Social Media Moves To New Era Of Growth

Social media’s rapid rise to dominating modern communication is astounding. In the early days, platforms aggressively courted new users to build network effects and scale, attracting ever more users in a virtuous cycle. Less than two decades after the launch of Facebook, social media users now total 3.8 billion across various platforms, amounting to 84% of the world’s population with internet access.1 And those users are spending an astounding 2 hours and 24 minutes per day watching videos, chatting with friends, and posting their thoughts.2 But with most of the internet-connected world already on social media, there simply aren’t many new users to attract to an established platform, forcing networks to consider new growth tactics.

Rather than looking for new users, social media platforms now focus on maximizing the revenue generated from each user. One way to do that is by selling more ads, for more dollars. Social media captures about 40% of total internet spending through selling targets ads to its user base but is looking to win even more of the growing pie.3 Platforms are also developing innovative new technologies, such as integrating in-app purchases and cash transfers, enabling augmented and virtual reality experiences (AR/VR), and more, as they search for additional potential revenue streams.

Ubiquitous Social Media

With mobile connectivity and the ubiquity of social media, we can connect with virtually any person in the world, anywhere, at any time. Social media platforms enable endless opportunities to chat, share, watch, meet, read, and manage media content. Because of this engagement across vast user bases, established platforms can collect troves of data that is monetized to target ads at specific users. This revenue is then reinvested into the platforms, developing even better technology and drawing more user engagement.

Such a model creates significant barriers to entry, but occasionally new platforms breakthrough, especially among younger generations. Among 18- to 29-year-olds in the US, 67% use Snapchat and 62% use Instagram, compared to less than 50% for any other generational cohort.4 For a newer entrant like ByteDance’s TikTok, Gen Z’ers represent approximately 60% of the platform’s user base.5

Don’t Harp on User Growth, Focus on ARPU  

With user bases totaling hundreds of millions, if not billions, monetization is the new focus for the largest social media companies. User growth for major networks was 11% in 2019, whereas revenue grew 17%.6 The vast majority of this revenue comes from advertisers who are set to spend more on online platforms, and social media in particular, than traditional media, such as TV, radio, magazines, etc.

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