IS3183 - Study Guide

Management and social media
C. Alaimo, J. Kallinikos
IS3183
2017
Undergraduate study in
Economics, Management,
Finance and the Social Sciences
This subject guide is for a 300 course offered as part of the University of London
International Programmes in Economics, Management, Finance and the Social
Sciences. This is equivalent to Level 6 within the Framework for Higher Education
Qualifications in England, Wales and Northern Ireland (FHEQ).
For more information about the University of London International Programmes
undergraduate study in Economics, Management, Finance and the Social Sciences,
see: www.londoninternational.ac.uk
This guide was prepared for the University of London International Programmes by:
Dr C. Alaimo, Lecturer in Digital Economy, University of Surrey
and
Professor J. Kallinikos, Professor of Information Systems, The London School of Economics and
Political Science
This is one of a series of subject guides published by the University. We regret that due
to pressure of work the authors are unable to enter into any correspondence relating to,
or arising from, the guide. If you have any comments on this subject guide, favourable or
unfavourable, please use the form at the back of this guide.
University of London International Programmes

Publications Office
Stewart House
32 Russell Square
London WC1B 5DN
United Kingdom
www.londoninternational.ac.uk
Published by: University of London

© University of London 2017
The University of London asserts copyright over all material in this subject guide except where
otherwise indicated. All rights reserved. No part of this work may be reproduced in any form,
or by any means, without permission in writing from the publisher. We make every effort to
respect copyright. If you think we have inadvertently used your copyright material, please let
us know.
Contents
Contents
Chapter 1: Introduction .......................................................................................... 1

1.1 Route map to the guide............................................................................................ 1
1.2 Introduction to the subject area................................................................................ 2
1.3 Syllabus.................................................................................................................... 9
1.4 Aims of the course.................................................................................................... 9
1.5 Learning outcomes................................................................................................. 10
1.6 Structure of the guide............................................................................................. 10
1.7 Overview of learning resources............................................................................... 13
1.8 Online study resources............................................................................................ 16
1.9 Examination advice................................................................................................ 18
Chapter 2: Social media........................................................................................ 21
2.1 Introduction .......................................................................................................... 21
2.2 Social networking sites (SNS).................................................................................. 23
2.3 Social media platforms (SMP)................................................................................. 23
2.4 Types of social media.............................................................................................. 25
2.5 Conclusions............................................................................................................ 30
2.6 Reminder of learning outcomes.............................................................................. 31
2.7 Test your knowledge and understanding ................................................................ 31
Chapter 3: The internet ecosystem and the development of social media........... 33
3.1 Introduction .......................................................................................................... 33
3.2 Social media platforms and the internet.................................................................. 34
3.3 The internet communication protocol suite.............................................................. 35
3.4 The end-to-end architecture of the internet............................................................. 37
3.5 Web 2.0 and the advent of social media sites.......................................................... 39
3.6 Statistics and figures............................................................................................... 41
3.7 Conclusions............................................................................................................ 41
3. 8 Reminder of learning outcomes.............................................................................. 42
Chapter 4: Social media as multisided platforms................................................. 43
4.1 Introduction .......................................................................................................... 43
4.2 Introducing digital platforms................................................................................... 44
4.3 Defining digital platforms....................................................................................... 45
4.4 Network effects and the dynamics of multisided platforms...................................... 47
4.5 Network dynamics in social media ......................................................................... 49
4.6 Conclusions............................................................................................................ 51
Chapter 5: The structure of platform participation............................................... 53
5.1 Introduction .......................................................................................................... 53
5.2 Platform participation............................................................................................. 54
5.3 Encoding user participation .................................................................................... 55
5.4 Social data ............................................................................................................ 57
5.5 User-generated content and social data ................................................................. 58
5.6 Core and peripheral interactions............................................................................. 60
i
IS3183 Management and social media
5.7 Conclusions............................................................................................................ 62
5.9 Test your knowledge and understanding................................................................. 62
Chapter 6: From social data to measures.............................................................. 63
6.1 Introduction........................................................................................................... 63
6.2 Disaggregation into data........................................................................................ 64
6.3 Data aggregation................................................................................................... 64
6.4 Social data as units of measures: establishing a common denominator.................... 66
6.5 Similarity, popularity and trending: measuring shopping.......................................... 68
6.6 Conclusions............................................................................................................ 71
Chapter 7: Platforms and value creation............................................................... 73
7.1 Introduction .......................................................................................................... 73
7.2 Multisided platforms and social media.................................................................... 75
7.3 Markets, organisations and platforms...................................................................... 76
7.4 The value creation process...................................................................................... 77
7.5 Conclusions............................................................................................................ 80
Chapter 8: Business models and social media platforms...................................... 81
8.1 Introduction........................................................................................................... 81
8.2 The concept of the business model ......................................................................... 83
8.3 Types of business models........................................................................................ 84
8.4 Business models, social media and the digital economy........................................... 87
8.5 Conclusions............................................................................................................ 88
Chapter 9: Creating value for business ................................................................ 91
9.1 Introduction........................................................................................................... 91
9.2 Social media and value creation.............................................................................. 93
9.3 Value for advertisers: audience-making................................................................... 93
9.4 The data internet ecosystem and social media......................................................... 96
9.5 Value for non-digital natives................................................................................... 99
9.6 Conclusions.......................................................................................................... 100
9.7 Reminder of learning outcomes ........................................................................... 100
9.8 Test your knowledge and understanding............................................................... 101
Chapter 10: Creating value for users.................................................................. 103
10.1 Introduction ...................................................................................................... 103
10.2 Value creation for users...................................................................................... 104
10.3 The case of Last.fm............................................................................................. 105
10.4 A web of APIs..................................................................................................... 107
10.5 From mass-customisation to personalisation....................................................... 108
10.6 Forms of user involvement and value.................................................................. 109
10.7 Conclusions........................................................................................................ 111
10.8 Reminder of learning outcomes.......................................................................... 112
10.9 Test your knowledge and understanding............................................................. 112
ii
Contents
Chapter 11: Digital innovation and social media platforms:

roadmap to the future......................................................................................... 113
11.1 Introduction....................................................................................................... 113
11.2 At the frontiers of innovation.............................................................................. 114
11.3 A mixed reality................................................................................................... 116
11.4 The sharing economy: crowd-based capitalism or data-based capitalism?............ 118
11.5 Conclusions........................................................................................................ 120
11.7 Test your knowledge and understanding............................................................. 121
Chapter 12: Conclusions...................................................................................... 123
12.1 Introduction....................................................................................................... 123
12.2 Summary of the subject guide............................................................................. 124
iii
Notes
iv
Chapter 1: Introduction
1.1 Route map to the guide

This is the subject guide for the course IS3183 Management and
social media. This guide forms the core resource of your study for the
course helping you to analyse and deal with the complexities of social
media from the point of view of management. It is important that you use
this guide to build your own understanding of the course and its main
topics. As a learner, you should take an active role and engage with the
material presented in a systematic and constructive manner.
Social media platforms or sites play a major role in the path-breaking
changes signified by the diffusion of digital platforms, such as eBay or
OpenTable, whereby different parties are able to transact with one another
and exchange goods and services. Social media are key actors in the
current digital economy that is increasingly shaped by the ways digital
platforms create and distribute value. At the same time, they develop
and expand the ways digital platforms work through the crucial role user
platform participation assumes, the implementation of novel technological
solutions for capturing and processing data and the development of new
business models.
This guide requires you to take a critical approach to social media
management. By a critical approach, we mean an approach that moves
beyond the trivial and evident, seeking to understand the core operations
that shape social media as both media outlets and business organisations.
You will not find in here a quick course on how to build an online social
media presence or step-by-step guide on how to use social media data
analytics. This guide takes another route to learning: it engages and it
requires you to engage with core concepts and theories that explain the
functioning logic of social media and the ways social media platforms
create and monetise value.
We have prepared for you a list of Essential and Further readings
that cover all the topics and concepts presented in this guide. However,
you will find that almost every chapter of the guide also has a section
of References cited that you can use to pick additional material and
resources that straightforwardly relate to the topics of the chapter.
To help you engage actively with the topics we present in this guide we
have created a number of Activities for you to undertake. Such activities
vary from writing short essays on a topic or on a paper to checking online
a social media company and answering questions related to it. Some other
chapters contain Boxes with specific short case studies or definitions that
help you quickly grasp unfamiliar concepts or just provide examples that
ground your learning. We have tried also to help you visually by including
a number of Tables which may work as quick ways of summarising a
topic or as means for retaining the most relevant information on a specific
topic or approach. At the end of each chapter a number of questions under
the Test your knowledge and understanding heading aim to help
you check your own understanding of the main topic of each chapter. Try
them out! Sometimes you need to engage with the material presented in
a different and active manner to check if you really have understood the
main points it conveys.
1
This guide is divided into two main parts and 12 chapters. The first
part includes this introductory chapter and five other chapters, that is,
Chapters 2 to 6. It provides the foundations of the course – that is to say,
key concepts and frameworks that describe the fundamental operations on
the basis of which social media platforms are sustained as socio-technical
entities. The second part consists of the rest of the guide and includes
Chapters 7 to 12. This part addresses more straightforwardly the economic
context in which social media platforms operate as business organisations,
and the means and practices by which they create value for platform
owners, advertisers, other third parties and users. It concludes with
Chapter 12 that offers an overview of the guide.
The subject guide aims to:
• provide a framework for the study of the subject
• introduce you to the relevant subject material
• present the material in a structured and digestible format
• guide you towards appropriate learning resources
• encourage you to take an active approach to learning by reading
recommended material, undertaking learning activities and
participating in discussion via the virtual learning environment (VLE).
1.2 Introduction to the subject area

