The Mystery Money Behind Social Media
Every day millions of people from around the world tap into Facebook or Twitter in order to connect with a great sphere of people in their network. Many of these people are living right next door, some are across the country, and some are even across the world. The growth and expanse of social media has spread like wildfire within the last few years.
To put things in perspective, let us dig into the statistics.
- Facebook alone is home to over 1.28 billion monthly active members.
- 802 million people log onto Facebook daily.
There is an approximated 34% increase of mobile users from year to year.
Now Twitter, a somewhat younger player in the game of social media, is experiencing remarkable growth as well…
- As recently reported, in the first quarter of 2014, Twitter generated $250 million, a 119% increase from last year.
- In just four years the total number of monthly active users skyrocketed from 30 million to 255 million.
- In 2013 the number of mobile users topped at 30.8 million and is projected to be approximately 56.5 million by 2018.
How are these sites like Facebook and Twitter, which are free to users, generating enough income to experience such phenomenal growth? The answer lies in stocks and advertising.
Facebook accrues the majority of revenue from advertising. In fact, it has evolved into a new platform for advertising campaigns. In 2013, advertisers increased their budgets by 40% to reach their targeted audience via social media.
The brilliance of advertising on Facebook is its “Facebook Ad Exchange (FBX)”. Essentially, Facebook controls which advertisements pop up on your page based on your activity. For example if you recently change your relationship status to “engaged”, Facebook then arranges advertisements for bridal shops or flower shops around your area so that you see them appear on your News Feed.
According to Forbes magazine, any purchase of Facebook stock made within the first 12 months after their IPO would have increased in value of 2-3 times, thus meaning the investor would receive a 100-200% return.
Twitter operates on the same basis as Facebook for generating income. Within the first quarter of 2014, Twitter acquired $226 million in advertising revenue alone, with mobile advertising revenue representing 80%. They increased their revenue by enhancing the software, opening up to more advertisers, and targeting audiences with advertisements, similar to Facebook. Unfortunately, Twitter has suffered a major loss with their stocks. A recent slump in shares has caused their revenues to decline. Despite the financial set back Twitter is projected to make a comeback, and continue to prove to be a major competitor with the “big boys” in social media.
With social advertising budgets set to increase this year, that just means more money in pockets of Mark Zuckerberg and Dick Costolo.
How does your social advertising budget look for this year?