Once they were just startups but now they are multi-billion corporations. Companies like Twitter, Facebook, and YouTube have found a way to attract their userbases, while the revenue was mostly driven by advertisements as these companies’ services are free, and “always will be”, as Facebook says. This is just an example of how people believe in social media.

As social media networks are booming ever since the late nineties with social media giants like Facebook counting billions of users across the globe, this online social phenomenon has slowly become a great part of our everyday lives.

Moreover, these social media startups soon turned into multi-billion corporations, turning a massive userbase into billions in revenue, which very soon attracted great interest from investors focused on social media stocks.

Despite massive success in the market, there are still some regulatory uncertainties tied to some of these social media giants, so how profitable is investing in social media stocks?

Investing in Social Media Companies

Despite the fact that Facebook was involved in a drama revolving around selling users’ data to third party companies, while EU imposed regulations that made the company ask users in the European Union whether they are allowed to use the information they need also legally bound to explain for what and how this data is used, interest that investors have in social media doesn’t seem to be declining.

During 2017, Facebook reported 499 billion dollars in revenue, with Twitter weighing 13 billion dollars within the same time period, with great odds of showing further progress in the growth rate.

Both companies are also showing immense progress a year later as well, as Twitter is recording 650 million dollars in revenue growth through advertising, and with Facebook reporting 33% of growth in revenues during 2018 with 13.37 billion dollars, we might see a difference between the two social media giants if we add the fact that Facebook missed its estimates by 40 million dollars for the year.

Facebook stocks might have seen a decline after the data selling drama, however, this social media giant is still attracting users with finding new ways to keep them returning aside from making excessive profits from advertising.

What is Social Media?

Social media is the collective of online communications channels dedicated to community-based input, interaction, content-sharing and collaboration. Websites and applications dedicated to forums, microblogging, social networking, social bookmarking, social curation, and wikis are among the different types of social media.

Here are some prominent examples of social media:

Facebook is a popular free social networking website that allows registered users to create profiles, upload photos and video, send messages and keep in touch with friends, family and colleagues.

Twitter is a free microblogging service that allows registered members to broadcast short posts called tweets. Twitter members can broadcast tweets and follow other users’ tweets by using multiple platforms and devices.

Google+ (pronounced Google plus) was Google’s social networking project, designed to replicate the way people interact offline more closely than is the case in other social networking services. This website is no longer offered to new users and plans to shut down remaining accounts in 2019.

Wikipedia is a free, open content online encyclopedia created through the collaborative effort of a community of users known as Wikipedians. Anyone registered on the site can create an article for publication; however, registration is not required to edit articles. Wikipedia was founded in January of 2001.

LinkedIn is a social networking site designed specifically for the business community. The goal of the site is to allow registered members to establish and document networks of people they know and trust professionally.

Reddit is a social news website and forum where stories are socially curated and promoted by site members. The site is composed of hundreds of sub-communities, known as “subreddits.” Each subreddit has a specific topic such as technology, politics or music. Reddit site members, also known as, “Redditors,” submit content which is then voted upon by other members. The goal is to send well-regarded stories to the top of the site’s main thread page.

Pinterest is a social curation website for sharing and categorizing images found online. Pinterest requires brief descriptions but the main focus of the site is visual. Clicking on an image will take you to the original source. For example, clicking on a picture of a pair of shoes might redirect users to a purchasing site and an image of blueberry pancakes might redirect to the recipe.

Business Applications of Social Media

Social media is becoming an integral part of life online as social websites and applications proliferate. Most traditional online media platforms include social components, such as comment fields for users. In business, social media is used to market products, promote brands, connect to current customers and foster new business.

Social media analytics is the practice of gathering data from blogs and social media websites and analyzing that data to make business decisions. The most common use of social media analytics is to mine customer sentiment to support marketing and customer service activities.

Social media marketing (SMM) takes advantage of social networking to help a company increase brand exposure and broaden customer reach. The goal is usually to create content compelling enough that users will share it with their social networks. One of the key components of SMM is social media optimization (SMO). Like search engine optimization (SEO), SMO is a strategy for drawing new and unique visitors to a website. SMO can be done two ways: by adding social media links to content such as RSS feeds and sharing buttons, or by promoting activity through social media via status updates, tweets, or blog posts.

Social CRM (customer relationship marketing) can be a very powerful business tool. For example, establishing a Facebook page allows people who like your brand and the way you conduct business to like your page, which creates a venue for communication, marketing and networking. Through social media sites, you can follow conversations about your brand for real-time market data and feedback.
In terms of customer feedback, social media makes it easy to tell a company and everyone else about their experiences with that company, whether those experiences are good or bad. The business can also respond very quickly to both positive and negative feedback, attend to customer problems and maintain, regain or rebuild customer confidence.

Enterprise social networking allows a company to connect individuals who share similar business interests or activities. Internally, social tools can help employees access information and resources they need to work together effectively and solve business problems. Externally, public social media platforms help an organization stay close to their customers and make it easier to conduct research that they can use to improve business processes and operations.

Social media is also often used for crowdsourcing. Customers can use social networking sites to offer ideas for future products or tweaks to current ones. In IT projects, crowdsourcing usually involves engaging and blending business and IT services from a mix of internal and external providers, sometimes with input from customers and/or the general public.

On the other hand, the integration of social media in the business world can also pose challenges. Social media policies are designed to set expectations for appropriate behavior and ensure that an employee’s posts will not expose the company to legal problems or public embarrassment. Such policies include directives for when an employee should identify himself as a representative of the company on a social networking website, as well as rules for what types of information can be shared.