IS3183 Management and social media is a Level 3 course offered
on the Management and Digital Innovation (MDI) programme that is
a BSc component of the Economics, Management, Finance and Social
Sciences (EMFSS) suite of programmes.
This guide is about social media platforms (or social networking sites,
as they are still called sometimes) and the broader context of the digital
economy within which social media operate. Social media are digital
platforms where the production and sharing of information is mostly
based on the participation of large numbers of users. Despite being rooted
in the communal ethos and libertarian rhetoric which characterised the
early internet (e.g. Wikipedia, early YouTube), most social media platforms
operate today as business organisations. The shares of many social media
companies such as LinkedIn, Pinterest or TripAdvisor are traded in Nasdaq
and other stock markets around the world.1 Facebook, which was founded 1
See Team, T. ‘A comparative
in 2004, is the largest and most emblematic of social media corporations, look at the valuation of
Facebook, Twitter and LinkedIn’,
and has grown to become one of the key digital actors of our time – in
www.forbes.com/sites/
fact, a behemoth whose strategies and initiatives shape the development of greatspeculations/2015/10/01/a-
the web and the global digital economy more generally. comparative-look-at-the-
Explaining the pervasive role social media play in the current global digital valuation-of-facebook-twitter-
and-linkedin/#945fdce78cbf
economy is the task of this guide. Social media do not readily conform
with standard views of how to establish and run a business. Little wonder,
as, like most business organisations, social media confront the challenges
of investing in and amassing resources, building up human skills and
competences, producing and trading a range of services and making a
profit. Yet, social media differ from standard organisations in several
respects. The resources which social media rely on are often evasive and
they are variously tied to the encoding into data of daily, diffuse habits
of interaction and communication as these are transacted and carried
out online (Alaimo and Kallinikos 2017; Gerlitz and Helmond 2013; Van
Djick 2013). For this reason, most social media platforms are critically
dependent on the participation of large and active user populations
2
through which they sustain their operations and produce their services.
Users participate in the operations and services of social media in various
ways (see Chapters 5 and 6 in this guide). Their contribution is so critical
that social media are hardly thinkable without a large and active user base.
The challenges of attracting, retaining and expanding a user population
are very different from those confronted by standard organisations and the
ways they address their customers or manage their employees. Users are
neither customers nor employees.
The role of users, we claim, is what distinguishes social media from
standard business organisations. Social media are open, participatory
arrangements in which users engage in communicative exchanges with
one another, as and when they like. Yet, what users do on social media
is not just networking and communicating with one another. As in most
traditional media, the attention of users is of interest to advertisers and, by
implication, to platform owners. But, as we show throughout this guide,
there is more to social media than just the trading of attention that is
characteristic of traditional commercial media (Napoli 2011). As distinct
from traditional media audiences such as readers, viewers or listeners,
social media users generate through their participation content and data.
These are resources of paramount important for the production of services
social media trade in the market. User participation on social media is
in many respects a data and content generation exercise, even though
ordinary users may not be fully aware of this.
Such data and content are tidied, further developed and ‘mashed up’
and, ultimately, traded through the use of various data management
technologies such as database systems, algorithms and machine learning,
and Application Programming Interfaces (APIs), to name but a few.
All these operations, from data procurement to the making of tidy and
tradeable data sets, usually involve several independent stakeholders
including social media owners, users and communities of users as well
as third parties such as advertisers, including political campaigners,
start-ups and entrepreneurs, data brokers and data analytics companies.
In this respect, social media platforms exhibit the kind of multisided
configuration which is diffuse in the digital economy and is often referred
to as platform organisation (see e.g. Gawer 2014; Parker et al. 2016). The
multisidedness of platforms is governed by particular economic rules and
conventions and is subject to distinct dynamics that are worth focusing
on and analysing. It is a key purpose of this guide to show how social
media operations are established as socio-technical entities and function
as business organisations, often adopting and adapting the characteristics
and dynamics of multisided platforms.
Though figuring prominently in the recent literature in economics,
management, media sociology and information systems, the concept of
‘platform’ is far from unambiguous. At the very least, it carries several
connotations. The term has been used to refer to the open and evolving
nature of the socio-technical arrangements through which different parties
interact. Platforms are adaptive settings rather than predetermined and
closed systems. They provide facilities through which actors interact and
shape the services they come to exchange and consume. In contrast to
the rigid apparatuses of standard organisations geared to the production
of, by and large, predetermined products and services, there is something
unfinished in platforms which is being concluded by the very contributions
of platform participants. Wikipedia stands as a prominent example, but
most social media make multiple uses of this fundamental principle
(Kallinikos et al. 2013; Zittrain 2008). In a sense, users participate in the
3
very development of the platform and its offering. Although it may seem
that users embark on social media platforms with no specific plans or
procedures to follow, the types of user actions performed on social media
platforms are the outcome of careful engineering (see Chapters 5 and 6).
Users and platforms constantly evolve, responding to careful planning as
well as to the varied contingencies that inevitably mark interaction and
communication online.
The term ‘platform’ further suggests a heterogeneous and dynamic array
of differentiated and, often, layered components that are tied together
through federated or modular architectures. Modularity is nowadays a
ubiquitous design principle and modular architectures feature components
that are linked with one another through interfaces that allow each
one of them to be developed without immediate regard for the other
components, insofar as interface specifications are followed (Baldwin and
Clark 2000; Baldwin and Woodard 2009; Simon 1969). A typical example
is the relationship between a computer operating system (Windows, iOS,
Android) and the application it hosts. The complex operations through
which apps are developed, certified and traded (Eaton et al. 2015; Tiwana
2014) suggest that modular architectures may support organisational
forms that feature decentralisation and a certain freedom of participation,
within an overall context of loose functional connections (Zittrain 2008).
We analyse modularity as a technical design principle in some detail in
Chapter 3 but also exemplify it throughout this guide.
There are more to platforms, however, than their open, evolving and
modular character. The term platform has recently been deployed to
describe the economic format and rules whereby different parties
interact and exchange goods or services via the facilities provided by a
central coordinator, the platform owner (see e.g. Gawer 2014; Parker et al.
2016; Tiwana 2014). Amazon, eBay and TripAdvisor are typical examples
of digital platforms on which value is a function of the congregation on the
platform of two or more types of participants, such as buyers and sellers
in eBay or Amazon, travellers and hoteliers in TripAdvisor. Economists call
these arrangements ‘two-sided’ or ‘multisided’ platforms to point out the
cross-side dependencies (often called ‘indirect network effects’) whereby
the value to one side is dependent on the size of the other side and vice
versa (Evans and Schmalensee 2016; Shapiro and Varian 1999). eBay and
OpenTable represent typical examples, but the principles apply, with one or
another modification (Chapters 2 and 4), to most social media platforms.
In sum, platforms are complex and multifaceted arrangements with
distinct growth patterns that are very different from the dynamics
characteristic of standard organisations. Social media platforms are a
specific case in point. In this guide, we draw on the concept of platform to
analyse social media as open and evolving organisations made of a great
deal of differentiated components (technologies, functions, systems) and
several types of participants tied together by mutually beneficial relations
or exchanges.
1.2.1 Social media as platforms

Viewed in this light, each social media platform is a complex digital
business ecosystem on its own that brings together a disparate range of
actors that have previously remained unconnected or have been linked to
one another by much less effective technologies and practices. The power
of social media as economic organisations derives from their capacity to
function as hubs that link together platform users, advertisers, aspiring
entrepreneurs, producers, data brokers and also other platforms. They do
4
so in new and innovative ways that ride on the tracking and interactive
functionalities of computing and communication technologies. In this
regard, social media platforms are similar to all digital platforms.
At the same time, social media differ from the broader category of
digital platforms in certain important respects. As indicated above, their
capacity to act as platforms that link various actors together is crucially
contingent on having first secured a large and active user base. Similar
to other standard commercial media (TV, newspapers, radio), social
media organisations depend on how successfully they diffuse across the
population. Unlike standard commercial media, however, the economic
power and market relevance of social media are largely reliant on the
active participation of people in the platforms they command. A large and,
crucially, active user base is a hugely important social media resource. This
is one of the reasons why Facebook is such a powerful economic actor.
User participation is thus key to social media platforms. However, the
dynamics of people’s participation on digital media and the internet more
broadly reflects a wider and longer evolutionary trend that precedes the
diffusion of social media. As Jonathan Zittrain (2008) shows in his much
acclaimed book The future of the internet, the evolution of the internet
has over its relatively brief history been closely associated with steadily
expanding levels of user involvement and participation. Zittrain’s insightful
study demonstrates that the more widely people participate in the internet
the more interesting, innovative and multidimensional the internet seems
to become. On the other hand, these developments, Zittrain claims, require
technical conditions (that is to say, modular and layered architectures) and
socially decentralised solutions that favour bottom-up processes of people’s
participation. We deal with these issues on several occasions in this guide.
It is enough here to say that growing social participation has been an
important trend in the relatively short history of the internet. Wikipedia
and proto-social media companies such as MySpace and Friendster
are useful reminders of how a wider social participation has been and
continues to be essential to the current transformation of the internet and
the rapid diffusion of social media platforms.
People’s participation in the internet has of course gone in tandem with
the diffusion of semantic and Web 2.0 technologies and, crucially, the
advent and diffusion of lightweight digital and wireless devices such
as smartphones, tablets and wearables. The rapid uptake of powerful,
portable devices by large segments of the population across the globe
and the growth of mobile telephony have been important means through
which people could be hooked onto the internet on a nearly permanent
basis. At the same time, the diffusion and increasing sophistication of Web
2.0 technologies has enabled users to perform a much wider range of tasks
than simply accessing a website or completing a buying transaction. As the
technological pathways that led to the internet proliferated and matured,
people have been able to relate to and communicate with others in ways
that have included a larger repertory of moments and daily whereabouts
and various forms of expression. Such developments have been
fundamental in transforming users from passive consumers of predefined
services or broadcast programmes released by centrally controlled systems
(notably television) to active producers of content. Social media platforms
grew out of this expanding entanglement of everyday life with Web 2.0
technologies and lightweight yet potent digital devices (Alaimo and
Kallinikos 2016, 2017; Van Djick 2013).
The ways technologies are linked to one another is never a sheer
engineering issue of linking hardware. The nature of the digital sphere
5
makes software and data standards essential to how data and information
are shared across devices and systems to sustain the developments
we are describing. The programming techniques by which devices are
made interoperable are not the subject of this guide. Yet, how data and
information are standardised and made portable across systems, devices
and platforms have far-reaching social and business implications (Yoo
et al. 2010). For example, in cases such as Netflix or Amazon, the ways
information is standardised into categories (e.g. types or genres of
film) and data items linked to one another critically impact upon what
products and services users can discover on these companies’ websites
and, ultimately, their economic performance. Architecture is thus critical.
Other design choices impact upon standard formats. For example, social
media buttons, such as Facebook’s ‘like’, are important mechanisms for
standardising information. Though it may not be immediately evident,
standardised information provides the cognitive currency for measuring
user involvement, and describing and comparing user behaviour at
several levels (that is, individual users, groups or communities). Through,
for instance, the aggregation of likes, users become measurable and
comparable with one another. Similarly, APIs help overcome differences
in data formats and facilitate the portability of data across information
systems, institutional sources and platforms. These operations are all
critical for the services social media produce and trade.
Other important architectural issues concern the ways users themselves
tag and organise data and information, what are usually referred to as
‘folksonomies’. Such practices of organising and sharing information
posit important challenges for the effective use of data and information.
While we do not deal with the programming technicalities of these issues
in this guide, it is important to understand the link between technical
choices and social systems, technological design and business behaviour.
The challenges confronting social media and the digital economy more
generally requires understanding and dealing with the critical issues of
technological design and architecture and its organisational and business
implications (Weinberger 2007).
1.2.2 Social media and the digital economy

The portrait of social media is never complete without considering the
value creation process and the ways social media platforms trade their
services. In some basic way, social media platforms operate as media
companies in the sense of subsidising user platform participation by
advertising revenues. Yet, as we have already indicated, social media draw
on the tracking and interactive functionalities of digital technologies to
accomplish this objective in novel and interesting ways that often break
away from the past and the ways standard commercial media carried out
these tasks (Napoli 2011).
The services that social media assemble and trade are produced out of the
data footprint of people’s participation in the platforms they command.
Activities, such as liking a photo, playing a track or rating a location, are
usually simply data clicks that are carefully engineered, recorded and
aggregated to construct profiles of people, products and places. In this
regard, social media platforms are data companies and the services they
offer to others, including the platform users themselves, are data-based
services that result from enlisting, counting, aggregating and scoring user
choices. As we show later in this guide (Chapters 5, 6 and 9 and 10), social
media platforms are massive producers of data (usually called social
data) and important actors in the big data economy. Data intermediation,
6
data analytics, information architecture and design are therefore made up

