Consumer Goods

Social media companies in Silicon Valley - Some monetize, most do not

  • MAR1556843
  • 24 Pages
  • September 2017
  • Consumer Goods
Social media companies in Silicon Valley - Some monetize, most do not

Summary

Social media is dominated by Alphabet, through ownership of YouTube, and Facebook, both of which were created on the assumption revenues would flow once a large user base had been created. But other major companies, such as Twitter, have failed to monetize and posted losses which undermine the chances of eventually generating profits. The belief that social media companies can concentrate upon creating a popular product before choosing to only later work out how to generate revenues is now fatally flawed. However, rivals and potential new entrants face extremely tough challenges in competing against Facebook and Google, making the task of monetizing harder than would otherwise be the case.

Key Highlights

- Due to the dominance of Alphabet, through the purchase of YouTube, and Facebook in social media, rivals have are being squeezing out of the market because they cannot hope to compete seriously in terms of providing the best value to advertisers, undermining their business model.
- Recent success stories have been dominated by social media companies which have been purchased by Facebook despite never having made money but are then monetized under the new owners. Facebook is primarily interested in data about user behavior to improve the offering to advertisers.
- Losses incurred by Twitter and Snapchat have made big headlines. Both of these companies will struggle to monetize because they are predicated on the old model of building a user base and then working out how to make money later. As time passes, the chances of monetization taking place grow slimmer.

Scope

- Explores how Facebook and Google shape the social media advertising market
- Looks at how companies such as Twitter have failed to monetize
- Analyses how some companies have performed much better after being purchased by either Facebook or Google
- Seeks to explain why some companies will likely continue to lose large sums of money

Reasons to buy

- How do Facebook and Alphabet dominate the social media market?
- Can Twitter and Snapchat ever make money?
- Is being bought out now the best route to success?
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