In February 2004, a student at Harvard University called Mark Zuckerberg, wrote the code of a simple website that allowed the students at his university to post their personal information and photos online, and to share them with their friends in a simple way. This website was called “Thefacebook”. Gradually the website attracted students from other universities to join and add their information.
Seeing the potential, Mark started adding support for all different universities and schools, allowing anyone older than 13 years old to join this network, reaching 1 Million users in the end of 2004. Soon after that, Mark has incorporated thefacebook, and after that it was know as “Facebook” after purchasing the domain name facebook.com for a sum of $200,000 in 2005. Microsoft have bought a share of 1.6% in Facebook making it valued at $15 Billion dollar in 2007.
Today Facebook has over 1.11 billion users, meaning that one in every seven people worldwide has a facebook account. Facebook IPO value exceeded $100 billion (although dropped afterwards). Facebook revenue streams include advertising, online gaming and partnerships. New business models were created around the services and potential of the site, and it is growing to even compete with Google in terms of intelligent information.
Facebook is a part of what we call “Social Media”.
What is Social Media?
Social Media, is a term that didn’t even exist -as a term- seven years ago. It has many definitions, some would define it as the media that drives social interaction, and some would define it as the use on technologies (especially web technologies) in order to drive social engagement. Those are all good definitions, but Social Media has a little more to it than just being restricted by the technology.
We can’t understand this concept truly without taking a look at the last seven years in which this concept has emerged in. In 2005, a video sharing website called Youtube was founded by three past Paypal employees, to be bought by Google in 2006 for $1.65 billion. Today, 100 hours worth of video content is uploaded every minute. Twitter, the micro-blogging service that allows you to communicate with your followers in messages no longer than 140 characters, has today more than 500 million visitors and more than $245 million in revenue. Wikipedia the open encyclopedia is the most reliable source of information with more than 31.7 million crowd sourcing contributors from all around the world. Today in the US, more than 27% of all time spent online is spent on a social networking or social media related service, in these numbers are growing in a very unpredictable rate.
Although all these amazing statistics are revolving around technological tools and services, but there is more to social media than technology, as we will see next.
The Power of Social Media:
As someone involved in the field of Social Media and Online Technologies, I was always fascinated by the amazing growth and reach that such tools had in the last five years. What made Facebook reach 1 million users in 2004, and more than 500 million in 2010 without virtually spending one dollar on advertisement? Even today with 1.11 billion users, there was hardly any advertising campaigns to drive people to facebook. How did Wikipedia become the most reliable source of information while its being edited by everyone and anyone?
There is absolutely no answer or conclusion that I could claim is the perfect or complete one for these questions, but after some time working in the business and technology field, I can conclude that the following factors have a great effect in the amazing success and growth in this field:
The Network Effect:
Would you have bought a mobile or land phone if you didn’t know anybody that owns one? The answer is probably no. This is called the network effect, which means that the value of a product that follows this effect increases dramatically when the base of its users increases. We use our phones because everybody else is using theirs, and we create an account on a social networking website such as facebook, because everybody we know is on facebook.
This is exactly what explains why the growth in facebook has been exploding with each year passing, first year it had 1 million users, and in the following year 12 million, and so on.
Also in itself is a new term, viral marketing means a special kind of the word-of-mouth advertising that we are all familiar with. In viral marketing, you start with a base of customers (called the seed), and this seed starts to encourage their close connections to use your product, and those connections drive theirs, and so on. If the ratio of new comers to the original customers ( R ) is bigger than 1, you got your self a viral campaign that spreads like a virus, and thats how it got its name.
This is how facebook got 500 million users in 2010, and 1.11 billion in 2013 without major advertising campaigns.
Another great example is a campaign for a Swedish radio, the campaign was called “Hero”, that included an interactive video of a whole nation announcing the name of their “Hero”, which is finally revealed as You! This campaign brought for the radio station over 26 million visits and 66 million page views in only 3 months. The keyword is providing the customer with something they want to share, that is the essence of C2C (Customer to Customer) marketing.
Wisdom of the crowd is another powerful aspect of Social Media. This concept says that the collective wisdom or opinion of the masses is in many cases better than the opinion or a person no matter how smart or professional he is. This concept is represented in Wikipedia, as anyone can write and edit there we would assume that the information would contain many fallacies, but in fact, Wikipedia articles as it was measured years ago, are three times more accurate than its next competitors (Britanica and Microsoft Encarta). This amazing result opens new opportunities for businesses in terms of what is called Crowd-sourcing. Why should a company spend millions of dollars creating its own content when the world can do it for them! Why should Flickr spend any money collecting photographs from professional photographers while the crowd can do it for them? Why should Youtube produce millions of videos while the crowd can do it for them?
The answer is simply, there is no reason to do so. Crowd-sourcing holds a great potential especially for start-ups.
These three factors and more, are what makes social media a very exciting field for business to enter in.
Is the new media really “new” ?
Seeing the previous examples, we can see clearly why it was called social media. Social Media is the media that is social ! Given this realization we can see that this term shouldn’t be restricted only to the technologies and websites developed in the last seven years. Consider America’s Funniest Videos, or consider a radio show that broadcasts (what the listeners ask for).
These examples and more had the customers input in them, which is an opposite to the mass media campaigns that concentrated on one message for the masses. We can call any kind of media that is involving social interactions “Social Media”, and what happened in the last years was that the internet industry has evolved to match the social nature of the human being, and thus it was labeled by this new term as a new thing, while in reality its just the natural progress of media in the digital age.
Future and opportunities:
Businesses worldwide has already started to realize the importance of this new field. IBM has reported an increase of millions of dollars in sales by using Social Media (IBM has its own network of blogs for its employees, and it encourages their use of the new tools such as twitter to drive and acquire new leads and opportunities). Many people are using the networking power to get new jobs or acquire new investors to their businesses. I have personally used social media to drive hundreds of thousands users interactions to clients and projects I have been working with. The examples are countless.
In the Arab region, the importance of these tools has been growing because of its potential to drive activism and social awareness, (and of course their role exploded with the Arab Spring in 2011) but it is still a little behind in the term of business solutions and platforms.
Another issue is the explosion of the self-proclaimed “Social Media Gurus” and “Social Media Experts”, some people fail to understand the psychology and strategy behind driving social interaction, making it appear with its misuse as a scam or facade for people with little experience in the field.
Of course as in any field there are several risks involved. Privacy is one of the major issues with social media, should the things you post to your friends be monitored by your boss? Many brands have the fear that using a rather uncontrollable tool like social media threatens to weaken their image by any unmeant mistake or accident.
In spite of all of those fears, this field is still very exciting for marketers and tech savvy people who see the potential of connecting with people all around the world with just one click!
Note: This article was first published in the February 2011 issue of the “Leaders Outlook” magazine, a publication by Talal AbuGhazaleh Graduate School of Business, Amman, Jordan. This is a modified and updated version.