of a compound of interrelating factors that are essential in understanding
the workings of social media and the digital economy more generally.
In order to produce a profit, business models that can monetise data-based
services have to be adopted or developed. Social media certainly extend
the business models of traditional media (the so-called three-party
model, incorporating owners, advertisers and customers), but they also
cross-subsidise services and products. Cross-subsidisation is a delicate
strategy whereby a company prices some of its products or services on
low and occasionally negative margins, or even gives a product away (e.g.
mobile phone/monthly subscription plans), to spur the demand for other
and often more lucrative products/services. The prevalent business models
of the digital economy reveal an intricate orchestration of several products
and services. These are tied together into market offerings through
complex monetary flows in which the cost and benefits of each individual
component are not immediately evident (Anderson 2009; Parker et al.
2016). Google and Facebook are just the most prominent examples of this
complex and delicate orchestration of revenue flows of cross-subsidised
products and services. A constantly growing and variegated business
landscape is emerging as technological developments increasingly support
business models in which products and services can be variously bundled
together. This guide presents and analyses key versions of several of these
models and ties them to the nature of digital goods and, more broadly, the
digital economy (Evans and Schmalensee 2016; Shapiro and Varian 1999).
Understanding the cross-subsidisation strategies of social media requires
exposing the distinct ways by which social media work as multisided
platforms. We have already mentioned that advertising is a major source
of revenue for social media platforms, which, in this regard, continue the
tradition of mass media, trading user attention for money. But social media
audiences differ from those of standard commercial media in a number
of respects. Being data-derived, social media audiences are permutable
(that is, possible to operate upon, scale and adjust to the varying requests
of advertisers – topics we deal with in some detail in several chapters
and above all in Chapter 9). TripAdvisor, for example, can offer travel
and booking agencies and hotel and restaurant chains varying audiences
on the basis of the travelling behaviour of their users and other user
preferences, as these are expressed in reviews and ratings but also in
forum discussions on the platform. In an analogous fashion, LinkedIn can
filter out its user base in a variety of ways that capture education, location,
real work experience, shifts in employment and career trajectories as well
as engagement and social connections on the platform to address requests
from recruitment companies.
These observations lend support to our claim that the digital economy is
substantially a data economy. For this reason, it is important to understand
not simply the mediation of audiences but also the critical role that
actors such as data brokers and data intermediaries play in the internet
data ecosystem. Data brokers and data intermediaries are important
allies to social media platforms with whom they build different types
of partnerships and create a variety of data-based services that are very
characteristic of how the internet and the digital economy currently
operate. Facebook, for example, collaborates with Axciom, one of the
biggest data brokers, that provides lifestyle and other behavioural data
it keeps on populations to qualify, strengthen and variously complement
the profile of audiences, compiled on the basis of Facebook social data.
Advertisers can access these data and use a suite of data management
7
solutions offered by Facebook to deepen their understanding of audience

behaviour and develop ad-hoc strategies better to individuate and target
the distinctive attributes of the audiences they seek to address (for
example, through the use of ‘lookalike audiences’). Furthermore, some of
these data strategies are used as a means of creating value for traditional,
non-digital native firms and organisations. LinkedIn, for example, is
increasingly relied upon by non-digital native firms for talent identification
and recruitment, operations that have traditionally been conducted by
very different means and work methods.
We have mentioned several times the significance which a large and active
user base has for social media platforms. To address this challenge, social
media must steadily produce value for their users to retain and expand
their numbers and, critically, to boost user activity online. As the cases
of Friendster and MySpace demonstrate, users can desert a platform
very quickly and often unpredictably. An important way through which
social media produce value for users is by what is often referred to as
personalisation, whereby a platform uses the data footprint of user activity
to tailor recommendations (such as recommending friends, events or
places) to users. Personalisation is a delicate strategy through which users
are recommended things they may value by having their activities being
related with those of other users with whom they share one or another
affinity. This is how, for instance, Facebook personalises each user’s
newsfeed or Amazon, the transaction of its customers. It is important to
realise that personalisation is a data exercise, accomplished by automated
techniques of data crunching such as recommender systems and, more
generally, machine learning.
Taken together, these ideas are very useful for understanding the paths
along which social media platforms increasingly innovate in tandem
with other actors of the digital economy and along lines that cut across
established business practices and industry boundaries. Combining
different data types and sources, software components and devices
across the offline, online and virtual spheres creates multiple or mixed
realities about which the recent upsurge of Pokémon Go is a poignant
reminder. This, we maintain, is one of the most interesting and compelling
contemporary trends. It is reasonable to expect that similar trends will
be reinforced by the diffusion of the Internet of Things (IoT) and the
mass of data such a development brings about. Towards the end of this
subject guide (Chapter 11), we consider how social media pave the way
for disrupting established institutions, business models and economic
practices by briefly exploring the topic of what is often referred to in the
current literature as the sharing economy, a distinct development of
the digital economy that features sharing, crowd involvement and various
forms of mediated mass collaboration.
These then are the key ideas the course mediates. By reading this subject
guide you will be able to understand the role of social media in the digital
economy and the ways social media engineer social participation in the
platforms they command and trade the data footprint of that participation.
You will be able to link such critical operations with the architectural and
design choices through which data and information are organised and
transported across systems and platform boundaries. Furthermore, you
will be able to understand the distinctive context of the digital economy
and how social media platforms operate as business organisations,
marketing and monetising the value they create. Over the last few years,
we have taught a slightly more advanced version of this course on the
Management Information Systems and Digital Innovation MSc programme
8
in the Department of Management at The London School of Economics

and Political Science (LSE) and we have received hugely enthusiastic
comments from the students and excellent course evaluations. We trust
students of the International Programme will take to the course with equal
interest and enthusiasm.
1.3 Syllabus
The course covers a spectrum of themes that are indicated by the structure
of the subject guide. Here is a snapshot of the key themes covered by the
course:
• A brief history of social media.
• A description of social media as organisations, with special emphasis
on the varieties of social media such as Facebook, Twitter, Instagram,
Pinterest, Last.fm, Spotify, TripAdvisor etc.
• A description of the internet ecosystem, with special emphasis on
the evolution of the internet towards increasing levels of social
participation.
• A detailed account of how social media engineer user participation to
make them the engine of data production on social media.
• The operative logic of social media and the significance data assume in
the making of most services social media deliver.
• A description of the value creation process in ways that break with
the traditional product-centric view of value but also the more recent
understanding of value as user product or service experience.
• An account of the business models pioneered by social media,
including the freemium model exemplified by Spotify, the affiliated
marketing model of social media for shopping, the hybrid model
of Facebook featuring open participation and two-sided markets,
and the new (data) sharing economy of companies exemplified by
organisations such as Uber and Airbnb.
• The assessment of the value creation process of social media, featuring
the generation, shaping and commercialisation of the data produced
on social media.
• A description of how social data are associated with big data.
• Social media as organisations and the use of social media by business
and corporations and public organisations.
1.4 Aims of the course

The course provides an analysis of social media and the broader context
of the digital economy within which social media platforms operate as
business organisations. A key objective of the course is to show how social
media platforms engineer and sustain user participation as a means of
procuring data that are analysed and repackaged to offer services to users
themselves and to third parties. More particularly, the course aims are to:
• analyse how social media contribute to the making of the
contemporary digital, data-based economy
• analyse how social media platforms engineer social participation
• critically assess the role which current computing and communication
technologies play in transforming user platform participation into
revenue-generating services
9
• analyse the types of services social media platforms develop for

platform users and third parties
• evaluate the roles of technical design and information architecture in
the making of the services produced by social media platforms
• analyse the business models pioneered by social media and the ways
these models change business practices
• critically assess the relevance of customisation and personalisation as a
service strategy in the digital economy
• analyse the technical and organisational preconditions of the sharing
economy and the ways this is likely to develop in the immediate future
• investigate the shifting nature of the web and the direction along
which social media take the digital economy and the development of
the internet.
1.5 Learning outcomes

The course analyses the critical role social media platforms play in shaping
the digital economy. Upon completion of the course, you will be able to:
• analyse the technological, social and economic forces that make social
media such ubiquitous and often powerful economic actors
• critically assess the modus operandi of social media and the logic
on the basis of which social media are able to sustain their business
operations
• investigate how user participation online is an essential force through
which social media construct a range of services for third parties and
for users themselves
• link social participation to data production and assess the significance
of data in the making of revenue-generating services
• critically assess the importance of social data (data generated on social
media as the result of user participation) as a distinct and critical form
of big data and an important force of the digital economy
• analyse the development of the internet and appreciate the dominant
role social media play in shaping the ways the web is currently
developing
• critically assess the significance of social interaction and participation
online and the role which active user participation plays in the current
transformation of the web and the digital economy
• evaluate recommender systems in general and personalisation as a
ubiquitous service strategy in particular
• think critically and creatively about the emerging digital world marked
by the presence of social media and the type of services they produce.
1.6 Structure of the guide

In the rest of this introductory chapter we summarise each one of the
chapters of the subject guide.
Chapter 2: Social media

Reviews the two fundamental conceptions of social media as Social
Networking Sites (SNS) and as Social Media Platforms and provides their
corresponding definitions. The chapter also ventures to identify different
types of social media such as networking-based (Facebook), content-based
10
(Instagram) and service-based (TripAdvisor). Such a distinction and the

examples the chapter provides helps us to understand the reach of social
media platforms and the different paths along which they contribute to the
making of the digital economy.
Chapter 3: The internet ecosystem and the development of social

media
Places the understanding of social media within the broader context of the
technical and social innovations brought about through the development
of the internet. The chapter briefly considers the history and evolution of
the internet and web protocols, known as TCP/IP and HTTP respectively. It
also features important design principles such as layering and modularity
that are closely associated with the end-to-end architecture and
decentralised nature of the internet. Taken together, these developments
demonstrate how the internet has grown along lines that have admitted
increasing levels of social participation, a crucial development for
understanding social media. The chapter furthermore provides a brief
history of the origins of social media including such proto-social media
organisations as Friendster and MySpace.
Chapter 4: Social media as multisided platforms

Describes social media as multisided platforms that bring together various
stakeholders such as platform owners, users and communities of users
and third parties such as advertisers, entrepreneurs, start-ups and data
analytic companies. The notion of the multisided platform is often used in
the literature to convey the direct or indirect dependencies that develop
between types of platform participants, and to underscore the fact that
the platform presence of one type of participant is often the precondition
for the participation of the other (e.g. buyers and sellers in eBay). The
chapter further describes how the notion of the multisided market helps
understand social media as complex and layered arrangements (i.e.
platforms) rather than as sheer networking sites.
Chapter 5: The structure of platform participation

Describes the structure of social participation on social media. Users do not
just congregate on social media platforms. Rather, they participate along a
limited number of well-defined activities such as liking, tagging, following
etc. that transform the footprint of user platform engagement into data
that can be smoothly recorded, counted and aggregated. The structure
and typification of user engagement are key to social media platforms.
The chapter delves into the operations of social media by introducing the
distinction between content (pre-packaged content such as video and
music) and data produced via the recording of platform user engagement.
The chapter further discusses the different types of data/content produced
by social media such as user-generated content (comments, photos, video),
sensor data and social data that quantify platform user engagement via the
standardisation of user activities.
Chapter 6: From social data to measures

Analyses how large volumes of data produced on social media platforms
require piling them up into distinct data clusters that allow the inspection,
control and ultimately measurement of user platform engagement.
Essential to this is the typification of user engagement discussed in
Chapter 5 that delivers discreet and standardised data that are possible
to aggregate to different data clusters. Thus clustered, data can be
compared at aggregate levels and various measures produced out of these
11
aggregates. Such measures cast user engagement into new light that can
be of potential interest to a range of stakeholders, from advertisers to data
brokers and data analytics companies. An example from our own research
is given that shows how a social shopping platform uses social data to
measure the degree or force of the intention to buy.
Chapter 7: Platforms and value creation

Reviews the value creation process in social media platforms and
multisided platforms more generally. Value creation has traditionally been
seen as coterminous with the worth or usefulness of a good or service.
Social media and multisided platforms more generally redefine this
product-centric view of value. But they also go far beyond the relatively
recent attempts to redefine value as buyer or consumer experience. In
multisided platforms, value accrues as the outcome of specific forms
of interaction between groups of platform participants or users such as
diners and restaurant owners in the case of OpenTable. In this sense, value
creation in platforms is, primarily, a social and communicative process in
which availability and smooth exchange of information are critical. This
contrasts with the concept of value as a physically embedded process of
producing predefined goods and services out of available resources or
value the buyer experience associated with the conditions under which a
product or service is consumed.
Chapter 8: Business models and social media platforms

Reviews a few standard and widespread families of business models and
relates them to social media platforms via the key concept of cross-
subsidisation as this has been defined above. The chapter outlines
the conditions on the basis of which social media platforms develop new
pricing strategies for cross-subsidising their services and connects these
strategies to the broader context of the contemporary digital economy.
While relying on a traditional three-party media-based business model
(media producers, consumers, advertisers), social media platforms extend
and in some cases radically reframe that model.
Chapter 9: Creating value for business

