Social media revenue down, membership up

Graphic by Joshua Awolade
Graphic by Joshua Awolade

In the past few weeks, many of Silicon Valley’s major social networking companies have released earnings reports. In this round of report releases, many social networking giants have posted results that are more adverse than one might expect in an industry known for its rapid growth and prosperity.

The prominent professional networking company, LinkedIn, faced a six per cent decline in their stock price on May 1.
Reports of this kind may point to various changes in social media trends.

In the past few years, older demographics have come to embrace social media sites, changing their fundamental makeup. In addition, with so many people already having registered with sites like Facebook, it’s no wonder slower growth is being seen.

“I think they’re likely to reach a point where saturation happens; at which point it becomes more difficult to raise revenues,” said Peter Carr, lecturer of management sciences at the University of Waterloo.

However, companies like LinkedIn have not seen decelerated growth in membership. They claim more and more professionals are travelling to the site every day, both to set up new profiles and take advantage of the new services their existing profile can offer them.

“I think back a few years ago we gained a member every two seconds. Now we gain two members a second,” said Danielle Restivo, head of global programs at LinkedIn.

LinkedIn is seeing an interesting change in demographics where the largest growth is occurring. A younger generation is starting to take advantage of networking and realizing the potential services like LinkedIn offers.

“Students are our fastest growing demographic,” said Restivo. “We’ve tailored the site to allow students still in school to show what courses they’re taking, what degree they’re pursuing, their extracurricular activities, etc.”

That being said, the social media market is definitely changing. A market that was once quite small has become immense, and new niches are found every day. Companies must now adapt to this new reality and find areas where they can both create and excel.

“It’s two things: allow current users to spend more time on the site, and then also perhaps to attract new people who the new services and functionality is likely to appeal to,” said Carr. “But, the other key is to change how their advertising works.”

Sites like LinkedIn have already taken some of these thoughts into account, as they have fundamentally changed the features of the site, and allowed for users to spend more time logged on.

“The recent addition of all the content we have is making a difference in the number of times people want to keep coming back,” said Restivo.

As the social media market expands and changes, new trends will certainly come, and old trends must go. Recent changes by giants like Facebook and Twitter have come to show us that nobody can truly predict what the market will be like in the next few years.

“What could happen is the big products could introduce their own niche functionalities, or the smaller companies could expand and claim bigger market share,” said Carr.

“I think the biggest danger would be that big products would take over the market, making the market harder to penetrate, and that would be too bad.”




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