Social Media and Businesses

Social media encompasses a variety of internet-based tools that enable users to create and engage in online communities, share personal information, and communicate with each other. This platform has substantially transformed the dynamics of business advertising and customer engagement. Unlike traditional media, which is primarily a "one-to-many" communication model, social media facilitates "many-to-many" interactions, allowing users to share diverse perspectives and participate in multi-threaded conversations. As a result, businesses have rapidly adopted social media strategies to tap into this expansive online marketplace.

Social media not only serves as a powerful advertising platform but also allows companies to gather valuable insights about their customer base. By encouraging users to engage with their brand and share personal preferences, businesses can tailor their products and services more effectively. Moreover, the rise of social media influencers has created new marketing pathways, enabling brands to leverage the reach of individuals with significant online followings. However, the fast-paced evolution of social media platforms poses challenges, as businesses must adapt their strategies to remain relevant in a constantly changing landscape. Overall, social media has become an integral component of modern business practices, shaping how companies connect with customers and manage their reputations.

Published in: 2023

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Subject Terms

Social Media and Businesses

Abstract

Social media refers to a set of internet-connected tools that allow users to create and participate in online communities, joining other users to share information about themselves and their activities. The creators of social media platforms earn revenue by analyzing the data users share about themselves and sharing it with advertising partners for a fee. Social media has rapidly grown to have a large effect on the economy, and all but the smallest businesses now have a social media strategy in place to derive value from this online marketplace.

Overview

Social media represents a departure from traditional methods of information dissemination. In the past, media outlets such as television stations and newspaper publishers would collect information and distribute it to their audiences, either for a fee (in the case of newspaper subscriptions) or through the support of advertising revenue (in the case of television commercials). This model has been called the "one to many" approach because it involves a single outlet transmitting the same informational message to a large number of recipients (Close, 2012).

Over time a number of disadvantages were observed with this system. One of these is that one-to-many broadcasting only accommodates a single viewpoint—that of the broadcaster. It is also time-consuming for the broadcaster to collect and synthesize information into a form that is ready for broadcasting, so there were often delays between the occurrence of an event and the distribution of information about that event to the public. Social media has addressed each of these concerns by turning the old model on its head. Instead of a one-to-many broadcast, social media makes it possible for participants to experience "many to many" communication, as each user can communicate news and information to their entire network. Each member of a user's network can then respond in kind, creating multi-threaded conversations among users who are each able to receive and transmit their own perspectives (Houser, 2013).

The business world has been quick to follow the emergence of social media and to find a place for itself in the online world, particularly with regard to advertising. Data shows that each year people spend billions of hours on social media, and for advertisers, this represents a treasure trove of time in which they can try to get their messages about their products in front of social media users' eyes. Given the nature of social media, with its emphasis on sharing all kinds of information, advertisers are able to use social media to urge consumers to help advertise products.

Social media not only provides businesses with an additional platform to capture people's attention, but also allows businesses to leverage user identity construction in order to make their advertising dollars go further. This works because social media platforms encourage users to construct online identities that parallel their true personalities. Typically this is done by allowing users to choose "avatars," visual representations of themselves (for example, a drawing of a tooth representing a dentist), and by allowing users to describe themselves by listing personal information such as their date of birth, marital status, the name of their employer, and so on (King, 2012). Alternatively, users can upload actual pictures and videos of themselves to their social media pages; the preference lies in the level of privacy one prefers.

Crucially, users often have the additional option to describe themselves in terms of their preferences, including their favorite music, movies and books, favorite color, favorite types of food, preferred brands of clothing, and so on. These data are of great value to businesses engaged with social media. For example, if a business selling sunglasses could convince a popular social media celebrity to wear its brand of glasses and to mention the brand on social media, then all of the social media users who belong to the celebrity's online network would learn about the glasses and identify them with the celebrity. The business would have essentially achieved an advertising shortcut. Instead of paying a television station to run a commercial about the glasses, which would be seen by millions of people with no interest in sunglasses or the celebrity, the business used the celebrity's social media network to simultaneously create and get in touch with a market for its product (O'Connor, 2012). Advertisements on social media became so pervasive in the 2020s, individuals promoting a product or business were required to also mention that their social media post was also an advertisement (Sawers, 2023).

Social media is more than simply an advertising platform for businesses, however. It can also be a way for businesses to collect information about current and potential customers. The essence of social media is the sharing of information, so with the application of some creativity, businesses can steer this activity in the direction they specify. This strategy can be seen on the website of almost any business, where there are links to Facebook, Twitter, Instagram, YouTube, and TikTok encouraging customers to "follow us online." The purpose of this is for the business to build an online community of users of its products, while getting the word out about the business to the connections of those users.