Describes how social media platforms create value for platform owners
and other platform stakeholders. The chapter deals first with how social
media platforms use social data to construct audiences that are of interest
to advertisers. Audience making is a central activity and advertisement
a lucrative source of revenue for social media platforms. It then moves
on to discussing the data internet ecosystem and how social media
platforms seek to create value by means of integrating their own data
with traditional data sources and data from other social media platforms
and the entire internet ecosystem. Much of value creation for businesses
is nowadays closely associated with the opportunities to mix and match
data from various sources and produce, through data analytics, insights
that can be used for a variety of purposes, from advertising to product
development. The chapter also discusses the significance of social data for
organisations and organisational strategy and points out some of the issues
that traditional (non-digital native) firms and organisations confront with
respect to integrating social data into their strategy making.
Chapter 10: Creating value for users

Discusses the different ways social media platforms create value for their
users. Beyond the straightforward networking and communication services
platforms offer to their users, they develop a range of services that are
12
very relevant for user retention, user-base growth and engagement, and
therefore for platform success. Recall that an active user base is a critical
social media resource. For this reason, social media seek to establish
highly responsive and personalised user environments that constantly
adjust to user behaviours. The chapter discusses how social media reuse
the data produced by its users to solve information-based problems for
users. For instance, usability is constantly monitored and changed with
experiment and tests (i.e. A/B Testing). Today usability is further extended
to the ecosystem of connected applications or devices that link a platform
to other platforms by increasing the portability of user profiles and the
standardisation of data packages and APIs. Information overload and
information relevancy are constantly tackled by personalising newsfeeds
and a plethora of other recommendation services. Some of these ideas
are illustrated by the case of Last.fm, a social media platform for music
discovery.
Chapter 11: Digital innovation and social media platforms:

roadmap to the future
Reviews some of the most compelling innovative businesses made possible
by the advent of social media platforms. Different typologies of new
business ventures are analysed in light of core concepts associated with the
sharing economy and innovation and illustrated with the help of examples.
The chapter further discusses future possible scenarios brought about by
the Internet of Things and the combination of its sensor data with social
(media) data. Specifically, the chapter discusses the creation of new
applications based on the mash-up of existing but unrelated services (i.e.
mixed reality apps) and the creation of new ways of doing business (Uber
and Airbnb).
Chapter 12: Conclusions

Provides a review of the entire subject guide. The main purpose of the
chapter is to summarise briefly the major arguments put forward in ways
that make evident the links between the various chapters and the logic
that holds the subject guide together. In doing so, the chapter reminds you
of the basic implications of the ideas we have put forward and the learning
outcomes of the entire course which this subject guide serves.
1.7 Overview of learning resources

1.7.1 How to use this subject guide
The subject guide has been written with a view to providing a road
map to a complex conceptual and practical territory that still lacks
comprehensive high-quality textbooks on the topic. The subject is
new but also multidisciplinary, cutting across the boundaries of fields
such as management, information systems, data science, media and
communications, sociology and, to a certain degree, economics. A high-
quality textbook that relates to these fields in non-trivial ways is no
meagre accomplishment. It comes therefore as no surprise that such a
textbook still awaits publication.
We have learned, though, from our teaching at LSE and other academic
institutions of high standing that it is possible to support the delivery of
a high-quality course by putting together a comprehensive study pack
that draws from academic journal publications, case study materials, web
publications, practitioner talks and other material from a host of relevant
outlets. All that is needed in this case is a conceptual blueprint that maps
13
the diversity of the materials into a meaningful and coherent narrative that
can support the teaching of the course content to students. This is what
this subject guide is about.
Each chapter is connected to other materials, such as articles in academic
journals, case studies and illustrations, and newspaper articles that help
shed light on the ideas and concepts in the course and provide help to
students to develop their skills and knowledge base. As is always the
case, the student can seek further help in the literature and the web and
find and use materials that may be rewarding, in one way or another. In
fact, such an active relation to learning is much recommended. It is also
important here to uphold that this is a course in the suite of courses that
make up the Management and Digital Innovation programme. There is
much relevance in and a huge potential for learning by relating to other
courses on this programme and the concepts, techniques and ideas the
other courses teach.
1.7.2 Essential reading

The key text of the course is:
Parker, G.G., M.W. Van Alstyne and S.P. Choudary Platform revolution. (London:
Norton, 2016) [ISBN 9780393249132].
The textbook covers a large part of the content of the course. However,
it is a book on the wider subject of digital platforms with only occasional
references to social media. For this reason, the book is complemented by
additional book excerpts and journal articles that pay close attention to
the specifics of social media platforms and the technologies by which they
are sustained. These readings are essential to the course and include the
following:
Alaimo C. and J. Kallinikos ‘Encoding the everyday: the infrastructural
apparatus of social data’ in Sugimoto, C., H. Ekbia and M. Mattioli (eds)
Big data is not a monolith: policies, practices, and problems. (Cambridge MA:
MIT Press, 2016) [ISBN 9780262529488] pp.77–90. (Available on the VLE)
Alaimo C. and J. Kallinikos ‘Computing the everyday: social media as data
platforms’, The Information Society 33(4) 2016, pp.175–91. Available at:
http://eprints.lse.ac.uk/81432
Anderson, C. Free: the future of a radical price. (London: Random House, 2009)
[ISBN 9781905211470] Chapter 2, pp.17–33. (VLE)
Boyd, D.M. and N.B. Ellison ‘Social network sites: definition, history, and
scholarship’, Journal of Computer-Mediated Communication 13 2008,
pp.210–30. (VLE)
Constantiou, I.D. and J. Kallinikos ‘New games, new rules: big data and the
changing context of strategy’, Journal of Information Technology 30(1)
2015, pp.44–57. (Available in the Online Library).
Kallinikos, J. and N. Tempini ‘Social data as medical facts: web-based practices
of expert knowledge creation’, Information Systems Research 25(4) 2014,
pp.817–33. (VLE)
Kaplan, A.M. and M. Haenlein ‘Users of the world, unite! The challenges and
opportunities of social media’, Business Horizons 53(1) 2010, pp.59–68.
(VLE)
Konstan, J.A. and J. Riedl ‘Recommended for you’, IEEE Spectrum 49(10)
2012a, pp.54–61. Available at: http://spectrum.ieee.org/computing/
software/deconstructing-recommender-systems
Leiner, B.M. et al. ‘Brief history of the internet’, Internet society (2003).
Available at: www.internetsociety.org/internet/what-internet/history-
internet/brief-history-internet
14
Teece, D.J. ‘Business models, business strategy and innovation’, Long Range
Planning 43(2–3) 2010, pp.172–94. (VLE)
Zittrain, J. The future of the internet. (New Haven, CT: Yale University Press,
2008) [ISBN 9780141031590] Chapters 1, 2, 4, pp.7–35 and 63–100.
Available at: https://dash.harvard.edu/handle/1/4455262
1.7.3 Further reading

We also recommend that you study other relevant texts which we use
throughout this subject guide and which are included here in this section.
The section includes journal articles and books. Each chapter of the subject
guide indicates which parts of the relevant books to consult, but our advice
is to read as much as you can from these books.
Alaimo, C. ‘Computational consumption: social media and the construction of
digital consumers’, PhD thesis, LSE, 2014.
Baldwin, C.Y. and K.B. Clark Design rules, Volume 1: The power of modularity.
(Cambridge, MA: MIT Press, 2000) [ISBN 9780262024662].
Benkler, Y. The wealth of networks: how social production transforms markets
and freedom. (Cambridge, MA: Yale University Press, 2006) [ISBN
9780300125771].
Bowker, G.C. and S.L. Star Sorting things out: classification and its consequences.
(Cambridge, MA: MIT Press, 1999) [ISBN 9780262522953].
Brynjolfsson, E. and A. McAffee. The second machine age. (New York: Norton,
2014) [ISBN 9780393350647].
Bucher, T. ‘Want to be on the top? algorithmic power and the threat of
invisibility on Facebook’, New Media and Society 14(7) 2012, pp.1164–80.
Ciborra, C. Teams, markets and systems. (Cambridge: Cambridge University
Press, 1993) [ISBN 9780521404631].
Desrosières, A. The politics of large numbers: a history of statistical reasoning.
(Cambridge, MA: Harvard University Press, 2002) [ISBN 9780674009691].
Espeland, W.N. and M.L. Stevens ‘Commensuration as a social process’, Annual
Review of Sociology 24 1998, pp.313–43.
Evans, D.S. and R. Schmalensee Matchmakers: the new economics of multisided
platforms. (Cambridge, MA: Harvard Business Review Press, 2016) [ISBN
9781633691728].
Gawer, A. (ed.) Platforms, markets and innovation. (London: Edward Elgar,
2009) [ISBN 9781848447899].
Gehl, R.W. Reverse engineering social media: software, culture, and political
economy in new media capitalism. (Philadelphia: Temple University Press,
2014) [ISBN 9781439910351].
Kitchin, R. The data revolution: big data, open data, data infrastructures and
their consequences. (London: Sage, 2014) [ISBN 9781446287477].
Konstan, J.A. and J. Riedl ‘Recommender systems: from algorithms to user
experience’, User Modeling and User-Adapted Interaction 22(1–2) 2012b,
pp.101–23.
Lessig, L. Code version 2.0. (New York: Basic Books, 2006) [ISBN
9780465039142].
Lusch, R.F. and S.L. Vargo Service-dominant logic: premises, perspectives,
possibilities. (Cambridge: Cambridge University Press, 2014) [ISBN
9780521124324].
Napoli, P.M. Audience evolution: new technologies and the transformation of
media audiences. (New York: Columbia University Press, 2011) [ISBN
9780231150347].
Oestreicher-Singer, G. and L. Zalmanson ‘Content or community? a digital
business strategy for content providers in the social age’, MIS Quarterly
37/2 2013, pp.591–96.
Rosenblat, A. and L. Stark ‘Algorithmic labor and information asymmetries: a
case study of Uber’s drivers’, International Journal of Communication 10
2016, pp.3758–84.
15
Shapiro, C. and H.R. Varian Information rules: a strategic guide to the network
economy. (Cambridge, MA: Harvard Business Review Press, 1999) [ISBN
9780875848631].
Sundararajan, A. The sharing economy: the end of employment and the rise
of crowd-based capitalism. (Cambridge, MA: MIT Press, 2016) [ISBN
9780262034579] Chapters 1–2.
Tiwana, A. Platform ecosystems: aligning architecture, governance, and strategy.
(London: Morgan Kaufmann, 2014) [ISBN 9780124080669].
Yoo, Y., O. Henfridsson and K. Lyytinen ‘Research commentary; the new
organizing logic of digital innovation: an agenda for information systems
research’, Information Systems Research 21(4) 2010, pp.724–35.
Van Dijck, J. The culture of connectivity: a critical history of social media. (New
York: Oxford University Press, 2013) [ISBN 9780199970780].
1.7.4 References cited in this introduction

Baldwin, C.Y. and K.B. Clark Design rules, Volume 1: The power of modularity.
(Cambridge, MA: MIT Press, 2000).
Baldwin C. and C.J. Woodward ‘The architecture of platforms: a unified view’
in Gawer, A. (ed.) Platforms, markets and innovation. (London: Edward
Elgar, 2009) pp.19–44.
Eaton, B., S. Elaluf-Calderwood, C. Sørensen and Y. Yoo ‘Distributed tuning of
boundary resources: the case of Apple’s iOS service system’, MIS Quarterly
39(1) 2015, pp.217–43
Gawer, A. ‘Bridging differing perspectives on technological platforms: toward
an integrative framework’, Research Policy 43(7) 2014, pp.1239–49.
Gerlitz, C. and A. Helmond ‘The like economy: social buttons and the data-
intensive web’, New Media & Society 15(8) 2013, pp.1348–65.
Kallinikos, J., A. Aaltonen and A. Marton ‘The ambivalent ontology of digital
artifacts’, MIS Quarterly 37(2) 2013, pp.357–70.
Gerlitz, C. and A. Helmond ‘The like economy: social buttons and the data-
intensive web’, New Media & Society 15(8) 2013, pp.1348–65.
Eaton, B., S. Elaluf-Calderwood, C. Sørensen and Y. Yoo ‘Distributed tuning of
boundary resources: the case of Apple’s iOS service system’, MIS Quarterly
39(1) 2015, pp.217–43.
Gawer, A. ‘Bridging differing perspectives on technological platforms: toward
an integrative framework’, Research Policy, 43(7) 2014, pp.1239–49.
Simon, H.A. The sciences of the artificial. (Cambridge, MA: MIT Press, 1969) 3rd
edition [ISBN 9780262691918].
Weinberger, D. Everything is miscellaneous: the power of the new digital disorder
(New York: Times Books, 2007) [ISBN 9780805088113].
1.8 Online study resources

