As Friends Reunited, a company at the vanguard of social networking, closes after 15 years while other providers are riding high, it seems timely to focus on changes in and prospects for this industry.
Social media plays a large and evolving part in the connected world, from blogging to business applications. Some companies providing social networking and media platforms have enjoyed high stockmarket ratings, despite a lack of clarity often over how growth rates can be maintained or revenues generated. Others have fallen by the wayside and relatively few of the pioneering set are among the leaders today.
There are various reasons why some companies thrived while others foundered. In some cases the technology was lacking. Others failed to keep pace with changing customer behaviour and preferences. One key factor would be achieving successful transition from PC to mobile with the rise of smartphone usage; another is appealing to multiple generations.
Young adults tend to be the heaviest users of social media but lack the financial firepower of older generations. Here perception is important; younger cohorts may not choose to befriend and/or be monitored by their parents, opting instead for sites that are edgier or more oriented towards their age group. Equally for some, 140 characters is too much effort, while for others their views are too big to express in such a concise manner.
Older users may have a more sceptical view of the trade-offs between privacy and connectedness. This possibly adds to uncertainty about user numbers. Effective filters and security have significantly lagged the subscription momentum of social media.
Assessing the impact of social media and social networking at a societal level is complicated. For every claim of increased social or political engagement, there is a counter of changing social behaviour leading to reduced ability or opportunity for personal interaction and social isolation for those who cannot or do not access social media.
Technology is a tool, rather than a force for good or evil, so it is the content and transmission that should be the focus. Providing a means for people to express themselves or highlight injustice or campaign might be positive, but amplification and endless retransmissions of incorrect or oversimplified or banal material are not.
Social media tends to be free at the point of consumption and has a revenue model that is heavily dependent on advertising. A minority of companies also operate a subscription model. In effect, the companies provide access to potential consumers for a fee. Either way, they benefit if they have an ever-expanding customer base.
Since people view material only when they are logged on, the advertising model works with more time spent online or higher conversion rates per viewing. The metrics are monthly active user (MAU) and average revenue per user (ARPU). The US tops ARPU by region, followed by Europe and then Asia.
