The Attention Economy: Understanding The Business & Currency Of Social Media

18 April 2023 |
Episode 13 |
23:06

Episode summary

Ever wondered how social media companies make money? In this episode, I explain what the attention economy is, how it works, and why you’re the product, not the customer, when it comes to social media. I explore the business models that social media companies use to profit from your time, attention, and data, and why it’s so important for them to keep you online, even when it’s not in your best interests. I also examine why social media platforms adopt the same features and the reason you should be wary of their intentions.
 

Episode notes

In this episode, I talk about:

  • The birth of social media and how social media platforms are exponentially evolving
  • Why social media platforms are a popular startup idea, despite huge competition
  • The reason social media platforms are all launching similar features
  • The attention economy aka the economy of distraction aka surveillance capitalism aka how social media platforms make their money
  • The value of your time, attention, and behavioural data to social media platforms and the companies that advertise with them
  • The reason social media users are products and not customers
  • Why social media companies prioritise features that make you use their platforms for long periods of time, even if this is against your best interests
  • The rise in social media subscription options and why this operating model might be preferable for both social media companies and users

 

Episode transcript

Expand to read a transcript of this episode

[00:00:34] Hey guys, welcome back to The Digital Diet Podcast. I hope you’re well and that you’re having a great day. As I’m recording this, I’m just getting to the tail end of a bout of sinusitis. I’m a little congested and my head’s a little foggy still, so I’m gonna apologise in advance for how nasal I probably sound. And thank you for listening, in spite of it!

[00:00:58] It’s a short one today anyway, so your ears won’t have to suffer for too long, and what I have to share is way more important than how I sound. At least that’s what I told myself this morning as motivation to get on the mic, even though I’m feeling a bit under the weather.

[00:01:14] If you’ve listened to the last couple of episodes, then you’ll know that I’ve been a busy bee lately. I’ve been preparing to launch my first ever group coaching programme. It’s all focused around the subject of social media, so I’ve had my head in anything and everything related to social media, and how it impacts our wellbeing.

[00:01:35] Last week, I shared the story of UK YouTuber, rapper, boxer, and entrepreneur KSI, and how recent controversy surrounding some comments that he made in a now deleted YouTube video showcases some of the worst parts of the social media experience. And I’ll link the episode in the show notes, in case you haven’t had a chance to listen yet.

[00:01:58] But what I want to do today and over the next, I want to say, six weeks or so, is really go deep into the social media experience with you and unpick what’s happening, why it’s happening, and also share some tips so that you can navigate social media in such a way that it doesn’t negatively affect any aspect of your life.

[00:02:20] When I tell people that I’m a digital wellness coach, I would say that around 80-90% of the time, the first thing that people want to ask me about is social media. Most of the time, it’s their own social media habits. But sometimes it’s about how their partner’s social media use is driving them up the wall and affecting their relationship. Or how they’re worried about how much time their kids are spending online, and what they might be doing while they’re there.

[00:02:50] And when you think about how much time most of us spend on social media, this isn’t really surprising. We’re rapidly approaching the point where the number of people who can remember a time before social media will be smaller than the number of people who’ve grown up with it natively. And if, like me, you’re old enough to remember a time before social media, then you also won’t have failed to notice that the number of social media platforms has exponentially increased in the last 20 years.

[00:03:21] And the speed with which these platforms keep making changes and rolling out new features is much greater than it has been at any other time. Going from 0 to 100 like this means that there’s a lot to unpack, and that’s why I’m going to be breaking this down over multiple episodes. Because otherwise we’d be here for hours and, ironically, probably feel completely overwhelmed and overloaded by it all.

[00:03:46] In fact, I’m almost certain that by the time I get to the end of exploring this topic with you, something significant will have changed in the social media landscape. Things are changing that fast. So I’m sure this won’t be the last time that we touch on social media either, but we can at least start at the beginning and go from there.

[00:04:06] A sensible beginning seems to be why there are so many social media platforms in the first place, and why they’re all vying so hard for your attention. There are of course some stalwarts, like Facebook, Instagram, YouTube, Pinterest, Twitter. And these have all seemingly been around forever at this point.

[00:04:27] There’s been some casualties, like Google+, MySpace, and Vine. But there are also constantly new arrivals that quickly gain popularity, such as the likes of TikTok, BeReal, and Clubhouse. They’ve all got their quirks; so Instagram initially focused on pictures, YouTube on video, Twitter had a character limit, and Facebook was really about connecting you with your friends.

