Twitter, Facebook, Snapchat, Instagram. What do these companies have in common?
They have all at one point been valued at $1 billion dollars
They sell no tangible product and are free to use
What is it then that is so valuable about these companies? How are they making money? I could not answer these questions until I began to understand that these companies do have sales, but not to consumers. The users are the product, and the information that they disclose, whether they know it or not, is being sold to all sorts of different organizations. This concept is called “the audience commodity”, in which the users or audience are the product. Users of the aforementioned platforms are constantly sharing their location, interests, field of expertise, current school or job through posts, likes, and any other way that users can interact. These platforms are a well oiled machine and a dream come true for marketers, and I’ll explain why. First off, no matter what demographic you’re trying to reach, chances are they use social media. This video demonstrates some rather shocking statistics about just how ubiquitous social media has become:
Most of the world is putting their information online for anyone to see and or use. These massive technology platforms take this information, package it, and sell it to advertisers. Here’s where things get interesting: They then offer advertising opportunities to companies on the very platform they obtained the data from in the first place! They are quantifying their users information in an extremely complex way and offering an unprecedented method for reaching specific audiences. Historically, Neilson has quantified the television audience by reducing them to a simple binary: watching or not watching. This provides limited information to begin with, as watching a program doesn’t necessarily mean you’re enjoying it, and also completely negates the reality that people aren’t always engaged with what they are watching (ie. being on as “background noise”). It also operates using a sampling research method, as not everyone has a Neilson box in their home. Facebook, Twitter, Snapchat and Instagram on the other hand face no such limitations. They have complex algorithms designed to consider every single user, so sampling is not necessary. They also have quantified proof of very specific interests and tendencies of their users with a level of nuance that is unprecedented. Which brings me back to my point, that the platform is a dream come true for marketers. With this model, everyone wins (except maybe the consumer, whose valuable data is being sold). Audience commodification via social networks is completely changing the way audiences are targeted by advertisers. Should we be worried about this? Are we being ripped off by these companies who are using our data to sell things to us? Surely, the free cost to use these wonderful platforms is worth the sacrifice, right? This article provides some interesting insight to how much are personal data could be worth:
I think when considering how these companies have become so successful, its important to explore why people use them in the first place. We know how they are making their money, but what’s attracting the masses of information revealing users and keeping them around?
The uses and gratifications approach can be used to understand why and how audience members use different types of media. According to the theory, audience members are active and select different types of media to satisfy certain needs or desires. These audience members are aware of these needs, and consciously seek gratification through different types of media. While social media platforms don’t offer any tangible goods, the reason so many people use them could be to satisfy a need or desire. These platforms are full of information, whether it be pointless or useful, and the desire to consume this information is likely what brings in so many users. When they become part of the platform, they in turn disclose their own information for others to consume, and it works in a full circle. In the course textbook “Media Audiences, Effects, Users, Institutions, and Power” there are the results of a study that asked “Why do so many people use Facebook, what do they get out of it?” The subjects of the study had multiple explanations for the reasons they used the site such as to waste time, network, or keep in touch with family. It essentially concluded that Facebook could potentially gratify many different motivations, though the most prevalent use is as a social utility. For more information on the study in question here is a link to the full paper:
Regardless of which needs social media platforms are gratifying, the reality is that they are diverse in their content and delivery while all sticking to the same social facilitation concept, and as a result are able to attract a wide variety of people, many of which will use multiple platforms to gratify the same needs.
Through this analysis of major social networking organizations, I have identified some explanations for their financial success and massive reach. However, understanding the concept of the audience commodity and uses and gratifications and how they apply to this scenario provide some but not all of the possible explanations and motivations behind these massive organizations and why so many people use their platforms, and many communications theories and concepts can be used to provide a better understanding.
Sources:
Bumgarner, B. (2007). You have been poked: Exploring the uses and gratifications of Facebook among emerging adults. First Monday, 12(11).
Ehrenberg, B. (2014, April 22). How much is your personal data worth? Retrieved from: https://www.theguardian.com/news/datablog/2014/apr/22/how-much-is-personal-data-worth
Sullivan, J. (2013). Media Audiences, Effects, Users, Institutions, Power. California: SAGE Publications.
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