E-Business and Social Media as the Most Buzz Words Over the Recent Past - Essay Example

INTRODUCTION E-Business (in general) and social media (in specific) are the among the most buzz words over the recent past. Implicit importance of connectivity across the entire value chain of business, integration of web and internet with businesses and later followed by social media are now the order of the day. The growing importance of social media in an individual’s life can be defined simply as a way of communication. Alongside dominance in driving individual life, social media has taken the co-pilot’s position in every business flight and businesses are transforming their existence using social media power. In addition, social media is taken a priority position among the communication channels for the reason of giving access to greater business audience without considerable investment. The estimate of the size of the audience of social media can be made as only single social media site, facebook, has population next to population of India and China (Divol, Edelman, and Sarrazin, 2012). (Oracle, 2012) The role of social media in business is as important as in an individual’s life and with the passage of time this has been gaining more attention. However, immense success of social media sites has gained popularity across business and individuals. This has also called for attention to explore the methodology that leads to success of the E-business form of social media sites. SOCIAL MEDIA Understanding the business model requires understanding the defining elements. Social media component of e-business has undergone considerable debate pertaining to its definition. Kaplan and Haenlein (2010) for defining various categories of social media have provided two-factor matrix as given below: (Kaplan and Haenlein, 2010) There has been a debate on what the definition of social media is over the years. However, since businesses are concerned with benefits from the social media irrespective of its technical definitions, Hansen, Shneiderman, and Smith (2011) have declared social media as any medium that provides connectivity to the community for interaction. In addition to this connectivity, social media also facilitates the functions of creating, finding, sharing and evaluating the mass information available across social and other web channels. CONCEPTUAL BACKGROUND BEHIND THE BUSINESS MODEL Social media form has many dimensions that can be accredited for being reason of success behind the understudy business model. Among the most crucial factors, the leading position without any doubt can be given to the fact that social media has enabled the strong connection of business with entire existing and potential customer base virtually (I-newswire, 2012). For the theoretical perspective Symbolic Interaction-ism theory of Mead has been defined as working behind the model in a study of Martinka (2012). Social media site has provided platform to businesses to influence consumer purchase decision by utilising various symbolic interactive versions. Further, social media has also enabled businesses to facilitate wide audience of existing and potential customers with marketing P’s virtually with added feature of two-way communication; the feature that distinguishes it from traditional medium of communication as given below (Mangold and Faulds, 2009): (Mangold and Faulds, 2009) Therefore, unlike traditional medium where only ‘place’ is the component that allowed two-way communication between the particular customer and front line sales personnel and hence resulted in intrusion in passing the real feedback from customers to decision making management. Social media, in contrast, allows businesses to generate mass information about liking and disliking of existing as well as potential customers hence passing information to management without any distraction. Divol, Edelman and Sarrazin (2012) have provided model about benefits that social media facilitates to businesses across all steps of consumer decision making. Following this model on the platform facilitated by social media provides business greater opportunity to align to the customer requirement by either developing the required attributes in products and services or by utilising various techniques to divert consumer purchase decision in desired direction: (Divol, Edelman and Sarrazin, 2012) Therefore, business model of social media sites have gained success for, apart from providing individuals social community platform for interaction, facilitating businesses with big data about customers. Hence, broadly, critical success factors of the social media sites’ business model are as follows: It enables connectivity across the globe with elimination of boundaries including geographical, social, political as well as demographic (Divol, Edelman and Sarrazin, 2012) It prompts connection and responses from customers as well as businesses (Hanlon & Hawkins, 2008) It facilitates direct and uninterrupted insight from changing trends of customer behaviour (Divol, Edelman and Sarrazin, 2012) Hence, despite the theoretical similarity in business models across most of the social sites there are still differences from many aspects. For instance, target market and objectives of every social site has some variations than other. Nevertheless, the adoption of various social media sites by big businesses such as Apple, Tesco, Pepsi, Marks and Spencer, Starbucks etc not only as part of their promotional component but also as an added feature of their product asserts the success of all the models in which most of sites have managed to carve respective share in business. BSUINESS MODELS OF SOCIAL SITES The most distinguishing factor of the social media sites than traditional business model is the fact that unlike traditional business medium that restricts businesses to