Social Media Moves to New Era of Growth
3rd Feb 2023, Pune: “Put some actual ‘social’ into this professional social media.” ~ Glenn Hansen
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 (FB), 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 and chatting with friends.
Social media networks increasingly prioritize maximizing the money generated from each user rather than searching for new users. Selling more advertisements for more money is one method to achieve that. By selling targeted ads to its user base, social media generates around 40% of all online expenditure, but it wants to take even more of the expanding market share. 3 As they look for other possible revenue sources, platforms are also creating cutting-edge new technologies like integrating in-app purchases and financial transfers, enabling augmented and virtual reality (AR/VR) experiences, and more.
We can connect with almost anyone in the world, anywhere, at any time, thanks to mobile connectivity and the pervasiveness of social media. Numerous options to speak, share, watch, meet, read, and manage media content are made possible by social media platforms. Because of this widespread user interaction, well-known platforms are able to gather large amounts of data that are then sold to target adverts at certain consumers. The platforms then use the money from this investment to upgrade their technology and increase user engagement.
The biggest social media businesses are now focusing on monetization because their user bases number in the hundreds of millions or billions. Major networks’ user growth in 2019 was 11% while their revenue increase was 17%. 6 The vast majority of this income is generated by advertisers, who plan to spend more on social media in particular than on more conventional forms of media, including TV, radio, magazines, etc.
Social media earned $118 billion in revenue from advertisements in 2019, which is equivalent to 20% of all ad spending or around 25% of all internet spending. 7 On the other hand, social media takes up about 32% of daily media time. According to these numbers, big social media networks may still have a lot of space for growth in terms of ad revenue. The projected $223 billion in ad expenditure on social media networks by 2024 represents a 14% compounded annual growth rate (CAGR) for the following five years.
If these projections are right, the average revenue per user will increase (ARPU). The quantity of advertising shown, the amount advertisers are prepared to pay for each ad unit, and overall user engagement all affect ARPU. Companies with higher ARPUs often have active user bases that regularly engage with large amounts of material. A high-ARPU company may also send hyper-targeted ads in a variety of media.
New strategies and technology are being offered as social media companies observe a slower increase in their user bases. The popularity of advertising across reputable platforms suggests that it will likely continue to increase over time. However, fresh growth opportunities presented by e-commerce and AR/VR represent greenfield developments that may represent the industry’s next wave of expansion.