This afternoon there were two articles which caught my eye in the “SmartBrief on Social Media”, a regular (free) newsletter I subscribe to. The first headline was: “IPO filing: Twitter is unprofitable despite strong mobile business”; the other article headline was: “Facebook announces that ads are coming to Instagram”.
There is no doubt both Twitter and Instagram are extremely popular social media outlets. Both companies started offering their services for free. To many, free is good. In my opinion, offering their services for free is one of the many reasons why Twitter has been able to build their user base to 218 million tweeters and Instagram can boast over 80 million users.
Today, Twitter is in the process of becoming a public company and is hoping to raise $1 billion from their Initial Public Offering (IPO). Despite Twitter’s posted revenue of $253.6 million, they still haven’t turned a profit yet. Facebook bought Instagram for $1 billion and has yet to see any revenue from it’s purchase. I don’t think it matters who’s bank account the money comes from, a billion dollars is a lot of money. If anyone does or has invested in either of those companies, they are expecting a profitable return on their investment.
Which brings me to my initial question. How long can a company run on free? When I was still knee high to a grasshopper, my mother taught me in this world there are no free lunches. Granted, social media has changed our world, but at the end of the day there are still no free lunches. So how are Twitter and Instagram expected to provide their investors a profitable return on their investments? Advertising. Hmmm, advertising? One problem with advertising is many social media consumers don’t like it. It is possible with the implementation of advertising now, fickle users could switch to the next social media outlet offering their services for free with no advertising; or it could inspire the user to tweet, snap, post, or blog their displeasure at the idea of constant advertising bombardment.
As a social media content creator myself, eventually I would like to get paid for my efforts. Actually, my bank, my hydro company, my equipment supplier, my internet space provider, my wife and a slew of other folks would like it if I also got paid, so I could pay them. Because I would eventually like to get paid for my efforts, I have wondered how will that happen? Once again advertising to the rescue! I will be charging advertisers a fee to latch on to my content. Like Twitter and like Instagram, advertising is a great idea. Provided you can get a company willing to pay for someone else’s free lunch. Both Instagram and Twitter chose to initially offer their services for free and then introduced advertising once they established a large enough user base. I’ve taken a slightly different route with the hope of one day being in a positive position – earning a profit from the content I create ($1 billion would be nice, but I will be more realistic and hope for a return in the thousands). My content has included advertising since day one. Unfortunately, because I don’t have enough subscribers yet, I am giving away the advertising for you guessed it – free. From my listener’s perspective, the advertiser was always there and it will not shock the system once I build enough of an audience to actually make it worth an advertiser’s investment.
What do you think is the best strategy, introducing advertising after the fact, or from the start? Do you tune-out advertising, or are you interested in it if it is relevant to your needs? Or, because it’s on the web, should everything be free – free of charge and free from advertising? Please let me know your thoughts in the comment space below.