maintain standing in the decided segment of the market only otherwise the brand value is affected, the social media attracts all traffic based on the objectives (image below). Hence, the point of attention remains the same i.e. what business model is fetching the greatest revenue for the social site along with audience with defined objective. (Bullas, n.d.) ANALYSIS OF BUSINESS MODEL SITES IN TERMS OF REVENUE GENERATION Though the theoretical background for most of the social sites are almost consistent, the revenue model has mark-able differences. Discussion adheres to the business model pertaining to these social sites and exploring if these sites have managed to gain the success. FACEBOOK Facebook is the most popular Social Networking Sites (SNS) that facilitates world to be more open and connected in line with its mission. The site has been developed with business model of MSP (Multi Sided Platform) and entertains a large number of customers with respect to their preferred value propositions. Some relevant statistics and facts about the Facebook are given below: (Sebastian, 2012) (Sebastian, 2012) Model of Facebook offers unique combination to businesses to reach the potential and relevant social community to advertise in accordance with the information shared by the user about likes, dislikes, feeds, age and other personal information etc. Along with advertising business Facebook facilitates businesses to use API (development tool) using which businesses can develop their page on Facebook and other various social plug-ins, apps related to desktop, mobile etc. Further, easy payment structure facilitated by Facebook site enables business to develop respective apps that allow receiving payments from the users in convenient business environment. While advertising being the basic source of revenue for Facebook, these payments also form considerable source of revenue for site as the payments revenue showed an increased from 2% in 2009 of total revenue to 15% in 2011 (BMI Matters, 2012a). To engage huge audience Facebook has employed the given below business model: (BMI Matters, 2012a) Facebook business model to attract revenues has been given great consideration for the variety of reasons. First and foremost for being innovator of the business model while other distinctions characterised to the Facebook model is based on the fact that most of the efforts are done by user or the advertiser whereas share of the benefit is reaped and enjoyed by Facebook. To elaborate following are the distinctions of the facebook model in contrast to the traditional model (Owyang, 2012): EFFORTS ARE INPUT BY USERS: All facebook users serve as paid or unpaid employees for the site. Hence, approximately, 900,000,000+ along with 526 million active users generate content in terms of posts and sharing on the site. Facebook users using site for the social networking posts and likes the advertised content resulting in revenue generation from advertised content (Owyang, 2012). Traffic and Revenue Both Are generated By the Advertising Brand: Facebook does not need to make considerable efforts in generating traffic to their site like other businesses are required to do. Instead, advertising brands self catches traffic for their product and hence to Facebook. Further, companies to develop their following on social media site direct Facebook link on their corporate websites thereby along with the traffic the site also receives revenue from advertisement. Hence, customers of Facebook are investing as well as paying Facebook at the same time (Owyang, 2012). Huge Customer Based Managed by Small Business: The stream of revenue is growing at a considerable pace while the investment is not increasing at the same pace, in particular investment in employees. Facebook stated its employee count is 3500+ with $860 million investment against the revenue of almost $ 3.7 billion. This is in huge contrast with other technology pertaining companies having headquarters of Silicon Valley such as Apple, Microsoft etc and has thousands of employees to manage (Owyang, 2012). Hence, it is not only the distinction of innovation that is paying to Facebook and the company is generating revenue mainly for its distinguished business model of employing large employee base to work for free. TWITTER Twitter, another among leading social networking sites, has provided its users with micro-blogging platform for community building. Twitter offerings are based on the small text messaging visible to the community to follows. Critical statistics for Twitter are as follows: (Larson, 2012a) (Larson, 2012a) Twitter is used by a large number of people as evident from the statistics above. Users tweet for sharing their thoughts, following expert opinion on matters etc. In addition though businesses have grown their existence; twitter enjoys most of the features that are enjoyed by the distinguished business model of Facebook. For instance in year 2012 President Obama has rated to be leading world leader that with following on Twitter and with 24 million followers of which 15 million have joined following this year while the closest to Obama’s following remained President Hugo Chavez of Venezuela with approximately 20 million followers (RMN Digital, 2013). Hence, investors invest to promote tweet aligned with the most famous ones. For revenue generation Twitter does not put adverts on page and has following formats of CPF (Cost-Per-Follow) for promoting accounts, CPE (Cost-Per-Engagement) for Promoting Tweets and also Promoting Trends such as the hottest topics of discussion for revenues generation. The business model for the Twitter and its respective cost and revenue generation is as follows: (BMI Matters, 2012b) With the goal to increase people using the service, Twitter serves as multi-sided platform. This platform allows various apps