In addition to the subject guide and the Essential reading, it is crucial that
you take advantage of the study resources that are available online for this
course, including the VLE and the Online Library.
You can access the VLE, the Online Library and your University of London
email account via the Student Portal at:
http://my.londoninternational.ac.uk
You should have received your login details for the Student Portal with
your official offer, which was emailed to the address that you gave
on your application form. You have probably already logged in to the
Student Portal in order to register! As soon as you registered, you will
automatically have been granted access to the VLE, Online Library and
your fully functional University of London email account.
If you have forgotten these login details, please click on the ‘Forgotten
your password’ link on the login page.
16
1.8.1 The VLE

The VLE, which complements this subject guide, has been designed to
enhance your learning experience, providing additional support and a
sense of community. It forms an important part of your study experience
with the University of London and you should access it regularly.
The VLE provides a range of resources for EMFSS courses:
• Electronic study materials: All of the printed materials which you
receive from the University of London are available to download, to
give you flexibility in how and where you study.
• Discussion forums: An open space for you to discuss interests
and seek support from your peers, working collaboratively to solve
problems and discuss subject material. Some forums are moderated by
an LSE academic.
• Videos: Recorded academic introductions to many subjects;
interviews and debates with academics who have designed the courses
and teach similar ones at LSE.
• Recorded lectures: For a few subjects, where appropriate, various
teaching sessions of the course have been recorded and made available
online via the VLE.
• Audiovisual tutorials and solutions: For some of the first year
and larger later courses such as Introduction to Economics, Statistics,
Mathematics and Principles of Banking and Accounting, audio-visual
tutorials are available to help you work through key concepts and to
show the standard expected in exams.
• Self-testing activities: Allowing you to test your own
understanding of subject material.
• Study skills: Expert advice on getting started with your studies,
preparing for examinations and developing your digital literacy skills.
Note: Students registered for Laws courses also receive access to the
dedicated Laws VLE.
Some of these resources are available for certain courses only, but we
are expanding our provision all the time and you should check the VLE
regularly for updates.
1.8.2 Making use of the Online Library

The Online Library (http://onlinelibrary.london.ac.uk) contains a huge
array of journal articles and other resources to help you read widely and
extensively.
To access the majority of resources via the Online Library you will either
need to use your University of London Student Portal login details, or you
will be required to register and use an Athens login.
The easiest way to locate relevant content and journal articles in the
Online Library is to use the Summon search engine.
If you are having trouble finding an article listed in a reading list, try
removing any punctuation from the title, such as single quotation marks,
question marks and colons.
For further advice, please use the online help pages (http://onlinelibrary.
london.ac.uk/resources/summon) or contact the Online Library team:
onlinelibrary@shl.london.ac.uk
17
1.8.3 Other resources

You should also make a habit of regularly consulting weekly and monthly
journals and newspapers and in this way ‘keeping up’ with trends in the
area. You must remember that new ideas, new technologies and new
applications of technology are usually first reported in newspapers and
magazines, sometimes years before they find their way into textbooks
or journals. Reading such contemporary accounts will also help you to
develop your sense of judgement about all sorts of issues related to social
media platforms and the digital economy more generally. Bear in mind,
however, that you should not believe everything you read. You must
always take a critical perspective of what you read. Most broadsheet
or business newspapers, such as the Financial Times or the Wall Street
Journal, have frequent articles on the digital economy with reference to
social media platforms. In recent years, the Financial Times has published
a regular series of supplements on mastering management, and these
supplements have all included much relevant material on management
and the digital economy. In addition, most countries have local
publications devoted to computers and information systems, and these
can also provide useful material for study. This includes news of local and
global initiatives and issues, examples or case studies of social media in
use, and discussion of relevant development and management practices.
Among the best-known publications that may be found in libraries are the
following:
• The Economist (www.economist.com); although this is not a computer
magazine, it does contain regular articles on aspects of e-business
• Medium (https://medium.com)
• Wired (www.wired.com).
These magazines and blogs are representative of distinct types of reading.
In your research, and for developing wider perspectives on this subject,
you should try to read regularly from all these types of publication. It is
a very good practice to keep a file of cuttings, photocopies and articles
collected throughout your period of study. When you come to the end of
the course, such a resource can be very valuable as a revision aid and as a
panorama of contemporary e-business issues and debates.
1.9 Examination advice

The information and advice given here are based on the examination
structure used at the time this guide was written.
The assessment for this course is based wholly on an unseen written
examination of three hours. The examination paper comprises five
questions and requires students to answer two of them. All questions
are of equal weight. Each of the questions is split into two equal parts,
that is, Part a and Part b. Part a of the question covers a theoretical issue,
approach or model and thus requires being addressed in ways that attest
to the proper conceptual or theoretical understanding. By contrast, Part b
asks for an example or illustration and is meant to check the adequacy and
depth of a student’s understanding of Part a and the ability to relate their
answer to real-life examples.
You should ensure that you answer two questions, allowing an
approximately equal amount of time for each question and the sub-
questions it entails, and attempting all parts or aspects of a question. Exam
questions are selected out of the major topics covered in the syllabus and
subject guide. Some questions could cover more than one topic from the
18
syllabus and cut across particular chapters. The different topics are not
self-contained and are linked to one another along different routes. They
may therefore require that in your answer you refer to several aspects of
the syllabus and the subject guide.
It is important that your answers address the questions asked. General
answers that relate only vaguely to the questions asked are not viewed
favourably. We recommend that before you start composing your answer
you read carefully the questions of the exam paper and choose those
that you believe you can answer best. You should also carefully check
the rubric/instructions on the paper you actually sit and follow those
instructions. It is also important that you present your answers in ways
that show the progression of your thought in well-structured argument
and in a clear prose. In a subject matter such as the one this course covers
the structure and presentation style are as important as the substance of
your answers.
There are no model answers to examination questions, as such, because
much depends upon the quality of the argument and the examples given
and there is rarely one single right answer to a question. Nevertheless,
every year we will provide an Examiners’ commentary where we discuss
the previous examination questions individually but in general terms,
including the sources (articles, subject guide chapters) where students
would find material on which to base their answer. A sample examination
paper is available on the VLE.
19
Notes
20
2.1 Introduction
In this chapter, we explore different approaches and conceptions of
social media. In particular, we delve into and contrast two of the most
widespread approaches in the literature. The first approach considers
social media as social networking sites (or online social networks) in
which users congregate and connect to one another. The second approach
views them as social media platforms; that is to say, as complex
social but also technical arrangements that do not simply facilitate the
ways users build links and relations online but also shape the way users
interact with the view to using and commercialising the data users create.
Understanding the specific features of social media that these approaches
focus on are essential to obtaining a more complete picture of social media.
As mentioned in the Introduction, social media are commonly associated
with semantic technologies and the Web 2.0. The main characteristic of
these internet technologies is to facilitate the creation of content, the
sharing of content and various forms of exchange and collaboration
among users. The advent of Web 2.0 signals the shift from one-way
communication to two-ways communication and the alleged beginning of
a more open and collaborative web. The technological developments of
the internet and the web are very relevant for understanding social media,
and we dedicate the next chapter and several other chapters of this subject
guide to it. In this chapter, we introduce the most widespread approaches
to social media and discuss the key features they attribute to social
media. Let us remind you that social media are complex socio-technical
arrangements made of both networks of actors (organisations, users and
external actors) and platform facilities (architectural frames made of
layers of core and variable technologies).
One of the aims of this chapter is to show that no single approach or one-
size-fits-all definition can exhaust the variety of types and the diversity
of activities of social media. Instead, the relevance and validity of each
approach consists in singling out and analysing certain essential aspects
of social media. In reality, social media are both networks and platforms;
they are settings in which people connect with one another; at the same
time they feature complex socio-technical arrangements that structure
people’s participation and shape their connections. Crucially, social media
platforms are elaborate business settings in which people’s participation
is, in some way or another, being shaped by the different resources which
platform owners and partners bring to the platforms and the varying
business objectives they pursue.
Building on the platform view of social media which we find more
productive, the chapter distinguishes between three different types
of social media: networking-based, content-based and service-based.
Understanding the differences and similarities between the three types of
social media enables us to identify the business models and main social
interaction (how users participate on the platform) each one of these three
basic types of platform adopts. It is important that you do not think of
the distinction between platform types as a rigid classification. Rather, it
is more productive to learn to use it as a tool in your analysis of various
social media business configurations and the social interactions they
entail. In reality, social media platforms show interesting combinations of
the core principles and attributes that characterise each of the three basic
21
platform types we outline. You will be in a better position to comprehend

such variety by using the distinctions we introduce, and which we elaborate
and illustrate in this chapter.
2.1.1 Aims of the chapter

This chapter aims to provide you with an introduction to social media and
how they have been conceived and defined in the literature. The main aims
of this chapter are to:
• introduce the different views of social media and explain the features
that characterise each one of them
• show the limitations of the widespread approach whereby social media
are viewed as predominantly networking sites
• introduce the concept of platform as an alternative approach to the
study of social media
• develop a typology of social media platforms to help you grasp their
variety and complexity
• illustrate the different typologies with real-life examples that help
describe the main business aims and core interaction of each one of the
types of social media.
2.1.2 Learning outcomes

By the end of this chapter, and upon completion of the Essential readings
and Activities, you should be able to:
• define social media as social networking sites (SNS) and as social
media platforms (SMP)
• explain the main differences between SNS and SMP
• identify and illustrate the different types of social media
• explain the business aim and core interaction of networking-based,
content-based, and service-based social media platforms.

pp.210–30.