Using Facebook as an example, each time a person follows a business site on Facebook by "liking" its page, that person's Facebook friends are informed that the person likes and is now following the business. This encourages the person's friends to find out more about the business and perhaps even to follow/like it themselves. What is more, each follower the business gathers online brings along his or her user profile, chock full of information that the business can access and make use of in order to learn more about its customers. This can help the business tailor its products and services to more closely meet customer needs. So, if a company selling binoculars learned through its social media activities that more than 80 percent of its online followers enjoyed bird watching, it could use this information to develop new products with bird watchers in mind (Springer & Carson, 2012). In the second decade of the twenty-first century, more businesses began devoting funds or offering free gifts to social media "influencers," or users with an especially large number of followers and clout who agree to include product references on their accounts (Detwiler, 2018). By the 2020s, being a social media influencer was the full-time job of many individuals. Influencers market their services to advertising clients using the number of people who subscribe to their social media page—the more subscribers, the more potential consumers.

Just as social media platforms can be used to spread positive interest in a brand or company, they can also be used to widely communicate negative sentiments, particularly following a crisis event, that could be damaging to a business's image. Therefore, businesses have been increasingly encouraged to develop strategies and devote resources to monitoring social media sites to mitigate any ill feelings or grievances that could then be rapidly spread across such online communities and even between platforms. At the same time, the company's effective use of these same sites can prove beneficial in the damage control and response process (Canhoto et al., 2015).

Applications

Advertising. Pay-per-click advertising involves a business placing an image or a link on a social media site, hoping to entice users of the site to click on it. When a user clicks on the advertisement link or picture, the user is then taken to the website of the business to learn more about the products and services available (Scott, 2013). The phrase "pay per click" refers to the advertising pricing model. The business pays a base rate to have the advertisement appear on the social media site for a specified period (forty-eight hours, for example) and then would pay an additional amount for each referral it received from the site—that is, each time a user clicked on the advertisement. This model is used because each click that an advertisement produces has a chance of resulting in a sale for the business, so over the long term, the more clicks one receives, the more sales one makes.

The pay-per-click model is widely used despite the fact that it has some drawbacks. One limitation is that some users of social media are sophisticated enough to use software that is able to hide most advertisements while displaying the rest of the social media site's information. This frustrates the purpose of the business in paying to place the ad in the first place (Close, 2012). Another concern for advertisers is the phenomenon known as "click farms." Click farms are operations that assemble a large number of people and computers, either in a single location or geographically distributed, and employ the people to sit at the computers, clicking on ads, sometimes for hours at a time. The purpose of doing this is to increase the advertising fees that a competing business will be charged and potentially drain the competitor's advertising budget. The click farmer will then be able to bid for advertising space at a lower rate. Alternatively, click farmers may run monetized websites on which other sites advertise. Clicking on these links drives revenue to the click farmer. This is a problem for businesses to be aware of because clicks generated from click farming have no chance of resulting in a sale (O'Connor, 2012).

Professional Networking. Other forms of social media allow businesses to accomplish goals that are not directly related to increasing sales. Some social media sites specialize in professional networking. Instead of allowing users to create profiles and make connections for purely personal reasons, as can be done with Facebook, sites such as LinkedIn are geared toward helping professionals manage their network of contacts, communicate with them efficiently and effectively, and expand their network by making new connections. Businesses can use tools such as this to find potential opportunities for partnership and collaboration in new markets, just as they use other types of social media to expand their customer base. In addition, it is also possible to use one's profile on professional networking sites as a modern version of a resume, so that instead of keeping a list of one's accomplishments on file in a word processing document accessible only upon request, one may add work experiences to one's social media profile, and even receive feedback from other social media users about one's strengths (Houser, 2013).

Using a professional networking social media profile in this way allows people to create dynamic resumes that are not only more current but also more accessible and less subject to the selective presentation of information characteristic of traditional résumés. Many companies now turn first to social media sites when they are evaluating job applicants. This is done for a number of reasons. The most obvious purpose is to make sure that a candidate's online presence does not raise any red flags—signs that the person has poor judgment or engages in behavior that could potentially be embarrassing for an employer in the future. Less obvious but just as important, companies can assess a candidate's skills by observing how the candidate interacts with others online and what others say about the candidate. It even happens that some employers use professional networking social media to recruit employees who are not even looking for work. Companies that specialize in this type of activity are known as headhunters because they are paid to use social media to locate a specified number of candidates for an employer/client to evaluate (Sponder, 2012).

Viewpoints

With new technologies, excitement often outpaces the amount of information that is actually known about it, and people develop unrealistic expectations about what it can accomplish (Lawton & Marom, 2013). This has certainly been the case with social media and its business applications. Because social media does indeed have much to offer businesses in terms of leveraging their investment in it into a large return, there has been something of a social media "gold rush" as numerous individuals promoting themselves as social media gurus have sought to convince businesses large and small that if they do not act quickly (by hiring the guru as a consultant), then they will be left behind by their competitors in the rush to conquer the social media landscape.

Concentrating too heavily on a particular social media platform is also a danger. It is relatively easy for developers to create social media platforms, but it is much more difficult to design a platform that is appealing to users and fills a need felt by a large community. Social media users have a finite amount of time and attention they are willing to devote to new online services, learning to navigate those services, and developing social networks on those services (Piskorski, 2014). As a result, very few of the many social media sites that have been launched have persisted for more than a year. However, despite this lack of longevity, there has been a tendency in the business literature to latch onto each new technology as if it is a guarantee of business success. While Facebook was the first popular social media site, it was quickly overshadowed by Twitter. As the twenty-first century progressed, Instagram, Snapchat, and TikTok became more popular.