[00:04:54] But as more apps have arrived on the scene and competition has heated up, they’ve all started to copy each other by launching their own versions of the same features. Short, looping, vertical videos is a prime example of this. Can anyone really tell the difference between a TikTok, an Instagram Reel, a Snap, and a YouTube Short? Of course not, because they’re all variations on the same theme.

[00:05:21] Now, if you were looking to launch a new business, on the surface of it, you’d probably think that launching a new social media app was a bad idea. The social media landscape is crowded and seemingly saturated, and there’s very little differentiation between the various platforms these days. As I said, they’re all copying each other’s features.

[00:05:42] So you’d think that it would be super hard to launch something new, and gain users and gain traction, and ultimately be successful in the social media space. So why do we keep seeing new platforms pop up? How are the older platforms managing to sustain themselves financially? How has Mark Zuckerberg amassed a net worth of $79B? And why did Elon Musk just pay $44B for Twitter?

[00:06:09] It’s time to talk about the attention economy. And this is probably a good point to say that you might hear it referred to as either the economy of distraction, or sometimes surveillance capitalism, but they’re all the same thing. And I’m going to use the term attention economy for consistency, but just in case you stumble across one of the other terms, then at least you’ll know what they’re talking about.

[00:06:32] The attention economy describes a business market where companies compete for users’ time and attention, because this is how they make their money, and this is the type of market that social media platforms are operating in. Attention economy companies operate under a business model that prioritises keeping their users active on their platforms for extended periods of time. The longer a user remains active and engaged on a platform, the more opportunities there are to firstly, gather behavioural insight data about that user, and secondly, to expose them to advertising.

[00:07:08] And this is why the attention economy is sometimes referred to as surveillance capitalism, because social media companies are literally capitalising and making money from their ability to survey and track your behaviour on their platforms, at an individual level. Now, for the most part, we don’t pay for these platforms, at least not for the very basic features on the most basic accounts.

[00:07:31] In fact, when Facebook first launched and everyone was very excited about the platform being free and there was no advertising at all, there was a healthy dose of skepticism about how long it would be before they started charging users. Because they’d raised a lot of investment and they didn’t seem to have a clear plan for how they were going to make money, if it wasn’t by charging a subscription fee. But clearly this is not the way that things went.

[00:07:56] When a social media platform has a large number of active and engaged users, they have a lot of data about those users. Not just the information that you handed over voluntarily when you completed your profile. So things like your name, your age, location, your level of education, your job title, the company you work for, but also behavioural information that they acquire from tracking what you’re doing while you’re on their platform.

[00:08:26] They know what you like and what you don’t like by the groups that you join, the pages and the accounts that you follow, and they know what type of content you’re most likely to respond to based on your historical actions. So the types of videos that you watched all the way to the end, the photos that you’ve liked or commented under, and the posts that you’ve shared with your connections or on your own profile.

[00:08:49] And because they have all this information about how you’ve behaved in the past, they can start to make fairly accurate predictions about how you’re likely to behave in the future, and what you’re likely to respond well to. This makes the platform attractive to advertisers, who are willing to pay a premium price to target ads at specific users. So users who are most active on the platform, and therefore most likely to be exposed to ads, as well as those who are also predicted to exhibit their desired behaviours, like making a purchase of those products and services that are being advertised.

[00:09:25] So, under this model, you, the user, are not the customer. You’re a product. It’s your attention and your data which is being monetised and sold, effectively becoming a form of currency. The customers of attention economy businesses, like social media platforms, are therefore the advertisers, because it’s their payment for your attention that generates the social media company’s revenue.

[00:09:51] Now, you might be alright with this, at least on the surface of things. I mean, what’s a couple of adverts or sponsored posts every now and again, if it means that you don’t have to pay for Instagram or TikTok, right? Well, there are actually quite a few problems with this, and we’ll be getting into them over the course of the next few episodes, but the main one for today is this…

[00:10:14] Because of this business model, social media companies have a really strong financial incentive to keep you repeatedly engaged with their platforms for prolonged periods of time, regardless of whether this is in your best interests or not. So, you might be thinking that you probably spend too much time watching back to back YouTube videos. Or that your partner isn’t paying you enough attention, because they’re always scrolling through Instagram. Or be concerned that your kids aren’t keeping up with their homework, because they’re too busy recording TikTok dances or makeup tutorials. But the social media platforms don’t see this as a bad thing.

[00:10:51] This is exactly what they want. And here’s the kicker. Obviously, there are only a certain number of hours in a day. In that time, aside from being on social media, you probably also have a job or studying that you need to do. You need to eat, you need to wash, you might have parental or household responsibilities, there’s life admin. I could go on, but you get the picture. Your time is finite and so is your attention.