Baldwin C. and C.J. Woodward ‘The architecture of platforms: a unified view’ in
2009) pp.19–44.
York: Oxford University Press, 2013).
2.1.5 Additional resources

www.facebook.com
www.instagram.com
www.tripadvisor.co.uk
www.wikipedia.com
www.quora.com
www.twitter.com
www.reddit.com
22
2.2 Social networking sites (SNS)

A highly influential definition of social media is by Boyd and Ellison, who
defined social media as social networking sites (SNS). According to
Boyd and Ellison, SNS are: ‘web-based services that allow individuals to
(1) construct a public or semi-public profile within a bounded system, (2)
articulate a list of other users with whom they share a connection, and
(3) view and traverse their list of connections and those made by others
within the system’. (Boyd and Ellison 2008). This definition clearly stresses
the role of social networks that become visible on social media as users
develop connections with each other, and also the role individual users
play in this process. Let it be remembered that a social network is a social
structure or configuration made of people and the relationships between
people. Within the SNS approach, social media are studied as individuals
(user) and groups of individuals (users) developing their own networks.
Such an approach focuses on how different patterns emerge from user
connections and interactions.
A social network is a social structure made up by a set of social actors (they can
be individuals, organisations or users), set of dyadic ties and other social interaction
between actors.
See https://en.wikipedia.org/wiki/Social_network
The attention in the SNS approach is usually directed to the visible

behaviour and motivation of users: how they connect and what we learn
from observing these connections. As the definition put it, SNS are web-
services that enable: ‘users to make visible their social networks’ (Boyd
and Ellison 2008, p.211). Social media make visible social networks
of users that, in turn, can be studied in order to shed light on other
phenomena, such as, for example, patterns of information diffusion,
properties of different networks etc. Understanding media as social
networks has historically set the stage for many subsequent and relevant
studies in the field. After Boyd and Ellison’s widely acclaimed definition,
many researchers have analysed social media by adopting a social network
perspective. Most of the articles on social media focus on visible social
networks and tacitly catalogue them as ‘user enabled’. For the majority of
these studies, information technology (IT) is simply a neutral facility, a
support of user interaction. One of the main drawbacks of this approach
is that it assumes that technology has little or no role to play in the way
in which user-enabled interaction takes place. Such a view even overlooks
the fundamental fact that most social media platforms are economic
organisations.
2.3 Social media platforms (SMP)

The focus on the networking or connecting capacities of social media
risks losing sight of many of the novelties social media introduce in our
everyday life. Social media are not just networks or tools facilitating
conversation or collaboration. As we show throughout this subject guide,
they are much more than this. In order to understand social media better,
we need to complement the approach to social media as ‘networks’ with an
approach that takes seriously into account their technological features and
the economic objectives they pursue.
Kaplan and Haenlein, for instance, define social media as a group of
‘internet-based applications that build on the ideological and technological
23
foundations of Web 2.0, and that allow the creation and exchange of
User Generated Content’ (Kaplan and Haenlein 2010). The SNS approach
deals with the ideological aspect of Web 2.0, leaving questions concerning
the technological aspects of social media mostly unaddressed. Kaplan
and Haenlein instead see also the technical side; they define social
media as applications or platforms built on top of the generic Web 2.0
infrastructure. As such, social media platforms are underlain by a set of
features or functionalities that do not simply facilitate user connection or
collaboration but enable specific types of user interaction (connection or
collaboration).
Rather than being seen as fixed arrangements, platforms are constituted
by dynamic technologies that steadily adjust to user needs and business
objectives. As indicated in the Introduction, a platform can be described
as a technological arrangement of different components divided into a
stable core, which usually provides generic functionalities, and a set of
more flexible components that can be changed, modified and extended
by the platform’s owners or by external actors, such as users, developers
or partners (Baldwin and Woodward 2009). This is a technical or
architectural definition of platforms that differs from the view of platforms
as digital, multisided markets that serve several participants that we also
discussed in the Introduction. The two conceptions of platforms – as digital
multisided markets and as technical assemblages of layered components –
are not incompatible with one another; in fact, they support one another.
We will look at digital multisided platforms in more detail in Chapter
4. Right now, it is important to understand that the definition offered
by the SNS approach to social media does not deal adequately with the
technological or architectural features of social media. Looking at social
media only as networks, in fact, loses sight of the interesting relationship
between the way platforms are built and the way users participate. Some
of the most interesting innovations platforms bring to the market derive
from the modalities by which they invite users to participate, collaborate
and interact. This ‘invitation’ to collaborate is embedded into platform
design and has been described as the ‘unfinished character’ of platforms
(see again the Introduction to this subject guide). It means that platforms
are open products that require specific forms of user participation and
interaction to work. A familiar example may be the way profile pages
on social media platforms are built. They look like questionnaires with
many blank spaces that ‘invite’ users to fill them in. These blank spaces,
once filled, become the data fields that serve the information needs of the
platforms.
It is very important to understand that by looking at social media as
platforms we are able to study not just the behaviour of users (user
interaction) but, crucially, how technological components change or
adjust to external changes, a ubiquitous feature of most platforms. The
way technologies, business models and user interactions come together in
specific social media platforms depends also on how the whole internet
ecosystem develops. Some platforms change when they add new technical
components, connect to other platforms or to other applications. Consider
the role of external or independent developers! It is important to realise
that social media are made of a combination of technological components,
which do not neutrally support or facilitate communication or networking.
Rather, the configuration of these components instead invites specific
forms of user participation and interaction that constantly adjust to the
ideology and technology of web 2.0, the business aims of the platform and
user needs.
24
2.4 Types of social media

One of the most interesting aspects of social media conceived as platforms
is how particular technologies are coupled with particular forms of user
interaction (or participation) and with particular business objectives and
models. These different elements come together in a variety of ways in
what we call different social media ‘types’ or ‘configurations’.
How do we study different social media platforms as configurations?
How do we make sense of the specificities of the single social media case
without losing sight of what it may have in common with other social
media cases? One good way to make useful distinctions when we talk
about social media is to observe the main business aim or platform reason
behind the user participation and interaction. We can ask: what is the most
important aspect of the site? What is the core action with which users
engage? For example, social media platforms that are built around the user
capacity to connect with other users can be called networking-based
sites (sometimes they are also called user-oriented sites). They would
be social media platforms where connecting with friends, articulating
one’s own network, as Boyd and Ellison claimed, is the core activity (e.g.
Facebook). Instead, social media platforms that are built to share content
such a music, videos or photos can be called content-based sites. In
this group, we can list YouTube, Flickr and Spotify. These are sites where
the main preoccupation is the creation and sharing of content: music,
videos, text that users post, upload, share or listen to. Lastly, the group
of social media platforms that are mainly concerned with the offering of
services or products may be called service-based sites. For example,
TripAdvisor is a social media platform where we connect with others
and we share experiences, reviews or ratings of travel destinations. The
site’s principal aim is to offer a service by collecting and capitalising on
the knowledge or experience of its users. Users on TripAdvisor produce
and exchange opinions or reviews of hotels, holidays or travel. They can
browse for information on the travel industry, search for accommodation
and check what others have written about hotels, cultural events or
holiday activities before booking a trip.
Let us restate that each of these types of social media provides a useful
tool for distinguishing and classifying a very complex and composite
reality that often defeats easy distinction or classification. In reality, any
social media platform always exhibits a mix of networking and content-
based attibutes or a mix of content and service-based attributes. However,
this does not mean that the classification we propose is irrelevant. On the
contrary, paying attention to the field in which a social media platform
operates and the ways it structures its core activity is a concrete and useful
point of departure for the analysis and understanding of how social media
operate as platforms and business organisations.
2.4.1 Networking-based
The main objective of a networking-based social media platform is
connecting with and communicating with other users. The core activity is
friending or ‘following’ other users, instant messaging and sharing. In
general, we may say that the core activity is building one’s own network
of friends and fostering connections with other users. In some cases, the
network is made up of users to whom we already have a connection in
real life, as happens on Facebook. In some other cases, the network is
made up of users to whom we are not already connected, as happened on
MySpace or Friendster, two precursors of Facebook that, as we will see in
25
Chapter 3, adopted a very different policy on the use of real-life identity as

a precondition for joining the site.
One of the most important features of these networking-based social
media platforms is the personal profile of users. Personal profiles have
been the object of various studies and analyses. The ways in which the
personal profile page has been organised by sites and used by its users
have changed a great deal throughout the first decade of social media but
it has not lost its value. Many social media platform users still develop
a very close relationship with their personal profile page and engage in
many and repeated activities to make it better, to change it frequently,
to enrich it with all sorts of content. Taking care of one’s own digital
profile has been studied as self-performance; that is, as the principal
means by which a user chooses to present themselves online, also called
self-modulation or the ‘acting’ of an online version of the self. Another
important aspect of the personal profile is that it becomes the repository
of personal information of users. From demographic information (who
we are), to location-based information (where we live), to the list of
close friends, personal profiles gather the most important information
on people’s lives. The possibility of presenting oneself on network-based
platforms – the new social mediated public visibility, or self-presentation –
usually comes at the expense of privacy and sometimes even of safety.
Activity
Can you list all the information present in your Facebook profile? Do you know what
information is publicly available and what is hidden from public view?
The articulation of self-appearance or self-presentation online is intimately

connected with who it is we are connected to. On networking-based
social media platforms, the circle of user friends is central to understand
user behaviour. Social network analysis (SNA), for instance, studies the
way in which the structure and dynamic of the user network influences
user behaviour. The notion of social influence – how the behaviour of
others (especially ‘significant others’) influences us – has a long history
in sociology and management. However, on networking-based social
media platforms it has taken a new life. Many social media platforms use
these data in complex models that help predict user taste, behaviour or
preferences which are essential for boosting platform participation but
are also of interest to other businesses or organisations (e.g. political
campaigns).
Facebook
‘Facebook helps you connect and share with the people in your life’ (Facebook’s sign-in
page). Mark Zuckerberg founded Facebook in his Harvard dorm room in 2004. After
just two years the site had already attracted 7 million users at American high schools
and universities, the same year the site opened up to everyone. Its name comes from
the tradition of American universities to publish yearbooks with details and photos of
students. Facebook had over 1.7 billion monthly active users as of January 2017 and
this number continues to grow. Today, Facebook is a corporation and a giant of the
tech world.
After registering on the site, users can create a user profile, ‘friend’ other users
and communicate with them in a variety of ways: exchanging direct messages,
posting status updates and photos, sharing videos, using various apps and receiving
notifications when others update their profiles, commenting on friends’ posts or
updates, etc. As this brief user activity list demonstrates, Facebook has never been only
26
a networking-site, but by starting from a core networking activity has gradually built on
other platform features.
One of the most important of these features has been the introduction of the ‘Like’
button in 2012. The Like button is a good example of the way technology impacts on
social interaction and on business objectives. It is undeniable that the Like button has
changed the way people communicate on Facebook and outside Facebook. We can
now ‘Facebook-Like’ things from all over the web. However, likes do not only play a
part in how users interact with each other; they also produce very important data that
Facebook uses to monetise user participation. Every Facebook ‘like’ is a sign of user
taste, preferences or interest. If you think that users produce roughly 3 million likes
every 60 seconds, you realise that networking becomes very important for the platform
business strategy and its partners. But you also realise that networking and user
interaction in general are highly conditioned by the different set of technologies in use.
Activity
Do you know that Facebook likes are used to predict personality traits with great
accuracy? Although the predictive personality model has been developed by the University
of Cambridge, it is now used to target users and predict their preferences for a variety
of reasons. Conduct a brief research online on the use of Facebook likes in the 2016
US political election campaign by the company ‘Cambridge Analytica’ and write a short
critical essay of 1,000 words.
2.4.2 Content-based
The main objective of content-based social media platforms is the production
and sharing of content among users. Content can be text, images, music and
videos. The core activity is sharing. As Tim Berners-Lee, the inventor of the
World Wide Web, has suggested, sharing information had been the dream of
the early internet. It is not surprising, then, that sharing has a central role in
determining much of the activities of social media platforms. Sharing is at
the core of both the social discourse and the technological infrastructure of
social media. If we look at the social discourse, we can see that much of the
Web 2.0 rhetoric is centred on the notion of participatory practices and user
creation and sharing of content. Creating content, sharing and collaborating
with others have become a way of life and very much part of our culture.
Enabled by social media platform tools and features, users become
prosumers. ‘Prosumption’ is a word coined by futurist Alvin Toffler some
time ago, during the Dot-com era, to signify the end of passive consumption
and the beginning of a new era of participative consumption, one where
users become also producers, at least in part.
On the other hand, it is important to understand that sharing is also a
built-in site action that constitutes the very experience of social media.
Many social media platforms would simply not work without the constant
production of content and sharing performed by users. Think about Flickr
or Instagram (see box below) without user photos or videos!
The possibility of producing content is a key empowering capability of social
media platforms. Self-expression, ‘connections with the people we love’
(as the Facebook slogan says!) and sharing are all part of the core message
of social media platforms. Surely these activities are spread across the
three types of social media platforms we consider in this chapter. Although
the boundaries between networking-based and content-based sites are
blurred, content-based social media platforms show different dynamics
from networking-based social media platforms. If on networking-based sites
we tend to ‘friend’ people we already know and share our everyday lives,
27
content-based social media platforms are specialised in one or another user

