TWITTER, Facebook, YouTube, the list of social media sites is ever growing and becoming a key domain for advertisers. But what impact is the fast growth of these social media companies having on traditional media?
Facebook has 900 million active users, Twitter 100 million and Tencent (China’s most used internet service portal) 600 million users. There are concerns that the emergence of social media is having a detrimental impact on traditional media for a number of reasons.
Firstly, there is concern that these companies will simply take market share from traditional media. In addition, the traditional advertising market is likely to decline overall since inventory online is basically infinite.
In the short-term social media may be positive for advertising agencies as they will benefit from advising clients on opportunities and threats in a rapidly-changing digital world.
Facebook offers clients a range of advertising options including banner ads with no social interaction or engagement from users. It also offers premium ads which appear on users’ Facebook homepage and they are able to see it immediately when logging on.
Like ads are advertisements which show the ad content as well as which of the users’ friends have liked the brand. There are also poll ads which engage with users to answer a question and users can see their friends’ responses and lastly event ads which invite users to attend a specific event.
As far as Twitter is concerned, companies use it to post messages about their products as well as to participate in discussion about the products or experiences.
Twenty percent of the time spent online is accounted for by social media sites while 50% of Facebook’s 900 million users log on to the website at least daily.
Social media companies present two characteristics that make them unique. Firstly they are able to exploit data on users’ real identities and secondly they can exploit the interconnected network of relationships with others. Additionally, activity on the social media can easily flow to and from third parties (it is now common to be able to use the same Facebook login for multiple websites).
In summary, social networks have evolved into platforms offering a large number of online activities and applications.
As well as offering higher reach, social media also enables advertisers to target specific groups. Indeed, in contrast to other online media, on social networks individuals normally disclose their identities and preferences.
Furthermore, social networks normally collect data on individuals’ gender, ethnicity, marital status, location and occupation, as well as interest in organisations, political parties, music and brands. In this way, corporates can acquire a more relevant audience which should increase the efficiency of advertising.
Although the advent of personalised advertising should be considered as a positive move, this may not prove to be the case. General Motors recently decided to cancel its Facebook advertising due to low impact.
On balance, social media should be negative for traditional media and in general, barriers to entry in the digital world are very low.
The agencies are in a strong position to strengthen their position as advisers for companies in this new digital world. The digital transition should be positive for fee generation.
:: Fiona Newborough is assistant director at investment manager Brewin Dolphin