[00:11:21] So social media platforms are constantly competing for your attention, both against each other, and against other sources of distraction in your life, including entertainment platforms like the TV, or Netflix, or gaming consoles like the Xbox. So this, at least partly, explains why the social media platforms are all copying each other’s features. If vertical video is hot and it’s where everyone is putting their attention, then the platform needs to bring out vertical video features stat, if they’re going to have any chance of competing.

[00:11:54] But it runs much deeper than this. This business model and this competition for your attention has led these businesses to increasingly prioritise features that might cause you to become addicted to their products or platforms, which raises a number of ethical considerations.

[00:12:11] Now, I’m going to dedicate a whole episode to what these features are, and how they work, and why they work, as part of this series on social media. So if you haven’t already, then make sure you subscribe to the podcast, on whatever platform you’re listening on, so that you don’t miss any of those episodes.

[00:12:29] To round out today, I’m going to walk you through a little example so that you can see what I mean, and that will set you up for this week’s challenge too. That example is YouTube. YouTube operates in the attention economy and it’s actually one of the few platforms that shares its revenue with content creators, which is why you mostly hear stories about YouTubers making crazy amounts of money and that being a full-time career.

[00:12:55] We’re not going to focus on that today, but we are going to focus on how YouTube itself makes money. And it does this in several ways, maximising its earnings through design features that encourage you to spend as much time on the platform as possible. I don’t know if you’ve ever tried to watch just one YouTube video? It’s next to impossible. So, here’s what’s going on under the hood.

[00:13:19] YouTube earns most of its revenue through advertising. It embeds ads into the video clips that creators upload, and these ads play automatically either before the video clips start, or they interrupt you when you’re in the middle of watching a video clip. It’s pretty annoying, actually. If you’ve ever tried, then you might have noticed that, unlike on other platforms where you can just scroll past ads, on YouTube you can’t skip an ad until certain conditions are met.

[00:13:46] For example, three ads need to play back to back in a row, or 10 seconds need to pass, after which time a “skip ad” button will activate and you click it and move on. So, unless you went to make a quick cup of tea or grab a snack, you’ll have watched all these adverts. Most of the time, if the advertiser got the targeting right, they’ll be related to the video that you’re about to watch. So, think cosmetic ads on beauty videos, or investing ads on finance videos.

[00:14:15] And when you’ve finished watching, the autoplay function, which automatically kick starts a related video, kicks in. Which is why I said it’s almost impossible to watch just one video. Because most people don’t realise that you can now turn this autoplay function off, and they have it on by default. The goal in automatically launching the next video is to encourage you to stay on the platform for even longer, so that you can be served even more ads. So by now, you’re starting to get how these features work.

[00:14:47] Now, YouTube ads are delivered through Google’s AdWords platform, where the advertisers bid against each other for visibility of their ads. This bidding process is blind, so advertisers can’t see what price their competitors are bidding for a particular spot, which encourages them to place higher bids to increase their chances of winning the bid and getting their ad shown. This means that there may be times when there aren’t even any, or many, competitors at all. But because advertisers don’t know that, they’re making artificially high bids. YouTube makes money based on ad views and so this bidding process makes the cost per view much higher.

[00:15:27] For sponsored videos, which are regular videos that a brand or creator has paid to promote, higher bids will also give the advertiser more prominence in the search results where these sponsored videos tend to appear. Advertisers pay YouTube whenever you click on a sponsored video, which is known as a cost per click or CPC model.

[00:15:48] So, there are ads before the video that you want to watch, ads in the middle of the video that you’re watching, and sponsored videos in the search results when you’re looking for a specific video. You’d think that that would be enough, but YouTube’s homepage also contains space for banner ads that generate revenue under the same cost per click model as sponsored videos. And placement of these banner ads at the top of the homepage, which doesn’t require you to log in, is another feature designed to maximise views and clicks for revenue.

[00:16:20] Now, this has been YouTube’s model for ages. And it’s worked well for them as a company, as well as for all of the active content creators who’ve received a share of that ad revenue for ads that have run on their videos. But as I mentioned earlier, competition for your attention is fierce. And that’s why YouTube continues to try to push YouTube Premium, a subscription that will make your YouTube experience ad free and give you access to premium features and exclusive content for a fixed monthly fee.

[00:16:51] It hopes that these things, so no adverts, premium features, and exclusive content, will make you want to spend more time on YouTube than on other platforms. And I swear, I get a pop up offering me a free trial almost every time I use YouTube. So, they’re clearly not registering my behaviour when I repeatedly click “skip free trial,” and they don’t realise that it’s a hard no to that service from me.

