Are business models in social media very different from ones prevalent before emergence of social media as we know it today?

Around 40% of world’s 7.1 billion population has access to internet today. A sharp increase in this has been the result of internet enabled mobile phones. Social media today presents a lot of power and opportunities in the hands of buyers and sellers. The emergence of social media has brought key changes in business models as compared to their traditional form. Let us take those one b yone –

  • Most of the business models in their conventional form were 2-sided. One, the seller and other, the buyer. Today, anyone who is looking to buy something goes online, seaches for the product, finds the seller with lowest quote, and most importantly looks for reviews posted by other buyers or experts. For instance, a person looking to buy a new car goes to an automotive website such as which offers detailed expert review and test drive results of the car. Further, customers who have purchased the car post their comments and real experiences. The involvement of parties other than buyer and seller in the purchase process has brought new dimensions to business. Thus, making it n-sided.
  • Tradionally, businesses were assumed to be favouring sellers only, thus, making the business model entirely supply side. Now, with high availablity of variety of products, competitive landscape, ease of access to multiple sellers, and better than ever service commitments a seller has to try really hard to win and retain a customer. Social media has helped change the market dynamics and make the business models run based on demand.
  • Another change that has been witnessed with rise of social media is the shift from content creation to content aggregation. Successful business models have been built around content aggregation viz. Reddit, Digg, StumbleUpon, Flikr, etc. There are mainly two kinds of content aggregators. One, those who simply gather material from various sources for their Websites, and other, those who gather and distribute content to suit their customer’s needs. This is also called syndication.
  • The one most visible difference is the kind of return businesses are experiencing in the current digital ecosystem. Traditionally, one popular buzz word was ‘economies of scale’. It increases value gradually and linearly. Small efforts yield small results, large efforts give large results. Whereas, with social media playing a big role in market, the returns are showing network effect. Network increases value exponentially – small efforts reinforce one another so that results can quickly snowball into an avalanche.
  • The new business models must present greater flexibility and fast response times. On one hand, companies should be in a position to address customer wishes and concerns more quickly. On the other, they must be able to react to unexpected crisis situations. After all, social media-based communication poses serious threats. Once negative opinions about a company or a product start spreading, they can reach millions of users in no time. Recall the case of brick and Vim soap delivered in a smartphone box by Snapdeal recently. Hindustan Unilever (Vim brand owner) was swift to make other company’s bloop turn his favor by sending a new smartphone to the customer. Businesses must be properly prepared for such crises and ready to act fast and act flexibly. Flexible organization within the company is essential for successful marketing via social media.




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