George is an independent small business consultant and business owner with a mission to help entrepreneurs improve their management skills.
Online friendship platforms for connecting, sharing, discussing and promoting social action were transformed by Facebook (FB) into a global business with revenues that now exceed $70 billion. All aspiring entries into the vast online social media industry try to emulate FB’s business model, which is tied to network effects. It is based on a simple principle that every additional user of a social media platform benefits more from an existing network with many users. This creates exponential growth possibilities. Connecting to friends and family members and like-minded individuals is a basic human instinct that went viral globally through FB’s well-designed channels of communication.
Once you create a social behemoth like Facebook, which currently boasts 2.65 billion users around the world, it becomes a dominant player in the industry that continues to grow and suppress competition. In 2020 there were approximately 800 social media sites competing for market share around the world. Most of them were small with Monthly Active Users (MAU) of less than 10,000. But there are and will be more successful penetrations by agile, niche start-ups who have been able to take advantage of some of FB’s weaknesses.
From a business perspective, one of the key considerations for entry is the relative size of the market. In the case of social media, it is vast with active participation of more than half of the total world population.
The social media landscape is dominated by 20 brands, headed by Facebook with 2.6B users, YouTube with 2.0B, WhatsApp with 2.0B, and Messenger with 1.3B. What is significant for new entries like TFM is the annual growth rate of 10.5%, which translates into 376M new users. Even a market share of .01% of the total number of users translates into 3.76M active users.
Find Opportunities in Social Divisiveness
Society’s divisiveness, polarization and inequality has never been at a lower point than in 2020. This creates a unique opportunity for niche start-ups to create a brand that breaks down racial, cultural, ethnic and gender barriers and unites people around common values that bind them. New start-ups can differentiate themselves from other competitors through the originality of their website's content. They can achieve this by embracing successful trends in social media such as short video formats, real-time podcasts, promoting community events. They can use celebrity influencers, and develop links to prominent websites with like-minded objectives.
Create a Sustainable Business Model
Becoming a prominent voice in social media requires a sustainable financial business model. It is clear from the experience of other start-ups that monetizing websites is a difficult proposition. New entries can use a social enterprise model, which is based on achieving financial sustainability over time. It involves setting up multiple streams of revenues that include donations, fundraising, grants, and also ethically produced merchandise and social services.
Like all small businesses, the initial start-up financing must come from its primary shareholders, family and friends. The goal of this initial funding drive is to raise enough working capital to sustain itself for the first three years. The three-year financial plan must define the sources and projected amounts from diversified revenue streams.
Define the Measurements of Performance for Social Media
A disciplined business approach requires that goals and objectives are tied to measures of performance applicable to all social media platforms. It includes such analytics as domain authority score (DA), monthly active users (MAU), conversion rates (CVR) and other indicators of progressive growth. These statistics will be readily available from the website hosting provider. Analytics offer useful demographic segmentations that facilitate rapid response to target market developments.
Keep the Entry Costs Low
Starting a business in this globally connected world has been greatly facilitated by the internet, low-cost of computers, smart phones, algorithms, and artificial intelligence. It seems that all one needs is a computer, a creative idea, product or service and some knowledge of digital marketing to make a dent in a targeted market. In fact, some of the biggest companies in social media started in this manner and network effects did the rest. Undoubtedly, the cost of entry for online services and products are comparatively much lower than for brick-and-mortar enterprises. Another facilitating development is the blossoming of the GIG economy, where you can hire talent by the hour or prespecified fee. This reduces major fixed costs such as salaries, and investment in facilities. The 2020 pandemic has accelerated the use of freelancers who operate remotely.
Take Full Advantage of Digital Marketing
Marketing in the internet era is driven by digital marketing. People use internet search engines such as Google, Edge and Bing to locate information, services, products, and social connections. Search engine ranking is dependent on algorithms that give preference to sites with quality content that aligns with certain keywords. The higher the ranking the more probability there is for website traffic growth. Digital marketing strategies are focused on search engine optimization (SEO), social media optimization (SMO), back links to high domain authority sites, and content that readily engages visitors and compels them to take action.
Digital marketing is best left to professionals with a deep knowledge of how the Google AI-driven algorithms automatically analyze internet content and make ranking selections. Fortunately, for small businesses with limited budgets, highly skilled digital marketing talent can be acquired at a relatively low cost in many emerging nations. Bangalore in India is a hub for software innovation, website design and digital marketing.
Use a Hybrid Business Model
In order to support primary objectives financially, the initial funding, donations, and grants will have to be reinforced by the marketing and sales of tangible products.
A good example of this hybrid form is GoodTrade.com which was launched in Los Angeles in 2014. It has rapidly grown in domain authority ranking. It currently averages an impressive 500,000 visitors per month. Its content targets the more socially, environmentally, culturally, and racially conscious millennials and Z-generations. While its content is designed to appeal to their targeted demographics, it subtly funnels visitors to its e-commerce section. The online sales of fair-traded fashion directly produced in small villages in developing countries provides sustainable, feel-good financial support for its loftier social initiatives.
Collaborate Instead of Competing
The start-ups’ website should be the prime place for the distribution of its social services and products. However, it is good strategy to connect to other social media websites and online movements that are aligned with its social objectives. Instead of competing with it may be preferable to collaborate and build a powerful network with multiple outlets that can compete with the globally dominant social media platforms. This could take the shape of a formal cooperative or an informal aggregation that openly supports certain initiatives. Another possible area of cooperation is organizing an exchange of guest posts with prominent websites. Topics such as diversity and inclusion are greatly favored by larger corporations and the media which is supported by their advertising. This provides an opportunity for guest articles.