Chapter 4, by Cha. This is particularly true for large sites like Facebook and Google’s YouTube, which both have millions of users, but still rely on advertising as the primary form of economic support.

TABLE 1.1 Social media tri-product market

Market	Types of products	Main business model
Business-to-Business (B2B)	Advertising in different formats/platforms	Built on audience impressions
Business-to-Consumer (B2C)	Attract users/followers	Premium services, add-ons, subscriptions, other payments
Consumer-to-Consumer (C2C)	Various types of products and services	Direct transactions among consumers

Having defined a few key terms, we can now turn our attention to an analysis of the social media industries from a business and economic perspective. One helpful tool is the well-established industrial organization (IO) model, explicated by Bain (1956) and expanded upon by Scherer and Ross (1990) and others. Adding to its utility is the fact that the IO model has been applied extensively to the media industries by other scholars (e.g. Albarran, 2010b; Chan-Olmsted, 2005: Gomery, 1989; Wirth & Block, 1995).

The IO model is simple to understand in that it follows a tri-partite formula for analyzing any group of firms or industry by considering the structure, conduct, and performance characteristics of the subjects. As such, the IO model is also referred to as the SCP model or simply the SCP model in the literature. By understanding the underlying economic structure of an industry, one can then anticipate the likely conduct of the firms involved which, in turn, influence the performance of the industry. We will utilize the IO/SCP model in the next three sections as we apply this framework to the social media industries.

Structure of the Social Media Industries

In assessing the structure of an industry, scholars utilizing the IO model have traditionally sought data to address five different variables which together provide a clear picture of the structure of the market. These five variables are listed below:

1 The number of sellers, useful in determining the level of concentration that exists in a market/industry.

2 How products are differentiated from one another.

3 The barriers to entry for new firms wishing to enter a market.

4 The cost structures that exist among the firms in a market.

5 Vertical and horizontal integration among firms in the market.

Number of Sellers

The number of sellers in a market typically tells us a great deal about the level of concentration that exists in a market. From neoclassical economics we know that a single seller is a monopolist, and sets prices in a market, while at the other end of a continuum is perfect competition, where an unlimited number of sellers provide a similar product, and price is determined by the market. In the middle are the theorized oligopoly (3–10 sellers each offering homogeneous products) and monopolistic competition (multiple sellers offering slightly differentiated products) market structures (Albarran, 2010a).

In applying this framework to the social media industries, we immediately find a challenge in that the social media industries—at least in its nascent stage in the 21st Century—consists of multiple markets that are differentiated by their individual “products” or what they offer to audiences and advertisers (in a dual product market). For example, we could begin to classify the broader social media industries using several sub-markets of activity:

• Social networking. Popular sites such as Facebook, Myspace, LiveJournal, and Tagged allow users to create personal profiles to share with their own network. Businesses and non-profit organizations also create profiles on these sites.

• Professional networking sites. These would include Linkedin and Google+ which target the business and professional community. Slideshare is a related site which allows for sharing presentations.

• Community/microblogging. Twitter is the killer application in this arena. Kaboodle and Fark are also popular, while Pinterest has been called “Twitter with pictures.”

• Social tagging. Tagging allows users a system of bookmarks and tags to help organize content. Golder and Huberman (2003, p. 198) define social tagging as “the process by which many users add metadata in the form of keywords to shared content.” StumbleUpon, Del.icio.us, and Technorati are among the well-known sites in this sector.

• Image/photo sites. Pinterest has emerged as a powerful new site where users “pin” photos and other content to different “boards” organized by themes (e.g. cooking, scrapbooking, etc.). Flickr was among the early leaders in the photo sharing sub-market. Instagram, another competitor, was purchased by Facebook in 2012.

• Video sites. These would include YouTube, Vimeo, and Socialcam.

• Social news. Popular sites in this area include Digg, Reddit, Newsvine, and Yahoo Buzz.

• Gaming sites. Zynga, the maker of the popular Farmville, Mafia Wars, and Words with Friends is the market leader in this sector. Other firms involved in gaming include Pogo, Yahoo! Games, Big Fish, and PopCap.

• Consumer shopping. Sites like Groupon, Living Social, Dealster, and Social Buy offering daily digital coupons or special offers.

• Review sites. Designed primarily for local businesses, sites like Yelp, Citysearch, and Epinions offer customer reviews for others to share.

• Wikis. Wikipedia is the best known, but there are many other wikis on the Internet that allow for the sharing and editing of information/content posted online. Investopedia is a popular site for personal finance and investing. Other popular wikis are Wikitravel, Wikia, and ShopWiki.

• Social publishing. Scribd is a popular publishing site.

• Location based services (LBS). Foursquare was the first to capture wide attention, and is often used in combination with review and shopping sites.

Given the large number of sub-markets (and this listing is by no means exhaustive), we can conclude that in terms of market structure, the various sub-markets within the social media industries are for the most part competitive in that there are multiple firms involved in every sub-market, although the sizes of the firms differ greatly in terms of their market share, as measured just by the number of users/subscribers/accounts in force.

Facebook is the classic example; reaching over 900 million people in 2012, Facebook is easily the largest social networking site in the world. Other SNS like Myspace, LiveJournal, and Orkut pale in comparison to visitors to Facebook. Most of these sub-markets reveal a hybrid-type structure, with an oligopoly found on one end evidenced by a small number of firms leading the sector, and a set of smaller firms vying for the remaining market share. However, if we have learned anything about the emerging social media industries to date it is that trends can change almost overnight, as evidenced by the rapid growth of Pinterest and Groupon, to offer just two examples.

Another distinction we note about the social media industries is that the term “price” only applies at this initial examination of the market ...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Contents
• List of Figures
• List of Tables
• Notes on Contributors
• Foreword
• Preface
• Acknowledgments
• 1 Introduction
• 2 A History of the Social Media Industries
• 3 The Paradoxes of Social Media: A Review of Theoretical Issues
• 4 Business Models of Most-Visited U.S. Social Networking Sites
• 5 Social Media Marketing
• 6 Social Media Content
• 7 Social Media and the Value of Truth: Navigating the Web of Morality
• 8 Traditional News Media’s Use of Social Media
• 9 Privacy and Social Media
• 10 Uses and Gratifications of Facebook Members 35 Years and Older
• 11 Social Media and Young Latinos
• 12 Bridging the Great Divide: African American and Asian American Use of Social Media
• 13 The Social Media Industries: Summary and Future Directions
• Author Index
• Subject Index