How Social Media Companies Are Making Money

It is not a surprise that social media companies have zillions of dollars but how do they amass all of their money? While it may seem quite simple to pinpoint how Google and Facebook utilize advertisements to create revenue, how is it then that a company like Twitter can make money when everything is free? Social networks are a daily activity for many Americans not to mention internationals, offering free ways to connect with friends and followers but still managing to pay employees and operate as legitimate businesses. How do they do it?


The most obvious and simple way for social networks to make money is to offer advertising services so that companies can get in front of millions of demographically targeted followers. Facebook has become the king of social media advertising, offering advertisers opportunities to get in front of a targeted audience that Facebook sorts for them due the large amount of data they are able to provide.

Premium Options

Although Facebook, Twitter and YouTube offer free information to visitors, sites like LinkedIn offer a premium option that allows users access to more information and services for a fee. LinkedIn has over 100 million members, although estimates suggest only a small percentage are paying clients.

Twitter Selling Tweets

Twitter has recently been cited for selling old tweets to a marketing firm called DataSift. They are the first company to have access to tweets, which have been purchased to extract insights that relate to brands, businesses, financial markets, news and public opinion. The tweets, which date back two years, will be used so that companies can track trends and make advertising decisions based on the data. This is just one of the ways that Twitter uses its network to monetize their reach.

Monetizing Data

What all the above have in common is that they are able to accumulate massive amounts of data and use it to their advantage. Social media companies are able to gain insight into our daily lives because we volunteer the information and they use it to either advertise directly to us or sell it to some third party company who can do the same. Expect data to drive the revenues of these networks in the near future. Here is what Forbes had to say about the matter:

Data is just as likely to be as big a piece of the business equation as advertising. Facebook, LinkedIn, MySpace and Twitter already possess billions of pieces of useful data that can infer so much about what’s happening – and what’s going to happen – in consumer society.

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Posted in: Blog, Social Media Marketing by on March 1st, 2012 Comments (0)

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