Social Media Monetization

Social media is gaining momentum in generating commercial value. This book examines how economic agents (brands, firms, and social media platforms) make money using social media platforms. Though a handful of researchers and practitioners have studied several aspects related to social media monetization, their contributions are largely limited by their strategic focus on a particular economic agent or a certain research context.

Social media advertising is becoming a winning strategy for firms, brands, and retailers (He & Shao, Telematics and Informatics, 35(2), 504–516, 2018). Statistics demonstrated the staggering growth of the global social media advertising market: Marketers’ spend on social media advertising had grown to over $89 billion in 2019; it was estimated that this ad spend would produce a yearly growth rate of over 8% and likely reach over $100 billion in 2020 (Zote, 55 critical social media statistics to fuel your 2020 strategy. Retrieved from https://sproutsocial.com/insights/social-media-statistics/, 2020). In contrast to traditional media’s limited reach capability, promotional messages on social media can connect and reach over one billion customers (Shareef et al., 2019; Schulze et al., 2014). Social media also outperforms traditional print media because it incorporates more social, informative, and interactive elements in firm–customer communication (Alalwan, International Journal of Information Management, 42, 65–77, 2018; Barreda et al., Tourism Management, 57, 180–192, 2016; Lee & Hong, International Journal of Information Management, 36(3), 360––373, 2016; Mangold & Faulds, Business Horizons, 52(4), 357–365, 2009; Swani et al., Industrial Marketing Management, 62, 77–87, 2017; Wu, Journal of Business Research, 69(11), 5310–5316, 2016). Although social media ads cannot be directly converted into sales, the promotion of such ads can be a facilitator in building customers’ awareness toward brand or product, spread brand and product-related knowledge to customers influencing customers’ brand or product perceptions, and eventually nudging customers to make purchases (Alalwan et al., Telematics and Informatics, 34(7), 1177–1190, 2017; Duffett, Internet Research, 25(4), 498–526, 2015; Kapoor et al., Information Systems Frontiers, 20(3), 531–558, 2018; Shareef et al., Journal of Retailing and Consumer Services, 43, 258–268, 2018).

A staggering number of stores, around 9000, failed from Jan 2019 to Oct 2019, significantly higher than the 5844 stores that failed in the entire 2018 (Coresight Research, Weekly US and UK store openings and closures tracker 2019, week 43: Destination maternity files for chapter 11 bankruptcy protection. Retrieved from https://​coresight.​com/​research/​weekly-us-and-uk-store-openings-andclosures-tracker-2019-week-43/​, 2019). Businesses know that sales are crucial for a firm’s survival in the current volatile, competitive business environment. With steady sales of products or services, a firm can monetize its resources, maintain its business operation, and be able to conduct risky, high-return activities such as market expansions, new product development, and digital innovations.

Social media advertising comprises a major revenue source for many large social media platforms. The Interactive Advertising Bureau defines social media advertising as “an online ad that incorporates user interactions that the consumer has agreed to display and be shared. The resulting ad displays these interactions along with the user’s persona (picture and/or name) within the ad content (see Chu, Journal of Interactive Advertising, 12(1), 32, 2011).” Social media advertising is quite different from traditional mass media advertising. Social media advertising incorporates more social elements in the advertising process. Social media ads can be interactive, immersive, and influential when social media users are browsing social media content. Social media users can comment, distribute, and like social ads. Social media ads can also be presented in an organic form which looks similar to regular social content displayed in users’ online social circles.

Social media is mainly offered free of charge. Facebook, Twitter, YouTube, LinkedIn, and many other applications are free to users. Hence, it is interesting to study how free-to-use social media achieves monetization. Previously, we have discussed the possibility of monetizing via social advertising. We will not reiterate this here but focus on an alternative approach to monetization of social media users: premium service or content.

A monetization process encompasses six activities: market research, social media strategy formulation, social media listening and social media intelligence, influencer marketing, performance assessment and reporting, and community management and customer care. All activities serve the ultimate goal of increasing corporate profit via social media. The six activities are not arranged in a causal sequence. For example, social media listening could be performed earlier than market research. These activities can constitute the entire monetization process, but not all activities are necessary in different forms of social media monetization. This chapter offers an overview of the monetization process. The key activities will be discussed in further detail in later chapters.

A social media strategy is comprised of six elements: why, who, where, what, when, and how (5Ws 1H). Before a social media strategy is decided upon, a firm needs to resolve these six issues.

