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The social media in the economy

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 THE SOCIAL MEDIA IN THE ECONOMY
I OANNA A NNA P APACHRISTOU
ioannapapachr@gmail.com
Sustainability Modeling and Measurement Lab.,
Universitat Politecnica de Catalunya – Barcelona Tech

“It is not the consciousness of men that determines

their being, but, on the contrary, their social being that
determines their consciousness.”

― Karl Marx, A Contribution to the Critique of Political Economy

1. INTRODUCTION
Traditionally, economists have studied social and economic phenomena by using a
framework in which interaction is centralized and anonymous. They were taught that the
economy is the net result of the actions of individual investors, who act independently of
one another to maximise their own utility. This view of economy sees the individual as all-
important and downplays the role of society (Orrell 2010), while prices have been the
principal device of coordination among individual actions. The reality, however, is distinct. In
recent years, a growing body of empirical work has argued that the aforementioned
approach is inadequate for an understanding of a number of phenomena (Goyal 2007).

Even from the marketing point of view the things have changed. Historically, companies
were able to control the information available about them through strategically placed press
announcements and good public relations managers. Today, however, firms have been
increasingly relegated to the side-lines as mere observers, having neither the knowledge nor
the chance – or, sometimes, even the right – to alter publicly posted comments provided by
their customers (Kaplan & Haenlein 2010). The fundamental task of marketers has been to
spread the word about their products and services in order to get people to buy them, by
using a combination of outbound techniques, including e-mail blasts, telemarketing, direct
mail, TV, radio, and print advertising, and trade shows (or expos) in order to reach their
potential buyers. The problem with these traditional marketing techniques is that they have
become less effective at spreading the word as people get better at blocking out these
interruptions. The way people shop and learn is not controlled anymore by business with big
advertising budgets. Interruption-based, outbound marketing techniques are fundamentally
broken and in order to successfully break through the noise and connect to people,
companies need to rethink the way they marketed from the bottom-up (Halligan & Shan
2010). They have to ensure their customers can find them using social media platforms.

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2. EVOLUTION OF SOCIAL MEDIA
After the Internet revolution, that has changed almost every facet of our business and
personal lives, over the last decade another revolutionary trend arises; that of social media
(Qualmann 2009). Internet started out as a giant Bulletin Board System (BBS) that allowed
users to exchange software, data, messages, and news with each other. The late 1990s saw a
popularity surge in homepages where one could share information about his private life. The
era of corporate web pages and e-commerce started relatively recently with the launch of
Amazon and eBay in 1995. The current trend toward social media can therefore be seen as
an evolution back to the Internet’s roots, since it retransforms the World Wide Web to what
it was initially created for: a platform to facilitate information exchange between users. The
technical advances that have been made over the past 20 years now enable a form of virtual
content sharing that is fundamentally different from, and more powerful than, the BBS of
the late 1970s (Kaplan & Haenlein 2010). From the late 1990s, Blogger (1999), Wikipedia
(2001), Myspace (2003), Facebook (2004), Flickr (2004), YouTube (2005), Twitter (2006), and
a wide array of ensuing platforms began to offer web tools that sparkled old and new online
communication tactics (Van Dijck 2013). Social media are now shaping the way young people
think, connect, engage, and work together (Kanter & Fine 2010).

So what is the social media? Social media is a group of Internet-based applications that build
on the ideological and technological foundations of Web 2.01 and that allow the creation
and exchange of User Generated Content (UGS)2 (Kaplan & Haenlein 2010). It is a term used
to describe web services that receive most of the content from their users or that aggregate
the content from other sites as feeds. In social media anyone can become a producer, but
many of the people see themselves more as participants who engage in the community
(Lietsala & Sirkkunen 2008). The concept has caused lots of criticism among media
researchers. One of the metaphors that it raises is that the traditional media has been
somehow unsocial, which is not the case (Lietsala & Sirkkunen 2008). Social presence theory
states that media differ in the degree of ‘‘social presence’’ – defined as the acoustic, visual,
and physical contact that can be achieved – they allow to emerge between two
communication partners (Short et al. 1976). Social presence is influenced by the intimacy
(interpersonal vs. mediated) and immediacy (asynchronous vs. synchronous) of the medium,
and can be expected to be lower for mediated (e.g., telephone conversation) than
interpersonal (e.g., face-to-face discussion) and for asynchronous (e.g.,
e-mail) than synchronous (e.g., live chat) communications. The higher the social presence,
the larger the social influence that the communication partners have on each other’s
behaviour.

