Social media are exploding as more and more people use social media platforms (up 82% from last year according to Nielsen). But the big providers--MySpace, Facebook, Twitter, etc.--still haven't figured out how to make any money. Meanwhile, their business expenses are increasing and their investors are clamoring for a return. They need to make a profit. But how?
Murder - Suicide
This has serious implications for marketers. Social media stole people's time and attention from traditional media outlets, reducing the size of their audiences and the prices they could charge for advertising. What's more, the infinite availability of ad inventory online drove traditional media ad prices down even further and often to unprofitable levels.
This double-whammy wreaked havoc with traditional media like newspapers, magazines and television; forcing them to operate on the slimmest of margins. Many couldn't and went out of business altogether. Read The Chaos Scenario by Bob Garfield for a great review of the entire process. (Full disclosure: I helped him publish the book)
Meanwhile, the social media companies that ran them off aren't making any money at all. Which, I don't need to tell you, is a difficult business model to sustain. If they can't achieve profitability soon, their demise could be next.
Could we be headed toward a world without traditional OR social media? Not everyone would mind. A 2003 Yankelovich survey found that a third of Americans would accept a slightly lower standard of living in exchange for a world free from advertising. If social media don't discover a profitable business model--and soon--those people might just get their wish.
Spread the fire. GS