[00:17:15] In my opinion, and it’s an opinion shared by a lot of more vocal people on the internet, it’s not worth it. I’ve been using YouTube for years with ads. At one time I was a YouTube content producer, and I get a strange bit of comfort from knowing that some of the advertising revenue goes to the content creators who own the YouTube channels that I watch. Especially as it’s not an insignificant amount of money for some of them, when you add it all up.

[00:17:45] But YouTube are going to keep pushing the subscription model, and not for the first time. There was previously YouTube Red, which was a short lived paid subscription service very similar to the Netflixes, the Disney+, and the Amazon Prime videos of this world. And there’s also YouTube Music Premium, which is Google’s answer to Spotify and Apple Music.

[00:18:07] With all that advertising revenue, you might be asking yourself why they’re bothering to push it. And the simple answer is that subscription services provide businesses with predictable, recurrent revenue. Something that the advertising model, as great as it is, will never be able to provide. It’s the same reason that Elon Musk is now charging users for the blue tick of verification on Twitter. Predictable, recurrent revenue.

[00:18:34] Now, I’m not Mystic Meg, but I think we’re going to start to see this a lot more from social media platforms. I don’t think they’ll do away with the advertising models completely, but I can see them playing both sides by offering you a way to avoid the adverts if you’re willing to pay them for the pleasure, because your money would be replacing all of that lost advertising revenue. We’re even seeing some companies in the attention economy go the other way.

[00:19:01] When people started complaining about hikes in Netflix’s pricing, their answer was to offer you a cheaper subscription option, with adverts. So I can definitely see these two revenue models operating side by side in future, which I guess at the very least gives you some degree of agency and choice over your social media experience.

[00:19:22] So, that’s just one example of how committed social media platforms are to capturing your time and attention, and the many ways that they can monetise it. And you can clearly see that the key to these models being financially successful is finding ways to keep you on the platform.

[00:19:39] We’re going to be diving deeper into the specific features these platforms include and why they’re so effective at keeping you online next week. So ahead of that, your challenge for this week is to play social media detective. And no, I’m not asking you to social stalk your latest Bumble match to find out their life history.

[00:19:58] I’m challenging you to pay really close attention, when you’re on social media this week, to all the ways in which they’re trying to keep you on the platform, and all the ways that they’re making money from the time that you spend there. We’ve all told ourselves that we’re only going online for five minutes and still found ourselves there several hours later. So, pay really close attention to what you’re spending your time doing on social media.

[00:20:24] Are you making your own posts? Are you watching other people’s videos? Are you reading the comments beneath posts? How are you spending your time? And while you’re there, how many adverts do you see? There’ll be some really obvious ones like the banner ads on YouTube, but watch out for the more subtle ones too. The posts in your Instagram feed that come from people that you don’t follow, but still seem to be the kind of content that you like.

[00:20:51] How often are these adverts inserted into, and interrupting, your experience? And do you notice anything about the types of ads that you see? Are they always for the same things, or the same genre of things, or are they different? Really pay close attention this week to what you’re doing and what you’re seeing. It’s a pretty easy challenge this week because you don’t actually have to do anything extra outside of your normal routine or change up your routine, but you’ll be surprised at what you notice when you do it.

[00:21:22] The place to let me know what your detective skills have spotted is The Digital Diet Lounge, our dedicated community space for all things digital wellness. If you haven’t been there before, then come and join us, it’s completely free. I’ll put a link to the space in the show notes. There’s a specific room for the podcast and that’s where we can chat about this challenge, and you can connect with any other listeners that are taking part.

[00:21:44] As usual, the show notes for today’s episode can be found over on my website at thedigitaldietcoach.com/013, and that’s also where you’ll find links to everything that we’ve talked about today. That’s it for this week’s episode. I hope that you’ve enjoyed it and that I’ve helped to demystify the business of social media a little bit.

[00:22:06] There’s a lot more juicy stuff to come as we continue to go deeper into how social media affects your wellbeing, so make sure that you subscribe, or follow, or whatever the button says on the platform that you’re listening on, so that you don’t miss a thing. I know you’re busy and your time is incredibly valuable. So, as always, I thank you for choosing to spend a little of your day with me, and I’ll see you next time.

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Marisha Pink

Meet Marisha

Marisha Pink is a Certified Digital Wellness Coach who is on a mission to empower women everywhere to live life more intentionally in an age of digital distractions. She helps women create healthier digital habits that better balance the technology in their lives, so that they can take back control of their time, reclaim their happiness, and live their best lives offline.

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