New media and Economics
From Baruchnewmedia
Contents |
History
The Journal of Media Economics was first published in 1988. Since then, this subject has flourished in many ways! The trends that are used today, have been transformed greatly from what they were yesterday.
Economic Crisis In New Media
Media is a industry such as any other industry. Businesses like The New York Times or Yahoo! are in the media industry business to make money. During the economic crisis which started in late 2007, new media played a big role in projecting the crisis. All the headlines were about how bad the economy was and bailouts. The United States has gone through many recessions, as a matter of fact, recessions are constants in the economy, they are expected. Due to how the internet evolved since the previous recession in the early 2000's and the emergence of new media, such as newspapers going digital, Twitter and Facebook, the recession that started in 2007 was projected different.
New media exploded this current recession into a much bigger problem than it really is. With stories of riches to rags, new media psychologically affected individuals. With the combination of focusing on the negative aspects of the economic crisis and new media platforms located in the internet, this recession was widely spread all over the world as the worst one yet. While the experts do agree that this recession is the worse one since the The Great Depression, it was the way that is was projected that escalated the situation. [1]
There are benefits to recessions. Companies can get lazy during a period of continuous expansion and inefficiencies come about, but they are disregarded because the company is still making a sufficient profit. Recessions bring about a reality check to these companies, therefore they adapt and evolve to the current economic crisis, coming out of the recession as a better company then it was before the crisis. [2] There was plenty of positive news the publishing companies could have focused on instead of the negative. Positive news such as Wal-Mart thriving in an environment where almost all retailers were doing terrible. With its price strategy, Wal-Mart beefed up its profits during the worst parts of the recession, it expanded in a time of economic contraction. [3] The real estate market was over all, but it was doing well in some areas such as the bay area. [4]
New media portrayed the economic crisis as a bigger monster than it really was. In a time where generally people were going through tough situations, new media made such situations worse by psychologically scaring individuals. This focusing on publication of negative news in period when individuals already had a negative outlook towards the economy caused a domino effect. The more people read negative news the more gloomy the situation became, personally. This compounding of negativity was reflected in social networking sites like Facebook and Twitter. It would spur from media sites and people would carry it over to social networking sites. In a survey made over the phone on 1000 adults, 77% of Americans believe that the U.S. media is "making the economic situation worse by projecting fear into the people's minds." [5]
Benefits of New Media and Economics
The new media has changed business practices in many ways. It has revolutionized economic activity in many ways. Specifically through e-commerce and B2B transactions, businesses have been able to flourish making the economy flow faster. A key term that came as a result of the new media's influence on the economy is called "weightless economy". Weightless economy is the exchange of intangible services and products which may include software, databases, and intellectual property. There are two key features of the weightless economy: First, developing a product has a high initial cost but a very low cost to reproduce and distribute. Second, products have no limits of being distributed. These two factors are significant because the weightless economy can be among the fastest growing and most profitable sectors of business. The new media has facilitated business transaction. [6]
Another key invention of the new media are the social networks. These have also been great use of businesses. Through social networking sites businesses has been able to use them to hire employees or spread advertisements. It has given a new tool for businesses looking to grow.
Companies now use social networking sites and blogs in addition to or instead of their own websites. Using a social networking site and/or blogs are free, therefore they decreases costs for the company that would have been spent on advertising. Also, when a company decides to use both a social networking site/ blog and their own formal site, it can be seen that the company appreciates any feedback from the customers. They can directly connect to their customers. When customers see that a company cares, they in turn form a bond with that company and continue purchasing from that company.
The new media also helps create jobs especially for writers, editors, journalists, and authors. The job market has opened for writers and employment of writers is expected to grow by 8 percent from 2008 to 2018. Companies of all sorts of industries are trying to use newer multimedia technologies and online media to reach a more technology friendly consumer and meet the growing demand for web based information. Online publications and services have increased demand for authors, writers, and editors. [7]
Influence Economy
Influence economy is the measurement of using new media ultimately to get a person to purchase the product or service. Influence economy is seen on Twitter, Facebook, Blogs, and Myspace. This is opposite to advertisements set out by companies. With social sites it is more of a trust between people as opposed to customer reviews on a commercial site. This is the reason that companies are involved in social sites such as Twitter and Facebook. The power of commercial influence rises from the "band wagon" of goods. For instance when apple announced their new releases in September people would blog, tweet, or wall post on the products. This is the success of new media in economics. The more buzz there is on the internet the greater influence economy is in that firm.
There are plenty of companies that generate their revenues on new media sites. Starbucks and Dell are famous for "advertising" on new media. Their "advertising" is actually much cheaper than creating a commercial or a billboard, instead they let their fans do it for them. Influence economy is also the reason why companies target younger audience and why they are targeted successfully. Applications are the backbone of influence economy. Users of mobile devices and their applications consist of a younger generation that have them engage in social buzz.
Social marketing can be measured by showing how much of a potential revenue there is. Below in the different types of new media are several ways on seeing the success of influence economy.
Companies use Facebook to reach out to consumers and and capture a new fan base. Facebook is a good source for consumers to receive the latest news on the companies through the group pages. Many companies take advantage of the group pages to notify its followers of the new sales.
For example, Hautelook is a company that offers great sales and discounts on luxury clothing for men and women. They announced that it would start bringing its online sample sales on Facebook. "Our members spend one-third of their online time on Facebook. So we know that getting out of the e-mail inbox is going to be crucial for the flash-sale business," said Adam Bernhard, chief executive of the company. "This is designed to go where the shoppers are instead of where they come to shop." [8]
Need to quickly send out a message about a new clothing line or a recall of some sort, twitter is used by companies to communicate an under 140 character message to users.
