Social Media Industry Assessment

The projections presented here are based on a combination of historic figures and short term predictions by research firms. Using a forecasting algorithm with exponential smoothing and a trend, incorporating the last three years of revenues and utilizing currently existing forecasts through 2016, results have been extrapolated through 2025.

Compared to some research firms' forecasts, we've erred on the side of conservatism as accurately forecasting 10 years in the future involves a degree of speculation. As you can see from the chart, we believe that although revenues will continue to grow over the next 10 years, the year to year growth will slowly decrease as new services, new business models, and bottlenecks impact the industry.

Porter Was a Good Man; He Had Five Forces

The social media industry is still in its growth stage, which makes it tempting to jump in and hope for the best. But there is no place for gut feelings in this room. There are ways to gauge the attractiveness of entering an industry and one very useful method is an analysis of Porters Five Forces. As you can see from this summary, obstacles do exist, but that does not prevent us from considering this as an attractive industry. Let's take a look at what the obstacles are and how you might be able to navigate them.

Rivalry

Rivalry is high between competitors with constant innovation in terms of functions and features. Price wars exist between competitors, but it doesn't detract buyers from utilizing the offered services. Properly marketing your products and services and investing in R&D are the ways to grow and keep your users.

New Entrants

There are literally hundreds of new social media related solutions being built today. Mediocre engineering is relatively affordable, but a high level of quality requires a large investment in engineering. The marketing, business development resources, and amount of time and money required to build a following often makes it difficult for new entrants to achieve success. Yet, smart bootstrappers have done it. Research methods to keep new entrants from penetrating your markets. This can include patenting appropriate processes or keeping your users loyal via contracts and subscriptions.

Substitutes

There are a large number of internal substitutes and the external substitutes are slowly becoming obsolete. Yet, even if we only consider the substitutes internal to the industry, we see that they are more of a value-add than a threat. Competitors can be an opportunity for customer analysis. Understand their offerings and how their customers respond. Your users are on multiple platforms, how can you use that information to your benefit? Maybe an option is to offer third-party data through your portal.

Suppliers

Your end-users are your suppliers and your supply. They are the reason marketers are interested in you. Your users expect a high level of speed and functionality with your products and services. Know your users, meet their needs, and they will utilize your services. This must be said because we've seen so many mistakes in the news over the years: Do not piss off your users! Love them, embrace them, or they will leave and the marketers, your buyers, will follow.

Buyers

And your buyers have their own needs. They follow the users, which mean they're on multiple platforms too. They will ignore you if you don't have a sufficient number of users. Increasing eyes and ears is the name of the game. Watch your user numbers and implement growth tactics. Marketers also want feature-rich analytics tools to see what works for them and what doesn't.

Now that we have an understanding of the risks and barriers associated with the social media industry, discussed potential risk mitigation and barrier breaking techniques, and analyzed ten year projections, next are some recommendations on how to utilize this information.