1 A platform developed in 2004 whereby content and applications are no longer created and
published by individuals, but instead are continuously modified by all users in a participatory and
collaborative fashion (Kaplan & Haenlein 2010).
2 UGS is the sum of all ways in which people make use of Social Media. The term achieved broad

popularity in 2005 and is usually applied to describe the various forms of media content that are
publicly available and created by end-users (Kaplan & Haenlein 2010).

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In December of 2011, 1.2 billion users – 82% of worlds’ Internet population over age 15 –
logged on to a social media site, up from 6% in 2007 (Van Dijck 2013). As of December 2012,
the online social networking application Facebook registered more than a billion monthly
active users (see Figure 1). For mobile users, the numbers reached the 680 million (Anon
2013a). At the same time, in YouTube, 800 million unique users were registered watching
over 4 billion hours of videos each month, while 72 hours of video were being uploaded
every minute (Anon 2013b). To compare the increase in the use of these media during the
last four years, in January 2009 the active users for Facebook were reaching the 175 million
and the uploaded hours per minute in YouTube the 10 (Kaplan & Haenlein 2010). That
corresponds to a growth of roughly 82.5 and 86.1 % in total or 20.6 and 21.5% per year
respectively. Smartphones accelerate the connection processes and the dependence from
social media even more. As a result of a study launched in March 2013 (Levitas 2013)
concerning smartphone users between 18 and 44 years old in the U.S., half of U.S.
population is already using smartphones (181.4 million users) and the first uses that they
give them are checking and writing e-mails (by 78%), web browsing (by 73%) and checking
Facebook (by 70%), while the time spend on calls is reaching only the 16%.

Figure 1: World map of social Networks, December 2012. Facebook established its leadership
position in 127 of the 137 countries analysed for the study.
Source: (Cosenza 2013).

Social media can be classified in different ways, depending on their content and the user
interaction. One of which, proposed by (Lietsala & Sirkkunen 2008), classifies them into the
following genres: i) content creation and publishing (blogs, v-blogs, podcasts), ii) content
sharing (YouTube, Flickr) iii) social network sites (Facebook, Twitter, LinkedIn, Pinterest, My
Space, Google Plus+3), iv) collaborative productions (Wikipedia), v) virtual worlds (Second
Life) and vi) add-ons. Independently of the category they belong to, social media, rather
than being finished products, are dynamic objects that are tweaked in response to their

3Social network sites have been actualised from the list proposed by Lietsala & Sirkkunen,
according to the eBizMBA Rank (eBizMBA 2013).

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user’s needs and their owner’s objectives, but also in reaction to competing platforms and
the larger technological and economic infrastructure through which they develop (Feenberg
2009).

3. WE ARE ALL CONNECTED

So how does individual behaviour aggregate to collective behaviour? And where do social
media enter? According to the atomic theory of economics, individual people or business are
supposed to be independent of one another, so they are uninfluenced by each other’s
decisions. In this picture, their desires and preferences therefore remain fixed. But in fact,
every decision made is affected by what is going on around (Orrell 2010). People interact
and affect each other’s behaviour. Markets are largely driven by things like rumours and
trends. These in turn affect the larger economy, and ultimately measures of activity like the
gross domestic product. We buy things not just because of necessity but because everyone
else is also buying. We are under constant social and psychological pressure to buy things.

Individual choices concerning the gathering of information are actually shaped by the
pattern of connections between persons in a society. This line of reasoning leads to the idea
that the pattern of connections that obtain in a society will themselves reflect rational
decision making of individuals (Goyal 2007). The possibilities of group intelligence, at least
when it came to judging questions of fact, were demonstrated by a host of experiments
conducted by American sociologists and psychologists between 1920 and the mid-1950s
(Surowiecki 2005). So, when group dynamics take over, the wisdom of individuals can
quickly break down. And in general, the bigger the crowd the better the result. Behavioural
psychologists describe this type of behaviour as herd behaviour. Although it does not seem
so rational, there is plenty of evidence to show that emotion plays a large role in decision-
making. Our actions reflect the fact that we are part of a global network – connected socially
and financially to friends, community, the media, and even remote events on the other side
of the world (Orrell 2010).

