Welcome back to another episode of The Sophie Kessner podcast! Today, we’ll be discussing the merchant attention merchant business model used by social media platforms like Facebook, Instagram, and TikTok.
The revenue model of social media platforms
Social media platforms provide free access to users, but they make money from the data they collect from users’ activities on the platform, which they use to sell advertising space to businesses. The longer the platforms keep users engaged, the more data they collect, and the more businesses are willing to pay for advertising space.
Advertising is not necessarily bad, but organic marketing is competing with an algorithm that prioritizes paid advertising and content that keeps users on the platform the longest, such as entertaining, emotionally charged, or polarizing content. The more the content keeps people engaged, the more data the platforms can collect and use to sell to advertisers. It’s important to recognize that the platform is primarily a giant business that leverages user data to generate revenue.
Here’s an infographic I posted on my Instagram of how the platforms we leverage for our own personal gain work:
It shows that social media platforms like Facebook and Instagram are designed to keep you scrolling for as long as possible. They collect data on how you engage with their platforms and use that information to create profiles of you as a user. This data is then sold to businesses that want to put paid ads in front of you.
In fact, in 2021, Facebook generated over $114.9 billion USD in revenue from ads alone. The algorithm pushes different ads to users based on their behavior patterns, even if they don’t purchase anything, which benefits Facebook by collecting even more data. To boost user engagement, these platforms incentivize creators to produce more free content to keep users on their platforms for longer periods of time. They even introduced “creator payments” for users who push high volumes of content that keep users engaged, leading to the trap of faux influencers.
So the next time you find yourself scrolling endlessly on social media, remember that your data is being collected and sold to businesses.
Building a business strategy that isn’t solely dependent on social media
It’s crucial to understand these business models and develop a strategy for your business that is not solely dependent on social media. Business owners who rely on organic content are competing with an algorithm that prioritizes paid advertising. While it’s challenging to compete, it’s still possible to use social media to reach specific audiences and share potent messages.
Also, it’s essential to recognize that the user is the asset being sold, and their data is what’s being sold and leveraged. However, this can also be empowering, as users can take advantage of the opportunities within advertising and recognize the value of their data.
Using social media strategically as a starting point
Now, I’m not saying that you shouldn’t use these platforms or that you should be investing in ads, but it’s important to recognize that social media shouldn’t be the only place where you’re building your business. These platforms can be risky, and they can shut down your account at any time, which can be frustrating and emotionally exhausting.
That’s why you should be using social media to bring people off of the plat
form and into other spaces where you can engage with them more consistently, like email lists, YouTube, or podcast content.
The benefits of SEO for long-term growth
Another thing to consider is search engine optimization (SEO), which is the practice of creating content that’s optimized for what people are searching for on platforms like Google, YouTube, and Pinterest.
With SEO, you’re not competing for attention on a platform, but instead, you’re creating high-quality content that perfectly matches what people are searching for. This can be a great way to grow your business without having to rely so much on keeping up with trends or posting constantly.
So, when it comes to social media and building your business online, remember that the end goal isn’t to stay on social media forever. Instead, you want to use these platforms as a step in the right direction and focus on bringing people into other spaces where you can engage with them more consistently.
If you want to learn more about the attention merchant business model and how to transition away from it, make sure you subscribe to my podcast for future episodes.
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