Social media veterans advise businesses that a more useful approach is to concentrate on developing an overall social media strategy rather than on developing strategies for each new tool or network that comes along. Social media, once a new phenomenon, has become an accepted feature of everyday life. While TikTok is the newest social media phenomenon, there is no predicting what may come next and whether current social media sites will be able to adapt and evolve (Geyser, 2023).

Businesses with substantial investments in the current social media players would prefer that the pace of change slow down, while new and emerging companies have less to lose and are, therefore, open to the continued emergence of new social media platforms. It seems likely that the services that do emerge in the years to come will have a better chance of surviving than some of their predecessors because more is known today about what is required for a successful social media community to be built.

Terms & Concepts

Avatar: An image or other visual representation chosen by a social media user to represent him or her. Because social media interactions are often not face-to-face, it can be difficult to identify who a user is. Avatars help to identify which user has shared what content.

Click farming: The practice of using low-wage employees to continuously click online ads in order to generate advertising revenue, at the expense of businesses paying for the online ads in the hope that actual customers will click on them.

Hashtag: A typographical convention used primarily on the social media site Twitter and denoted by the symbol "#." A hashtag is similar to a keyword and can be created by any user to make it easy to find all posts ("tweets") mentioning that hashtag. For example, a user could use the hashtag #newyearsday on all her posts that are about New Year's Day. Then, anyone wishing to find all posts about New Year's Day, regardless of who posted them, could simply search for the #newyearsday hashtag to find out what other users had been posting on that topic.

Headhunter: A person or company paid to use social media in order to locate and recruit candidates on behalf of an employer seeking to fill vacant positions. Headhunters often use social media to locate candidates who are looking for work and/or have the desired skill set.

Integration: In the context of social media, integration refers to the consistency of messages across multiple social media platforms. It is important for businesses to have an integrated approach to social media so that their presence on one social media site conveys the same information about the business as is conveyed by its presence on other sites.

Pay-per-click: A form of advertising in which businesses pay to have links to their products displayed on social media websites. Each time a person clicks on the link, they are taken to the website for the business, potentially generating a sale, and for each click, the business pays the advertiser a fee.

Bibliography

Canhoto, A. I., vom Lehn, D., Kerrigan, F., Yalkin, C., Braun, M., & Steinmetz, N. (2015). Fall and redemption: Monitoring and engaging in social media conversations during a crisis. Cogent Business & Management, 2(1), 1–16. Retrieved October 19, 2018, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=114559477&site=ehost-live&scope=site

Close, A. (2012). Online consumer behavior: Theory and research in social media, advertising, and e-tail. New York, NY: Routledge.

Detwiler, J. (2018). The anatomy of influence. Entrepreneur, 46(2), 52–57. Retrieved October 19, 2018, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=127980393&site=ehost-live&scope=site

Geyser, W. (2023, March 22). The Incredible Rise of TikTok - [TikTok Growth Visualization]. Influencer Marketing Hub. Retrieved May 25, 2023, from https://influencermarketinghub.com/tiktok-growth

Houser, K. A. (2013). Legal guide to social media: Rights and risks for businesses and entrepreneurs. New York, NY: Allworth Press.

King, D. L. (2012). Face2Face: Using Facebook, Twitter, and other social media tools to create great customer connections. Medford, NJ: CyberAge Books.

Lawton, K., & Marom, D. (2013). The crowdfunding revolution: How to raise venture capital using social media. New York, NY: McGraw-Hill.

O'Connor, R. (2012). Friends, followers, and the future: How social media are changing politics, threatening big brands, and killing traditional media. San Francisco, CA: City Lights Books.

Piskorski, M. J. (2014). A social strategy: How we profit from social media. Princeton, NJ: Princeton University Press.

Rubin, A., & Ta, L. (2016). How to protect your company's social media currency. Computer & Internet Lawyer, 33(8), 19–21. Retrieved December 16, 2016 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=116807307&site=ehost-live&scope=site

Sawers, P. (2023, April 21). Twitter seemingly now requires all advertisers to have a verified checkmark. TechCrunch. Retrieved May 25, 2023, from https://techcrunch.com/2023/04/21/twitter-seemingly-now-requires-all-advertisers-to-have-a-verified-checkmark

Scott, D. M. (2013). The new rules of marketing & PR: How to use social media, online video, mobile applications, blogs, news releases, and viral marketing to reach buyers directly. Hoboken, NJ: John Wiley & Sons.

Sponder, M. (2012). Social media analytics: Effective tools for building, intrepreting, and using metrics. New York, NY: McGraw-Hill.

Springer, P., & Carson, M. (2012). Pioneers of digital: Success stories from leaders in advertising, marketing, search, and social media. London, UK: Kogan Page.

Social Media and Businesses

On this Page

Subject Terms

Social Media and Businesses

Abstract

Overview

Applications

Viewpoints

Terms & Concepts

Bibliography

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