The STORY OF FACEBOOK :

The STORY OF FACEBOOK :

How Social Media Companies Make Money from Facebook.??

We'll use Facebook as an example.

The Facebook IPO was an unmitigated disaster. It lost over half of its value within six months of listing, and was priced at 107 times trailing 12-month earnings, making it pricier than 99% of all companies in the S&P 500 at the time.

But boy did it rebound.It was advertising that undoubtedly turned the tides for Facebook.

"Facebook has gotten really good at advertising. It's new, it's inexpensive, and it's smartly done," Holmes said. "When Google first started, it wasn't good at advertising, and look at them now. Facebook is going to be a success story."

Here is what Facebook did to unlock its value and become what Holmes described as "the most advantageously competitive product on the market for advertisers, hands down"...

Originally, Facebook started with space ads. Then, it added self-promoting individuals' or a company's Facebook page. But things were still sluggish.

However, around the start of 2013, Facebook developed a new advertising format. They're technically referred to as native social ads - ads that are seamlessly integrated into the social media's platform. BIA/Kelsey projects social media native revenue as the fastest-growing social media advertising method at a 38.6% CAGR by 2018.

"Facebook has integrated in-stream ads to the user experience. Response rates are high and advertisers will always chase the least expensive ad with the best response. It works because it's new and cheap," said Holmes.

In-stream ads can be videos. For instance, a commercial will appear before the user may watch an Internet video. The in-stream video ad will typically last 15-30 seconds.

By far the largest social network, FB's Q2 2014 ad revenue reached $2.27 billion - an 82% increase from the same quarter last year. Revenue for the full year 2013 was $7.87 billion, a 55% gain year over year.

"For the first time in 2013, Facebook let advertisers access FBX, an ad exchange where you can customize your own ads," explained Holmes. "Now we can glean information and better target our audience. We can also advertise on mobile now."

The ad model is helping Facebook monetize its massive 1.28 billion monthly active users who increasingly access the site via mobile devices. Facebook revealed it has more than 1 million advertisers in total as of the start of 2014.

And to top it all off, Facebook continuously improves its method to provide performance-based analytics that are invaluable to advertisers.

In an effort to improve its numbers, Twitter is in the process of rolling out 15 types of new ads aimed at e-commerce companies and mobile game developers, according to The Wall Street Journal.

But the key here is the addition of a mobile-app install unit. That means an ad for a game, for example, includes a button that takes users directly to an app store where they can buy it.
Facebook has included this tool since late 2012 - and in its most recent quarter, mobile in-app install units represented half of the company's revenue.

If Twitter is able to increase its user base and find successful ways to monetize it via ads, the stock could pull a Facebook-like turnaround.