How Social Media Makes Money from Attention?

Instagram describes itself as “A free photo and video sharing app available on iPhone and Android”. Google’s mission is “To organize the world’s information and make it universally accessible and useful”.  Why is Instagram developing amazing app for free? How is Google managing financially to organize the world’s information giving access to us for free? These are the same companies which are listed in the top 15 in the largest technology company by revenue according to Fortune Global 500 in 2019. Google’s new public holding company, Alphabet Inc. holds the 4th place, and Facebook, holding 14th position gets 31.8% of its revenue from Instagram. The previous 4 sentences contradict themselves, I know! The business model of these companies developed over the years is so unique for the entire humankind.


Andrew Lewis explains it very well, he states “ If you’re not paying for the product then you’re the product”. Yes, you have guessed it right! platforms like Google, Instagram, and others make money from you. They do not have any physical products like traditional giant companies like Toyota, Microsoft, Apple, Intel. So how are they using us as a product? These companies create a platform where we can avail their free services like search, interacting with friends, raising opinions, forming community with like-minded people, etc based on our need. They put in the best coders in the world to develop algorithms that result in interactive, fun and creative features that enhance user experience. With all these features, it has completely revolutionized how we as a community communicate. For example, memes are embedded in our lives on daily basis, we prefer texts over call, our conversations involve more emojis than ever, people’s opinions can reach in a creative way. All this is giving birth to a new culture and with all technological advancements, it feels like it’s a great time to be alive. All this still does not answer our question about how these companies get their revenue.


In the background, these platforms keep a record of our behavior based on our interests, dislikes, sharing, search, etc. With best coders at work, they make sure that users spend as much time on their platform. They create a person’s model based on one’s behavior and predict what one might find interesting. This data will be later used to advertise products to us based on our likings and interest. This is called personalized targeting. Let us understand from the company’s perspective who want to advertise their product: Running ads digitally turned out to be economical because investing in banners, agents is tiresome, and on top that targeting is done effectively on these platforms. Google, Instagram come into the picture here, where they act as agents who get potential buyers into the doorstep of companies who want to sell their product. This ecosystem creates a win-win situation for both users who do not want to see unwanted ads and advertising companies who want to effectively target their customers. Social platforms provide an affordable option which allows even small scale companies to advertise. Platforms earn merely by the huge volume of companies who want to advertise their product even if it is well a well established firm like McDonalds or a tiny restaurant in a remote corner of India.


This a great working model but lately with years of usage negative effects are observed with companies getting greedy and programming users at a deeper level. Violation of privacy is observed with these companies spying each and every thumb movement on the phone. More communal clashes are seen after the introduction of social media because it suggests people with similar interests and creating a biased society. Recently, I conducted a poll on my personal Instagram with small sample space and 83 people found ads creepy and annoying, only 26 think it helps them to get customized ads. Being an active user on Instagram myself, retargeting is one major problem that is annoying people.


I want to focus on one reason for annoyance is retargeting where users are made to see ads even after buying a product. “It’s like an annoying ex who keeps texting you. I’m more aware of you, but it makes me want to ignore you even more.” I get to see ads of the laptop even after buying it and I do not wish to see ads for laptops for a year or two. Platforms need to categorize ads based on whether the product is a long-time investment or short ones. Retargeting makes sense for short term ones because I will be needing a hair product frequently. Personalized ads are a great concept unlike generalized ads seen on TVs. But companies running ads still needs to categorize ads based on product usages. Social media has become part and parcel of our life and tiny changes like this can make a huge difference in how it is perceived.

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