Wednesday, 16 April 2014

Twitter Gnip Shows Why Social Media Should Share Revenue With Users

Source: Financial Times
Like Google's declaration of war on the human race, the news that Twitter will buy Gnip illustrates why social media platforms should share their Big Data revenue with users. Indeed, they would seem to have no choice if they are to survive in the longer term.

Gnip's CEO claims that:
"We have delivered more than 2.3 trillion Tweets to customers in 42 countries who use those Tweets to provide insights to a multitude of industries including business intelligence, marketing, finance, professional services, and public relations."
And that's not all. Gnip also has "complete access" to data from many other social media platforms, including WordPress, the blogging platform, and more restricted access to data from other platforms, such as Facebook, YouTube and Google+. 

Quite whether users consent to all that is an issue we'll return to in another post shortly. 

Meanwhile, Twitter suggests that Gnip's current activities have "only begun to scratch the surface" of what it could offer its Big Data customers in the future. Yet, from a user's perspective, Twitter has barely changed since Gnip began its data-mining activities. So are users receiving enough 'value' for their participation to keep them interested?

The social media operators would argue that their platforms would never have been built were it not for the opportunity to one day make a profit from users' activity on those platforms. And it may look like the features have not changed much since launch, but part of the value to users is the popularity with other users and it costs a lot to keep each social media platform working as the number of users grows. Each platform also has to keep up with changes to other platforms so users can continue to share links, photos and so on. That means platforms tend to lose a lot of money for quite a long time, as the FT's comparison chart shows. 

But analysing the value to users gets mirky when you consider that the social media are already paid to target ads and other information at users based on their behaviour, and that the cost of that type of Big Data activity is reflected in the prices of the goods and services being advertised. 

And it doesn't seem right to include the cost of buying and operating a separate Big Data analytics business, like Gnip, in the user's value equation if the user doesn't directly experience any benefit. After all, that analytics business will charge corporate customers good money for the information it supplies, and the cost of that will also be reflected in the price of goods and services to consumers. 

In other words, social media's reliance on revenue from targeted advertising and other types of Big Data activity means that social media services aren't really 'free' at all. Their costs are baked into the price of consumer goods and services, just like the cost of advertising in the traditional commercial media.

And if it's true that the likes of Gnip are only just scratching the surface of the Big Data opportunities, then the revenues available to social media platforms from crunching their users' data seem likely to far exceed the value of the platform features to users. 

Yet user participation is what drives the social media revenues in the first place (not to mention users' consent to the use of their personal data). The social media platforms aren't publishing their own content like the traditional media, just facilitating interaction, so there's also far less justification for keeping all the revenue on that score. And it seems easier to switch social media platforms than, say, subscription TV providers. 

So the social media platforms would seem to have no choice but to offer users a share of their Big Data revenue streams if their ecosystems are to be sustainable.

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