Instagram recently launched the ability to buy products from a creator’s post – without leaving the app. It adds another way for Instagram to generate revenue from the free-to-use app, while also giving consumers a hassle-free way to shop from their favourite brands.
But are other networks taking a similar approach to monetisation, or are they still relying on the tried and tested ad model?
1. Ads still rule
All of the major social networks still depend on advertising for the bulk of their revenue. Facebook’s family of apps (including Insta and WhatsApp) generated $55.8 billion in revenue in 2019, 99% of which came from advertising. Facebook uses the data it finds on user’s profiles, and the data gathered from the Facebook Pixel that it embeds on other websites, to build an advertising profile for each user and target them with personalised ads.
Snapchat has five different ways of generating money through advertising. It uses Snap Ads to grab people’s attention as they browse through their friend’s posts. Sponsored Lenses give brands a way to create fun overlays for people to use on their own posts. Brands can use Branded Geofilters to give users specific calls to action. Brands can also pay Snapchat to promote their content with branded content placed in the Discover section and by partnering with them to broadcast live events (which cost around $400,000 – $500,000).
Advertising accounted for 86% of Twitter’s revenue in 2018. Brands (and individuals) can buy promoted tweets, promoted accounts and promoted trends.
2. Exploring the potential of hardware
Facebook entered the hardware market when it purchased Oculus VR in 2014, but commentators argue that for Oculus to be a significant success for Facebook it will need to attract the interest of the gaming community. It may be tricky because established gaming companies, like Playstation, already have their own versions of the headsets. As the technology comes down in price, Facebook will need to sell more to make its initial investment worthwhile. Facebook has also invested in Portal, but people may be hesitant to buy the devices as they worry about trusting Facebook with a camera in their homes.
Snapchat has also looked into monetising hardware with Spectacles. However, it overestimated how popular the devices would be and ended up making a loss on them (it’s not stopped Snapchat trying again though).
3. Selling other services
Facebook also makes money from several services:
- Facebook Payments acts as a peer-to-peer transfer service.
- Facebook acquired Jibbigo in 2013, which lets brands translate post and chats into multiple languages.
- It acquired Atlas Solutions in the same year to help advertisers monitor their social media outreach.
- Onavo is technology that helps app developers fine-tune their app’s performance on mobiles.
For Twitter, 14% of its 2018 revenue came from areas like data licensing and service fees from its mobile ad exchange.
While Facebook is leading the way with social shopping, other apps are exploring what they can do. As we’ve seen, Pinterest already uses click-to-buy, but Snapchat is also starting to work with brands to develop shopping services. It tested a virtual search service with Amazon in September 2018.
Advertising may still be the dominant form of revenue generation on social media, but it’s clear that social networks and apps are exploring other ways to monetise their services. For brands, these offer multiple ways for the brand to engage on social media beyond the traditional ‘pay to post’ route.