Facebook is an ideal social media platform for achieving significant sales and maximizing business value. First, Facebook can enable a firm to reach one-fifth of the world’s population (Vrountas, 4 reasons why you can’t ignore Facebook advertising. Retrieved from https://​instapage.​com/​blog/​4-reasons-facebook-advertising-cant-be-ignored, 2019). Instagram Shopping is Instagram’s most crucial function for enabling firms and brands to achieve monetization through e-commerce. Instagram has reported that 70% of shopping enthusiasts use Instagram to discover products. WeChat is a social media and messaging app mainly targeting at consumers in China. WeChat was released as a messaging app around a decade ago by its parent company Tencent (Sehl, How to use Pinterest for business: 8 strategies you need to know. Retrieved from https://​blog.​hootsuite.​com/​how-to-use-pinterest-for-business/​, 2019a; How to use WeChat for business: A guide for marketers. Retrieved from https://​blog.​hootsuite.​com/​wechat-marketing/​, 2019b). It quickly became “an app for everything,” offering users gaming, ridesharing, e-shopping, and e-government services. Pinterest is an American image sharing and social media platform designed for the discovery of inspiration and ideas (Gershgorn, Pinterest is distancing itself from social networks as it goes public. Retrieved from https://​qz.​com/​1579086/​pinterest-is-distancing-itself-from-social-networks-as-it-goespublic/​, 2019). Pinterest is one of the most popular social apps in the USA.

This chapter aims to present the newest practices in social media marketing. We provide details of these practices and explain why the analyzed companies are considered winners in the era of social media. Nine cases of companies leveraging social media are introduced. This chapter focuses on how these companies use social media; therefore, their corporate strategy and business policy (matters of secondary interest for our purposes) are only concisely mentioned. We have included traditional retail brands such as Nike and Estée Lauder as well as online retailers such as Amazon and Pinduoduo. These companies have been chosen due to the success of their social media strategies.

This chapter introduces key aspects of social media monetization. From a network perspective, the value of social media relies on the number of social media users. The more users a social media platform has, the more attractive it is for advertisers, brands, and other business users. This explains why daily active users (DAUs) are so important for defining the popularity of social media. A significant number of users offer a solid base for a social media platform to profit and optimize monetization.

The external environment of a social media company encompasses social, legal, and economic aspects that can significantly influence a firm’s strategy for monetization. For example, if a social media company breaches a user data protection law, it could incur a large fine or even be banned from offering social media service by user data protection organizations or legal institutions. A legitimate business model is of paramount importance for a social media company to achieve sustainable monetization. Business model design describes the pattern by which a company makes money. A business model includes three elements: content, structure, and governance.

Information system (IS) and structure design establish the foundation for successful social media monetization. Previously, we have focused on discussing the conceptual and theoretical aspects of social media monetization. In this chapter, we will focus our attention on more practical knowledge about how to design an IS and structure design for social media monetization. The design research produces new insights for social media monetization because it applies existing theory and knowledge in a field of practice, and, most importantly, updates, refines, and advances our perceptions and knowledge about social media monetization in the iterative and interactive process between designers and artifacts. IS design research has been relevant to theory and knowledge for action, i.e., a form of how-to-do knowledge (Gregor, MIS Quarterly: Management Information Systems, 30(3), 611–642, 2006).

When a user swipes left, swipes right, browses, likes, and shares a piece of a post or video on a social media platform, the monetization system of the platform notes these actions and processes the user’s social media usage behavior. Noncommercial content, which seems to have no relation to social media monetization, could be preferred by the user. However, the user’s preference has been collected and utilized by the system to depict the user persona and detect user preferences. This information can be “monetized” at an appropriate moment by pushing a social media advertisement or a social media post containing a shopping link. This describes the basic workings of social media monetization which is quite different from our view of conventional business. Social media monetization is a novel economic schema that hybridizes commercial elements (e.g., advertisements, shopping information) and social elements (e.g., friends, community) in the service of optimal economic benefits. In the era of big data, artificial intelligence, headless e-commerce, and other frontier computing and commerce technologies, the monetization process is becoming more algorithmic, automatic, and cost-effective. The advertisement auction process in a social media platform can be automatically conducted in a way advertisers’ desire. The product(s) contained in a social media post can be precisely recommended to target users with a specific persona. It is expected that, in the future, the automation and precision of social media monetization will be further elevated and elaborated. Given this, we cannot help asking where we should locate humans in the algorithm-based economic system and what we should do when the system goes wrong?

In this chapter, we will present cases of two reputable social media giants, Facebook and WeChat, in order to discern how social media companies monetize their social business. We will explain how monetization strategy and monetization actions are used and geared toward generating revenue and conclude with what we can learn from the two cases.

It is difficult to predict the future of social media monetization. Multiple actors, individuals, organizations, and platforms can use social media to earn profits. Their paths to monetization are diverse and follow different routes. However, we can find some clues about the attributes of future monetization strategies and models based on current social media.