If you’ve ever wondered how some free services generate revenue, the answer is by selling attention.
Google & Facebook have been deemed the most powerful companies in the world today, and it’s not because of their profits, or financials. It’s because of the amount of information they hold.
It’s difficult to fathom the amount of information these two companies collect on us. From our specific daily habits to our likes and dislikes, they know us with immense accuracy—sometimes without us even knowing it.
Whether this collection of data is a good or a bad thing is another topic for discussion. I’m more interested in why information on us is so valuable to companies.
In a nutshell, companies collect information on people to improve processes to conduct business with us.
Sometimes our data is used to produce specific advertisements to likely prospective customers. If I knew everything about you, I would be able to know what you want, why you want it, when you want it, how much you’re willing to spend on it, etc. With that info, I can then present you with offers (targeted ads) with greater accuracy.
With big data, this process is done on a larger scale through companies like Facebook and Google. They categorize users by their likes, dislikes, needs, and wants which can then be used as target audiences. The company with the data can then aid other companies—for a fee of course—to better sell their products and services to us.
Did you know that there are companies out there with the sole purpose of gathering information on you? These are called Data Brokers. And it’s a big business. To put it in perspective, Acxiom which is a Data Brokerage company out of San Francisco claimed to have files on 10% of the world’s population with about 1500 pieces of information per consumer.
They earned over $900 million in revenue last year.
Google, which not only collects data but also has a platform that has a lot of users, (active users=attention) is able to understand what you want, and then while you’re using their product, they can sell your attention to other companies who want to sell you stuff. They also use your data on a macro scale to understand societal trends which helps them create successful new products, or invest in the right things. It’s no surprise that more than 80% of Alphabet’s revenue comes from Google ads, which generated $147 billion in revenue in 2020.
This is why tech companies are sometimes valued so high, even before seeing $1 of profit and sometimes before seeing any revenue. Investors are starting to place an actual monetary value on each user because of their attention. This is how valuable attention has become; Large portions of an entire company’s value come from its ability to hold people’s attention.
Similar to how Google generates billions of dollars by selling users (attention), anything else you can think of that also has users/attention has the potential to generate dollars. Celebrities such as Kylie Jenner, Christiano Ronaldo, and Ariana Grande each reportedly make around $1 million per sponsored post on the Instagram platform alone.
Influencers on social media earn money because they have the attention and support of their fans. Generally, when it comes to influencers, whether they’re on YouTube, Instagram, or a Blogger; The more loyal their fanbase, the larger the earning potential. Take Kylie Jenner for example; whether you agree with her or not, millions of women want to be like her, millions of men want to be with her. Millions of people love keeping up with her life and many are even envious. So, when she tells her audience to go buy this makeup which she uses herself, there are a lot of people eager to listen. Her audience is actually more willing to buy what she has to offer than if they were to see a billboard advertisement for that same product. The strongest form of marketing is referral.
When it comes to making money off attention, brands look for two things in a platform: 1. How much does the audience like and trust the platform? And 2. Do other brands’ values and morals align with the platform? Porn websites generate some of the larges numbers of traffic across the web. The problem is, Ford doesn’t want their brand affiliated with a porn website. So not all attention is equal.
Attract the attention of the masses, or create a platform that attracts plenty of attention (users), and you will have money thrown at your feet.
“When an online service is free, you’re not the customer. You’re the product.”