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Social Media Moves To Era Of Revenue Growth

The Blue Water Team

Social media has permeated almost every corner of the world. Currently, 84 percent of people who have Internet access use social media. They total 3.8 billion individuals. Social media platforms are turning their attention from winning over new users (Of which there are very few left) and focusing on creating more revenue from current users. This article by Global X looks at this new approach to growth and how it could benefit investors. 

Social media captures data to generate revenue.

Social media is a natural avenue for data collection. These platforms easily connect users to each other across the world and facilitate the exchange of information in vast quantities. Social media companies can use this data to generate revenue by selling highly targeted ads to interested businesses. 

Revenue is the new frontier for social media growth. 

Thanks to this ability to use data to make money, revenue growth is more important to social media platforms than is user growth. In 2019, for example, user growth for social media was 11 percent, but revenue growth was 17 percent. 

In 2019, social media generated 25 percent of all online spending, while accounting for 32 percent of the time that people spent online. That means that social media revenue could continue to grow. Some estimates place the growth of ad spending on social media at a 14 percent compounded average, which would lead to $223 billion in ad spending on social media by 2024. 

The growth of ad spending and revenue on social media leads to a higher average revenue per use (ARPU). Focusing on ARPU is the way forward for social media platforms looking for the most profitable growth patterns possible. 

Social commerce also drives social media revenue growth. 

Social media platforms are starting to embrace the concept of social commerce, whereby the platform itself allows users to sell products and services directly to consumers. For example, Facebook allows for in-app purchases from Instagram, while celebrities and other influencers often convince social media users to make purchases of specific goods and services. WeChat also plans to allow users to create live streams featuring their products in order to boost sales and brand recognition for users. 

As social media continues to focus on generating revenue, investors may find profitable investment opportunities to take advantage of in this field. Check out our investment ideas.