interest: music, photo, shopping etc. As a consequence, we may observe how
the act of friending or following and the act of sharing on content-based social
media platforms becomes more specialised. This is shown by the fact that on
content-based social media platforms we tend to friend or follow other users
we don’t know in real life but with whom we share the same music taste, or a
similar passion for photos or similar interests, more broadly. The composition
of one’s own network in this case is more oriented toward similarity in
taste rather than friendship. Consequently, the act of sharing is usually
limited to the common interest. Social network analysis traditionally calls the
tendency of individuals to seek out similar others as ‘homophily’, which has
been traditionally studied as the driver for forming or removing a relation.
On content-based media platforms, this characteristic becomes a powerful
tool to predict the preferences of users. To suggest interesting content to each
and every user, in fact, platforms use the information they gather from the
members of the user network. They use the behaviour of similar others to
influence users.
Activity
In which social media platform category would you place Twitter? Justify your choice by
using the content of this chapter.
Instagram
Instagram is a mobile app photo-sharing platform that allows users to take photos
and video, edit them with a set of filters and share them on the platform. The word
Instagram combines the two words ‘instant camera’ and ‘telegram’. Users can share
the photo or video they post on Instagram into a set of connected platforms and
applications (Facebook, Twitter, Flickr, Tumblr).
Founded in October 2010 by Kevin Systrom and Mike Krieger, Instagram grew to
a million users just two months after its launch. The possibility of shooting photos
and using a set of ready-made easy-to-use filters to edit them in real time has
undoubtedly been one of the main reasons for the platform’s success. Users can
browse other users’ photos and ‘follow’ other users. In 2011, Instagram introduced
hashtags (#) to help users discover photos and other users. Hashtags work as
clusters; they are user-generated metadata that aggregate photos under a specific
label. They facilitate the discovery of places (Geotags) or photos and other users of
interest (Hashtags). In this way, users can discover and connect to similar others in
the typical fashion of content-based sites we described.
Facebook bought Instagram in April 2012 for US$1 billion. Since then the platform
has grown by 23 per cent. In 2013, Instagram introduced videos and Instagram
Direct which allows users to send photos to a select group of other users. The same
year the platform introduced ‘natural-looking ads’. Ads on Instagram look exactly like
content and are distinguishable only by the ‘sponsored’ label, which appears over the
photo or carousel. Instagram advertising constitutes the main revenue source of the
company.
In early 2017, Instagram had over 400 million active monthly users posting 80 million
photos daily. In 2015, Instagram launched Boomerang, an app where a user can
shoot a one-second burst of five photos that are turned into a silent video that plays
forward and then reverses in a loop. Following this, Instagram launched Hyperlapse,
an app that allows users to create digitally stabilised time-lapse videos.
28
2.4.3 Service-based
The main objective of service-based social media platforms is the offering
and provision of a service or group of services. The core interaction of such
platforms unfolds around such actions as commenting, sharing knowledge
or experience, and giving feedback – for example, in the form of reviews
or ratings. On service-based social media platforms, the participation and
sharing of users take the form of expressing opinions and ideas. The aim
of a service-based site is to offer a service by gathering the knowledge
or experience of its users and summarising the aggregate results in the
form of displays, indexes and the like. User participation takes the form of
reviewing, rating, giving feedback or expressing opinions or, as in the case
of Quora, formulating questions and answers.
In general, we may say that the collective creation and sharing of
knowledge seems to be the common trait of service-based social media
platforms. The main idea underlying such participative knowledge
production is that the joint effort of many actors leads to a better
outcome than any actor could achieve individually. It is what has been
called the ‘wisdom of the crowd’, which suggests that the collective
opinion of a group of individuals is more accurate than the view of an
individual expert. Wikipedia, for example, is a participative project that
best exemplifies this idea. It is a collaborative encyclopaedia made by
the collective effort of many, rather than by the expertise of the few.
The production and sharing of knowledge usually has a focus or scope.
It is focused on the production of a service that can be offered free of
charge by a non-profit company, or can be offered free of charge by a
for-profit company that benefits in one way or another from the collective
participation of users. (We consider social media business models in
Chapter 8.) In the case of Wikipedia, the aim is to provide access to the
world’s first free encyclopaedia that ‘anyone can edit’. It is offered as a free
service by a still non-profit company. There is a huge variety of services,
business models and core interaction types that such service-based
social media platforms exemplify. For instance, in the case of the already
mentioned Quora, the service unfolds around asking, answering and
editing questions; in the case of Reddit, the service consists in organising
internet content such as news, other web content and discussion fora. It is
important to bear in mind that all of these social media platforms would
not work without the essential contribution of users. In service-based
social media platforms, however, the overwhelming bulk of the content or
service experienced is the result of a collective effort of users.
One of the main problems on service-based social media platforms is to
ensure the credibility of information that is gathered by collecting the
opinions of the crowd. How can one, for instance, ensure the credibility
of Wikipedia entries? How can one guarantee that the hotel reviews
have not been written by the very same hotelier reviewed (or by one of
their friends)? To overcome this problem, TripAdvisor, for example, has
famously adopted a policy of ‘zero tolerance for fake reviews!’ It reassures
users that it controls the authenticity and credibility of the reviews,
discovering and penalising offenders in various ways and ultimately
excluding them. Wikipedia, on the other hand, has instituted a system of
rules and regulations to monitor content production on the encyclopaedia.
Despite the various strategies adopted by service-based communities, the
issue of fake reviews or low-quality contributions exists and is bound to
become even more problematic with the ever-increasing community size of
the most famous sites. An interesting tendency can be observed here,
namely that the majority of these service-based social media platforms
29
have progressively restricted the open participation of users in one or

another way: either by adopting rules and regulations or by adopting more
rigid technological filters such as algorithmic ordering. On TripAdvisor, for
instance, in addition to Traveller Rating, users are increasingly trusting the
Popularity Index the platform publishes: a numerical ranking of hotels. We
will come back to this important point in Chapter 6 when we focus on the
adoption of measures and ranking devices and how these condition social
participation and social media dynamics.
TripAdvisor
‘TripAdvisor is the world’s largest travel community where you can get real
information, advice and opinions from millions of travellers to plan and take your
perfect trip’. TripAdvisor is a social media platform that offers service in the travel
sector by providing user-generated reviews and recommendations. Users share their
experiences, provide rankings for hotels and restaurants and comment on all kinds of
places or tourist attractions around the world.
Founded in February 2000 by Stephen Kaufer, the TripAdvisor brand has expanded
to operate in twenty-seven countries. It now has 60 million members and over 170
million reviews and opinions of hotels, restaurants, attractions and other travel-
related businesses. TripAdvisor Media Group operates 25 travel brands (Wikipedia).
The unique features of TripAdvisor perfectly explain the collaborative nature of many
service-based social media platforms: travel advice is effectively constructed from
the distributed effort of many. Users register on the site, write and submit a Traveller
Review. TripAdvisor aggregates and orders the various reviews into a Traveller
Rating. Stephen Kaufer, CEO of TripAdvisor, thinks that user reviews provide ‘fresher
information and tends to be more detailed. To many people, it is more reliable’.
However, TripAdvisor also publishes a numerical ranking of hotels and travel sties
that is called Popularity Index. We deal with this later in this subject guide. Suffice it
here to note that the index combines information from the Traveller Ratings and other
sources (travel guides, newspaper articles etc.), effectively mixing the wisdom of the
crowd, expert opinions and technological forms of information processing. The index
is calculated using a proprietary algorithm (which means that is not public), which is
known to rank, for instance, the most recent information as more relevant.
The business generates its revenue predominantly (around 70 per cent) through
advertising; the site hosts links to online travel booking sites such as Expedia, Orbitz
and hotels.com.
2.5 Conclusions
This chapter provides an introduction to social media. It describes social
media as social networking sites (SNS) and as social media platforms.
The SNS approach considers social media almost exclusively as networks.
The approach that views social media as platforms extends the study of
social media much further to include the consideration of technological
features of social media and their relationship with business objectives
and user interaction. On this view, social media are distinctive socio-
technical configurations that enable user communication and collaboration
(interaction). Rather than being neutral spaces, social media platforms
are unfinished products that are constantly tinkered with and adjusted to
take advantage of technological developments while addressing specific
business objectives, user needs or external influences. As we will see in
30
Chapter 5, this is one of the reasons why in reality no definition or type fits
all existing social media.
However, without distinguishing between different types of social media
it is not possible to advance the understanding of the different ways they
operate and document the implications such different operations have
for business and social life. Building on the conception of social media as
platforms, and further extending it, the chapter proposed a distinction of
social media as three different types: networking-based, content-based
and service-based. The specificities of each of the three types derive from
the way they organise their core interaction to serve the key business
objectives of each type. The chapter further provided examples that help
to illustrate the differences and similarities between the three different
types of social media we have outlined. However, despite the differences
underlying the three types of social media platforms we have proposed, it
is useful to bear in mind that all social media platforms have something in
common that distinguishes them from other types of digital platforms (e.g.
eBay) and other online ventures. The typology we have put forward is a
good beginning. Subsequent chapters build on it to analyse and explain
the role social media platforms play in the current digital economy and the
ways they operate as socio-technical systems and business organisations.
2.6 Reminder of learning outcomes

Having completed this chapter and the reading suggested, you should be
able to:
• make a distinction between different approaches whereby social media
are viewed as networks versus platforms
• define platforms both as multisided markets and complex and layered
technological configurations
• identify different social media types
• explain the main business aims and core interaction of each social
media type
• define the different concepts underlying each of three social media
types
• define social media as platforms
• discuss why no definition fits all social media examples.
2.7 Test your knowledge and understanding

1. Define social media. What are the main approaches studying social
media? Why do they differ?
2. Compare and contrast the three types of social media by discussing
their differences and similarities using real-life examples.
3. Why is it important not to rely on one definition of social media?
31
Notes
32
Chapter 3: The internet ecosystem and the development of social media
Chapter 3: The internet ecosystem and

the development of social media
3.1 Introduction
This chapter briefly reviews the history of the internet and links it to
the emergence and diffusion of social media platforms. The purpose
of the chapter is not to present a generic history of the internet. This
can be found easily elsewhere. Our major aim is rather to provide a
historic overview that helps to link the evolution of the internet and its
open, end-to-end architecture, with the emergence and quick uptake
of social media platforms. As we have seen, social media platforms are
proprietary systems with straightforward commercial objectives and, in
this, they conspicuously differ from the open, public and function-agnostic
nature of the internet. Yet, social media platforms operate within the
broader ecosystem of the internet and they are inconceivable outside it.
In this chapter, we link social media with the federated structure of the
internet, its modular and layered architecture and, ultimately, the open,
participatory culture and collaborative ethos the internet once pioneered.
The chapter discusses some of these fundamental conditions and then
describes some of the proto social media platforms before considering the
current era inaugurated by the foundation of Facebook in early 2004 and
the remarkable transformations this brought about.
The chapter features key concepts such as:
• architecture
• networks and networking
• the internet protocols known as TCP/IP and HTTP
• modularity
• layering
• participatory culture.

This chapter aims to introduce the history of the internet and to provide
the basic concepts for understanding major technological features of social
media platforms. Additional aims of this chapter are to:
• describe key architectural features of the internet and how they have
fostered a collaborative and participatory culture
• describe the history of the internet protocol TCP/IP
• link the collaborative and participatory culture of the internet with the
development of social media
• explain the main differences between Web 1.0 and Web 2.0
• use the history of social media better to understand current and future
developments.

By the end this chapter, and upon completion of the essential readings
and activities, you should be able to:
• describe what architecture is
33
• explain the design of end-to-end architecture and how it is linked to the

principles of modularity and layering
• describe the technical foundations of the empowerment of users and
user communities
• explain the role which TCP/IP and HTTP play in sustaining the web and
the internet
• link the development of the internet to Web 2.0 and social media.

pp.210–30.
Leiner, B.M. et al. ‘Brief history of the internet’, Internet Society (2003) www.
internetsociety.org/internet/what-internet/history-internet/brief-history-
internet
2008) Chapters 1–4, pp.7–100.