Relationships among individuals have a number of different dimensions. The first task is
therefore to find a conceptual framework within which they can be described and then
measured in a meaningful manner. A language within which variations in relationships can
be naturally expressed is also needed. The concept of a network addresses these
requirements nicely: a network describes a collection of nodes and the links between them
(Newman 2010). Individuals, firms, countries or even collections of such entities may be the
nodes. A link between the nodes signifies a direct relationship between them; for instance,
in a social context a link could be a friendship tie, while in the context of countries a link may
be a trade agreement or a mutual defence pact (Goyal 2007). The nodes are important, of
course, but without the links the network doesn’t exist. Hubs are the larger nodes within
networks, meaning the people or organizations that have lots of connections. Hubs are the
influencers in the network, the people who know everyone and are known by everyone.
They enjoy sharing information and connecting people to one another and resources. They
are the responsible for making things go “viral” online; that is when huge numbers of people
have watched a video or read a blog post or clicked on something (Kanter & Fine 2010).

4
Individuals can exploit their network position to their own advantage. These advantages are
related systematically to aspects of the network structure. In many contexts, the
connections that define a network arise out of investments in relationships made by the
individual entities themselves. Connections take on different forms and so the nature of
investment will vary (Goyal 2007). The networks can be divided into the following
categories, i) small-world network, where the connections between individual nodes are
arranged in such a way that it takes only a small number of steps to link one node to
another, i.e. World Wide Web and ii) scale-free networks, where there is no typical or
expected number of connections for any node: most nodes have few connections to other
nodes, but a small number of hubs are highly connected, i.e. air traffic network (Orrell 2010).

Social media belong to small-world networks, such as the World Wide Web, and that is why
their network is expanding with such velocity. They make even stronger those connections
between the individuals and affect the economy. People value the opinion of other people
and social media make it easier to disseminate information. Social media enable users to
inform their friends what they are doing every minute of the day. The most popular feature
of Facebook, LinkedIn and Google+ is status updates. By using it, users can continuously
drag, boast, inform, and vent to everyone in their network (Qualmann 2009). Consumers do
not simply consume anymore; they recommend what they like to their friends, who
recommend it to their friends and so on. They do not simply buy cultural goods; they buy
into a cultural economy which rewards their participation (Jenkins et al. 2013). People
primarily shop and gather information through search engines, such as Google. The average
information seeker conducts dozens of searches per day. Then they cross the obtain results
with information published in the blogosphere. And finally, they turn to the social networks
(Halligan & Shan 2010).

4. CONCLUSIONS
Why all of this is important? Where can it lead? Well, the potential impact of social media in
the economy seems to be huge. Social media seem to have penetrated almost every culture,
forming a new online layer through which people organise their lives. Today, this level of
platforms influences human interaction on an individual and community level, as well as on
a societal level, while the worlds of online and offline are increasingly interpenetrating.
Originally, the need for connectedness is what drove many users to these sites. Connectivity
quickly evolved into a valuable resource as engineers found ways to code information into
algorithms that helped brand a particular form of online society and make it profitable in
online markets – serving a global market of social networking and user-generated content.
Large and influential platforms such as Facebook, Twitter, YouTube and LinkedIn exploded in
terms of users and monetizing potential, alongside countless smaller profit and non-profit
sites. As a result of the interconnection of platforms, a new infrastructure emerged: an
ecosystem of connective media with a few large and many small players. The transformation
from networked communication to “platformed” sociality, and from a participatory culture
to a culture of connectivity, took place in a relatively short time span of ten years.

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Social media built the foundations for a participatory economy where participants gain use-
value as the result of community action. People collaborate on social media, and as a return,
the action of the individuals produces something new, even unexpected results. The
emergence may be profitable business and provide income for firms, but it also has an
impact on the social relations and the well-being of individuals.

REFERENCES
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Anon, 2013b. YouTube Statistics. YouTube. Available at:

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Cosenza, V., 2013. World Map of Social Networks. Vincos Blog. Available at:
vincos.it/world-map-of-social-networkds/ [Accessed March 20, 2013].

Van Dijck, J., 2013. The Culture of Connectivity: A Critical history of Social Media, New
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eBizMBA, 2013. Top 15 Most Popular Social Networking Sites | March 2013. Available
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Feenberg, A., 2009. Critical Theory of Communication Technology: Introduction to the

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