generation with APIs. In an attempt to increase the service, Twitter has developed partnerships with large number of people in following four categories (BMI Matters, 2012b): Search Vendors: Licensed Microsoft’s Bing Social, Yahoo and Google’s Google Real Time for directing search to the Tweet. Device Vendors: For Integrating Twitter App to the products such as Apple devices for user so can tweet directly from the gadget. Media: These partners facilitate the integration of Twitter in compelling way to brands’ websites. Mobile Operators: for facilitating users to tweet from mobiles such as sending SMS. GOOGLE AND GOOGLE PLUS Google is regarded as among the leading technologies of the world and is acknowledged as the most popular search engine. Google facilitates its users with responses to their queries for free. The business has added to its portfolio variety of products such as Google Map, Gmail, Google Docs, Google Calendar, and Google Chrome etc and now in the domain of social networking, Google has added Google Plus. Google plus allows users to add friends and families in categories regarded as circles and each post (feed or photo) or search is hence represented in reference with these circles. Though many consider Google plus is just a copy of facebook yet there are differences as Google plus does not impose huge advertisements in the user interface and Google plus has additional benefit of properties merged from Google (Myers, 2012). The statistics of Google plus are given below (Graziano, 2012): Within a year of launch Google Plus has added 400 million monthly users It has 100 million monthly active users. Google plus has 69.4% men and 29.2% as women Overall Google works on the similar model like that of Facebook and generates revenue from advertisements. Advertisers put their content using Google Adwords (a self-serve auction-based advertising program) and the revenue is generated using CPC (Cost per Click) and another program entitled Adsense facilitates extended Ad campaign for business. Google actually deals in four areas including research and development, Traffic acquisition, Data centre operation and marketing and is accessed for search by 1 billion users per day (BMI Matters, 2012c). Given below is the business model for Google for its cost and revenue generation: (BMI Matters, 2012c) Google generates 96% of the revenue from advertising. However, various units added to the business model have not generated considerable business revenue (BMI Matters, 2012c). Social networking domain of Google has differentiated itself from other social networking sites with its privacy control i.e. any other than circled members would not be able to view feeds (Myers, 2012). Google has attempted to increase its revenue by increasing the stay time with more relevant information. This is in contrast to the previous goal where Google search attempted to provide the best results to reduce stay time (Smeekens, 2011). VALUE IN BUSINES MODEL Though the business models defined are fetching attractive revenues for the businesses and all three ranks on constantly rising positions on table as given below: (Larson, 2012b) (Larson, 2012b) (Larson, 2012b) However, though each business is generating attractive revenues yet businesses are concerned with increasing revenue streams. For instance, revenue stream of Facebook has been 1/10 from that of Google instead its page view being twice from that of Google. Further, it is also estimated that revenue stream for Google is 100-200x than that of Facebook (Dixon, 2012) and therefore, Facebook is attempting to add value to its model. Similarly, twitter is also attempting to generate greater advertising revenue as well as considering charging nominal amount as fees of $ 1 a month or just developing its interface similar to that of Facebook that has adverts everywhere (Farber, 2012). But concerns rise for the fact users will divert to other free sites. Facebook is also facing problems in terms of annoyed corporate customers questioning facebook for the integrity. Facebook is now blamed as playing bait-and-switch manoeuvre and charging business in contrast to claimed plan (Lyons, 2012). Further for revenue as Google has entered the social media domain Facebook has also planned to enter the search world. With facebook graph, facebook will facilitate users by utilising relevant information from their posts and likes; thereby, socialising search. If the model succeeds, then it will be an extensive competitive advantage for facebook as none other company has data base for huge social networking users (Economic Times, 2013). However, considering the privacy setting that has caused large number of customers to withdraw related content from Facebook and an added advantage of Google Plus will continue to increase rivalry among them. CONCLUSION As a source of communication with customer businesses are growingly acknowledging the importance of social media contribution in establishing, securing and strengthening respective brands among competitors (Oracle, 2012). Acknowledgment of the social media has forced to explore business models working behind win- win strategy for all including, user, corporate as well as owner of social media sites. Exploration of the business models of the leading social media sites with respect to theoretical as well as revenue cost models such as Facebook, Twitter and the new in line yet making landmarks Google Plus revealed greater dimensions. Though one way or the other revenues is generated from advertisement the newer models are considered to have incorporated corrections for the mistakes done by prior players; yet the revenue war is and will constantly contribute to changes implementations. List of References BMI Matters. (2012a). Understanding facebook business model. 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