Here is an interesting article from the Washington Post describing the strategic use of cheap social media advertising by distressed businesses recovering from Hurricane Sandy. Faced with significant damages, lost revenue, and a local economy recovering from the devastation caused by Sandy, the owners of a small dessert business have embraced social media as a lifeline, allowing them to aggressively market their goods, increase their businesses reputation, and establish personal connections with consumers thereby increasing customer loyalty. Advertising through social media can be cheap, effective, and informative not only for the consumer but for the advertiser as well. Direct and measurable responses by the consumers can help advertisers understand consumer preferences and how to appeal to them.
As the most recent industrial revolution, the information age, continues to progress, consumers are beginning to spend more and more time on social media websites: Twitter, Facebook, Myspace; businesses have taken note. To advertise effectively it is imperative to place ads where the consumer goes. Consequently we have seen a rapid and growing increase in social media marketing and advertising. Economically, how will this benefit consumers? Will it lower the cost of goods or increase the cost of goods? How will this affect the business models of firms and the costs they dedicate towards advertising? Will social media advertising be more persuasive or informative?
It is important not only to consider things from the business side. With these websites being social in nature, discourse between consumers and producers is inevitable. Customers will have a direct response to a producers advertisements and goods. Moreover, these responses are public and available for other consumers to see. This increased communication between consumers could result in increased elasticity of the demand curve for firms. Alternatively, social pressures could increase perceived quality differentiation between products thereby decrease the elasticity of the demand curve for firms resulting in higher prices for consumers.