AT&T is one company that relies on twitter to keep their customers up to date. Most of the time the company posts on upcoming sales or newly added features.
AT&T also uses twitter to keep their customers in the know such as when there are power outages by posting tweets like "CA customers: We are aware of a cable cut situation impacting services in Santa Clara and San Jose areas." CNET
Apart from AT&T top following companies on twitter have two different uses for the new media.
Dell for one, strictly tweets about upcoming sales and products, yet they have over 1.5 million followers.
According to Dell’s Lionel Menchaca:
“Our @DellOutlet is now close to 1.5 million followers on Twitter, and back in June we indicated that @DellOutlet earned $3 million in revenue from Twitter. Today it’s not just Dell Outlet having success connecting with customers on Twitter. In total, Dell’s global reach on Twitter has resulted in more than $6.5 million in revenue. In fact our Brazilian and Canadian accounts are growing rapidly too –- and it was Canadian tweeters who asked to make sure Dell Canada came online to Twitter. Dell Canada responded because the team heard our customers. In less than a year, @DellnoBrasil has already generated nearly $800,000 in product revenues. Similarly, @DellHomeSalesCA has surpassed $150,000 and is increasing at notable pace."[9]
Starbucks uses twitter for more personal reach to the customers with over a million followers. Notifying followers of additional stores, wishing birthdays, or just replying to tweets is Starbuck's in influence economy.
Ways of measuring influence economy's success in twitter include number of followers as well as mentions. These add to the trend set by twitter that can lend your account on the top page. The more popular a business Twitter page is, the more potential revenue can be gained. With the use of new media such as Dell the economy can be stimulated. A simple site that sends out a message limited to 140 characters is amazingly able to generate a lot of revenue.
Blogs
Blogs are also useful strategies to attract consumers. This is a more of a pull strategy as opposed to push.
Cork'd is a popular blog about wine where they advertise different wine companies as well as just useful tips for its consumers.
Reviews on blogs feel more human. Customer reviews are trusted when you get to know who the blogger is. Websites with reviews may feel untrustworthy but a long time blogger who build a relationship with his/her audience will influence more potential buyers.
The success of a blog can be measured by the success of its influence. The more activity you have the greater the influence. Comments, number of visitors, subscriptions from RSS feeds, number of email subscriptions, and how many are linking to your blog. Also other new media sites such as Stumbleupon that features potentially fast growing web sites can attract more visitors. A popular blog in it's area such as Cork'd draws a lot of viewers and that adds up to ad space which in turn makes money. The money making scheme is simple just by posting on a free web page.
Virtual Economy
In the virtual world, we have seen the growth of a virtual economy. A virtual economy is an economy based on the transactions of goods and services in the virtual world.
Virtual goods are artificially scarce resources that exist in online spaces. Examples of virtual goods are virtual gifts and items through social networking services such as Facebook where you can "buy" a friend a birthday present and give it to them online. Examples of these also exist in Massive multipayer online games (MMOG) as powerful characters such as the popular game World of Warcraft or Ages of Empire where users need to collect resources to get stronger to be able to defeat their opponents.
Virtual goods and currencies are often bought and sold for real money. Much of it takes place in secondary markets where MMOG players buy characters and other currencies from other players. Game operators are also selling virtual goods to the players themselves. This transaction has contested subscription fees as the primary source of revenues for online games. This has given rise to these virtual games. [10]
Online Gaming Subscriptions
Gaming has taken a step towards becoming a new media platform through online services that allow for gamers from all over the world to converge and communicate with one another. Microsoft's Xbox Live service is one of the online services that gamers use everyday on their Xbox 360 home console. Through this service gamers are able to communicate with their friends while they game. Microsoft charges for this service, there is a yearly gold account price of $59.99, three month for $24.99 and one month for $9.99. [11] This online services has shown to be very successful with over 10 million subscribers strong and still going. [12] Gamers can also download expansion packs to the games they previously purchase, this is also a very strong driving force in sales within the Xbox Live service. Some games like Call of Duty are played daily by over a million subscribers. [13] The Xbox Live online gaming service has proved to be extremely lucrative for Microsoft because of the all-in-one package it offers; online gaming, Netflix, Facebook, and other services. [14]
Down-loadable Content
Another form of a virtual good is down-loadable content. This good is mostly found in the video game industry. Currently, it is a very popular trend for publishers to release a video game and a month or two down the road, release an expansion to the story or an extra map pack for the video game in the form of online content, which has to be downloaded into the console. This trend has been so popular because it extends the life of the video game, hence, more sales. A popular western themed game, Red Dead Redemption, got a second life due to its expansion release, between the original and the down-loadable expansion, the game had a total of 8 million copies shipped. [15]
How does New Media affects the Economies?
Most people in the world are now depending on the computer and visiting different websites. Among those websites, there are a lot of people visiting social network sites as their daily stops. That gives business a great opportunity to earn more money, because they can advertising on that social network sites, also it is easier for them to target their customers. However, because of the economic downturn, there were some slightly changes to social networks usage.
According to that graph, 25% of US small businesses plan on spending more, 33% plan on continuing their current spending, and only 5% are planning on spending less. Though companies are trying to cut budgets and costs in order to save some money during these tumultuous times. Also, privacy seems a big issue around the social network sites.
As in this finding result, there are 81% of people allow anyone on their network to see their recent activities,which is extremely high percentage.This way keeps all people virtually in touch, which in some way people may not have been able to meet in the real world, also in reality we are seeing mored products go out into the market place. In addition, social networking sites give a new place for people to advertise and inform people about their product. Therefore, once social networking sites help businesses grow, will also help the economic of that country.
