Bargaining Power of Buyers (Customers) High/Medium/Low
1. 49% of consumers claim that they depend on influencer recommendations on social media to inform their purchasing decision. This means that many consumers need recommendations from influencers to feel confident about purchases, making them dependent on social media. (Low)
2. Customers can choose to go directly to a brand’s website to order products instead of finding products/brands through social media, bypassing the need for social media altogether. (Medium)
3. Due to Covid related lockdowns and fears of contagion, many users were forced to replace in-person socialization with social media alternatives. Even though these concerns are now beginning to ease, it is expected that the new users will remain active on these platforms. (Low)
Bargaining Power of Suppliers High/Medium/Low
1. If brands want to reach a younger audience, than they have little recourse but to utilize social media. More than half (56%) of the age group 18-34 uses four or more social media services daily. (Low)
2. It is unlikely that a brand will connect with adults 45+ via social content: fewer than 20% of social media users age 45-54 follow brands. These gives content suppliers little incentive to create social media content if they wish to attract an older audience. (High)
3. Most social media users are posting personal content rather than interacting with brands. Only about a quarter of users like or follow brands, fewer visit brands’ social sites. While this type of activity benefits users, it does little to incentivize brands to create social media content. (Medium)
Threat of Substitutes High/Medium/Low
1. There is a great deal of ad-free content and services online that users can enjoy instead of spending time on social media, including informational sites, user posted content, and communication services like email. For example, 90% of online activity is used for email, and while only 73% is used for social media. (High)
2. Users can spend time watching paid video streaming services like Netflix, Hulu, or Amazon Prime instead of spending time on Social Media. Users can also frequent paid audio streaming services like Pandora or Spotify. Paid audio streaming alone accounts for 56% of online activity. (High)
3. Online shopping is an activity that users can enjoy instead of spending time on social media. According to Statista, 72% of internet users spend their time online shopping. (High)
Threat of New Entrants High/Medium/Low
1. Starting a new social media platform requires a significant financial investment. Entrants have to finance many different technological infrastructures, including: web hosting, backend software development, frontend UI/UX design, data storage, security, and software testing. There is also a large human resource cost to maintain a social media platform and continual costs related to data, security, and ongoing development. These substantial costs will make it difficult for new entrants to enter the market. (Low)
2. Social Media creates value for users by allowing them to connect with other users digitally, as such users tend to flock to sites that already have the largest number of users, as this gives them the most value for their interaction. This makes it increasingly difficult for entrants to establish themselves in the market as they must lure users away from existing platforms that already have large userbases. (Low)
3. There is generally nothing inherently proprietary about social media platforms. In theory, any entrant could code a new social media platform that resembles the function of current offerings. The algorithms used by social media platforms that aggregate content to recommend to users are typically proprietary, however similar results could be achieved by coding new algorithms or even using open-source options. (High)
Intensity of Industry/Competitive Rivalry High/Medium/Low
1. The Social Media industry is dominated by a number of notable giants, including: Facebook (who also own Instagram and WhatsApp), Twitter, TikTok, YouTube, Snapchat, and Reddit. These large players are constantly battling each other for the attention of users, and thus the potential ad revenue. (High)
2. New entrants like Parlor, Caffeine, or Houseparty also battle to attract users away from the dominate giants. It becomes increasingly difficult to grow social media user bases as users are very hesitant to leave established platforms that are already well populated. Entrants must use clever strategies and research to find unmet needs in this crowded market. (High)
3. Even through the giant players battle for the attention of users, they do so by offering different specialties. For each particular category, there is typically only one dominate offering, for example one dominate image sharing site, one dominate video sharing site, one dominate conference call platform, and so forth. In this manner, there is very little competition between the giant social media platforms, as each has its own USP to attract users and meet their needs. (Low)