Gehl, R.W. Reverse engineering social media: software, culture, and political
economy in new media capitalism. (Philadelphia: Temple University Press,
2014).
Lessig, L. Code version 2.0. (New York: Basic Books, 2006).
York: Oxford University Press, 2013).
3.1.5 References cited

Baldwin, C.Y. and K.B. Clark Design rules, volume 1, The power of modularity.
Raymond, E. ‘The cathedral and the bazaar’, Knowledge, Technology and Policy
12(3) 1999, pp.23–49.
Ulrich, K. ‘The role of product architecture in manufacturing firms’, Research
Policy 24 1995, pp.419–40.
3.2 Social media platforms and the internet

Social media platforms are commonly viewed as part and parcel of the
broader ecosystem of the internet. Being on Facebook or any other social
media platform amounts to being on the internet. Neither the general
public nor key figures of the age make any distinction between the two.
On several occasions, Mark Zuckerberg, the founder and chief executive
of Facebook, has remarked that Facebook is making the internet (the web)
social. Facebook and the internet are thus treated interchangeably. General
reporting involving statistics further reinforce this mixed-up image, where
no difference is perceived between social media and the internet. For
example, internet statistics (or stats) depict Facebook alone as claiming
1
See www.
half (1.75 billion users) of the world’s internet users (3.5 billion users).1
internetlivestats.com
All of this suggests that, in the public awareness and social imagination,
social media platforms and the internet are closely associated, if not
34
equated with one another. However, as we will soon see below, there
are differences involved even though they are evasive and ultimately
contestable. Knowledge of the internet and its history, we suggest, is at
any rate important for understanding the differences between the internet
and social media but also for shedding light on the origins of social media
platforms and how they are intertwined with the evolution of the internet.
If by social media we refer to the bounded, proprietary spaces that provide
users with the facilities to build a profile and interact with others (recall
the various views of social media reviewed in the preceding chapter), then
the internet has preceded and also aided the emergence of social media.
But the generic infrastructure of the internet is not only older than social
media platforms, it is also much bigger and more diverse, supporting
the online activities of other companies, governments, communities and
ordinary people. One of the principal differences between the internet and
social media platforms is that the former is a public and federated network
of networks while the latter are bounded, privately owned entities. At
the same time, the internet provides the very infrastructure that enables
the transfer of content and messages from one network to another. Social
media platforms are built on the top of that infrastructure. They are, as
a rule, private, for-profit companies that use people’s interactions and
communications on the platforms they deliberately design, develop and
control as the basis for developing a range of market-based services.
Surely, these differences may be contested. One may well argue that social
media platforms cannot operate the way they do without providing links
to other entities (other social media platforms, internet communities
and companies) that enable a constant flow of data and communications
from and to the platforms. In other words, social media platforms are
themselves infrastructures whose boundaries from the rest of the internet
cannot be unambiguously drawn. The exponential growth of social media
furthermore impacts upon larger areas of the internet, defining the
direction of future internet development and blurring the separation of
one from another.
These remarks and qualifications notwithstanding, it is important to
maintain the key differences between social media platforms and the
internet we have sought to capture above. Social media platforms are
bounded and privately owned entities that are built on the top of the
public infrastructure of the internet. For this reason, the operations of
social media are influenced by the ways the internet works as a federated
public infrastructure. At the very least, a deeper understanding of social
media platforms can be obtained by considering the open, end-to-end
architecture of the internet and the ways such architecture is intertwined
with key operations of social media platforms. Before we move on to this
task, however, we need to provide a brief overview of the foundation of
the internet as a global data exchange ecosystem.
3.3 The internet communication protocol suite

Today, the internet is a hyper-complex system of content creation,
management and communication that supports a large range of human
and social activities. As some of its key founding figures (Leiner et al.
2003) describe it, ‘the internet is at once a world-wide broadcasting
capability, a mechanism for information dissemination, and a medium for
collaboration and interaction between individuals and their computers
without regard for geographical location’. However, in its bare bones, the
internet could be seen as a world-wide system for transferring data from
35
one computer to another. This may seem a trivial task today. Yet, in the
early computer age of the 1960s and 1970s, accomplishing such a task
was a major challenge. Enabling communication links and data exchange
between a number of independent machines and computer networks,
built on rather heterogeneous principles and techniques, was a remarkable
accomplishment.
The solution was developed by Robert Khan at DARPA (US Department
of Defense, Defense Advanced Research Projects Agency) in the early
1970s, building on and extending the work of others, and is now widely
known as the Transmission Control Protocol/Internet Protocol (TCP/IP).
The IP component of the protocol links individual machines to networks
(link layer) while the TCP component packages and transmits data
between networks. The TCP/IP protocol proved to be both a simple and
elegant solution. Its ingenuity rested on the fact that the transference of
data between connected yet independent networks had to happen on
the initiative of end-users without external interference or control. The
protocol abstracted away issues with the semantics of the data (the type
of content) while, wisely, refraining from interfering with the operations
of the networks involved and the principles on which these networks
had been built (Leiner et al. 2003). The protocol was designed to be an
elementary, content-agnostic data transmission mechanism (Zittrain 2008).
In other words, the internet protocol was, from its very beginning, built on
the assumption of a diverse and decentralised world (many independent
networks built on different premises) that is coordinated without steering
control and external interference. The US defence context (DARPA)
within which the protocol was developed suggests it to be a choice that
was motivated by practical rather than ideological reasons: the protocol
enabled flexible, decentralised data exchanges between independent users,
as these users required. The TCP/IP protocol lived basically an obscure life
as a data transference protocol in several computer settings (including the
Arpanet, the predecessor of the internet) for nearly two decades before it
served as the basis for what came to be known as the World Wide Web,
developed by Sir Tim Berners Lee in the late 1980s and early 1990s.
Activity
Go online and read the fascinating history of the web at
http://webfoundation.org/about/vision/history-of-the-web
Summarise your reading in a brief 500-word essay.
The World Wide Web (or simply the web) entailed a suite of software
solutions, principles and mechanisms for managing the maintenance and
transference of more complex forms of information (content as opposed
to data) between different machines. This was accomplished through the
creation of websites by means of Uniform Resource Locators (URLs), the
linking of URLs by means of hypertext and the invention of the Hypertext
Transfer Protocol (HTTP) by which content (text, image and sound) could
travel across websites.
Being an application layer built on top of the TCP/IP link and data
transport layers, the HTTP further embedded and expanded the
federated ideal of the internet. A loose ecosystem of independent actors
took shape, exchanging data and information without any immediate
interference from the outside; that is to say, an ecosystem of coordinated
data and content exchanges, free from centralised control or surveillance
mechanisms.
36
Once these technical solutions were in place, they sparked an amazing

and exponential content growth through which large numbers of people,
organisations (including corporations) and communities sought to
make themselves and their pursuits, abilities or services available to
others. Whatever libertarian ethos of free communication might have
characterised the early years (Raymond 1999), it was soon supplanted
(or, at least, substantially modified) by the strong presence of commercial
actors and corporations that in many respects shaped the development and
public image of the web and the internet. In the early and mid-1990s, the
internet saw the appearance of the first web crawlers or search engines
(Altavista, Netscape) that adopted HTML as the standard transfer protocol
and the establishment of corporate giants emblematic of the digital
age such as Amazon (1994), Yahoo (1994), eBay (1995) and Google
(1998). Much has changed since then, including, as we will soon see, the
emergence and diffusion of social media platforms, but these events gave
the web and the internet a shape that is still recognisable today.
3.4 The end-to-end architecture of the internet

One of the key points to emerge from this very brief and, admittedly,
incomplete historical review is a fact that still remains at the heart of the
current internet, no matter how much it has been changed by its far-
reaching commercialisation. This is no other than the empowerment of
communities and individuals that were able through their participation
to shape much of the early internet and establish the conditions on which
social media platforms eventually emerged. Despite the broader political
or social undertones of decentralisation, it is important not to lose sight
of the technical infrastructure that has empowered end-users and made
the internet and the web functionally possible and sustainable. For that
reason, it is necessary to look a bit more closely at the architectural ideal
on which the internet and the web have been based.
A decentralised world is always based on the idea of the vitality and
strength of local events and actions that should be allowed to flourish
by whatever conditions confer them local operational independence and
autonomy. Communication between decentralised computer networks is
no different in this respect. The principles embodied by the internet data
transference and communication protocols (TCP/IP, HTTP) resonate with
this ideal. Users and local networks are the fundamental loci where actions
and communications are produced. Whatever systems or structures of
broader reach might emerge (that is, complexes of networks such as the
internet), they should be the outcome of the communication links and
actions established by independent users or groups of users and the local
computer networks within which users are situated. Larger arrangements
such as the internet should be no more than conduits along which local
events propagate.
Such an architectural design is known as ‘end-to-end computer
architecture’. It is a design that empowers individual machines and, by
extension, end-users while keeping at a minimum any central control
mechanism of either organisational or computational nature. End-users
and the devices and applications they rely on are the principal loci of data
and content production which can be shared and transferred between
end-users as these users wish, and through such elementary and content
agnostic mediation mechanisms as those implied by the internet and the
web data transference and communication protocols (TCP/IP, HTTP)
(Lessig 2006; Zittrain 2008). More elaborate, collaborative arrangements
37
or systems are built on these principles to address specific tasks in

particular contexts of social life. Wikipedia is a prominent example.
Of utmost importance are a few fundamental prerequisites for the
emergence of end-to-end architectures. An architecture of this sort is not
possible and cannot be realised unless the technical components and
layers that link individual machines to networks and broader networks of
networks are relatively independent of one another. The TCP/IP protocol
is such an independent component or module that can be installed on
individual machines, provided they have certain hardware qualities.
The same holds for the HTTP protocol. These observations suggest
that the individual machines end-users utilise, and the local computer
networks within which such machines are embedded, are essentially
bundles of components or modules. These are linked together by a loose
architecture that allows operational independence for each module (e.g.
an application) within a broader system of functional links (the individual
machine or the network). The ideal then of operational independence
cascades from broader systems or networks down to individual machines.
Viewed in this light, end-to-end architecture relies on the fundamental
principle of modularity. Modular devices or systems consist of relatively
independent modules that connect to one another via interfacing solutions.
By these means, each module can be designed, developed and updated
without close attention to the others, insofar as the interface allows the
module and its data output to be linked to other modules. Modularity
then furnishes the design philosophy for constructing systems through the
development of individual and relatively independent components that are
linked to one another via interfaces (Baldwin and Clark 2000; Kallinikos
et al. 2013; Yoo et al 2010; Zittrain 2008). A modular architectural design
is contrasted with integral architecture in which the components are
tightly linked to one another, through multiple or hardwired links that
do not allow much in the way of individual operational independence,
decomposition and change (Ulrich 1995).
Modules are often organised in layers, whereby each layer retains the
principle of operational independence within an overall context of
functional synergy with other layers and modules (Yoo et al. 2010;
Zittrain 2008). Such is the case, for instance, with the TCP/IP and HTTP
protocols. The former is a presupposition for the latter while both exist as
independent modules and layers. In a somewhat schematic or simplified
manner, we can claim that the upper layer of applications, with which
end-users are in daily contact, requires an appropriate operating system to
function properly. In their turn, operating systems must be accommodated
by the appropriate hardware. Layering and modularity thus furnish the
design principles by means of which individual machines, networks and
networks of networks are assembled. A machine or a network is no more
than a working assembly of modules linked together via interfaces at
several layers. In fact, the entire internet ecosystem consists of systems and
devices through which modules are assembled into larger functional units
that remain steadily expandable and updatable.
Social media have emerged in this fluid and flexible digital environment in
which end-users are able to use a range of applications and several devices
that are constantly renewable and updatable (Kallinikos et al. 2013).
User empowerment and participation have no doubt been given a new
momentum through the unprecedented recent diffusion of lightweight
digital technologies (smart phones and tablets). As noted in Chapter 1, the
diffusion of lightweight digital technologies significantly expanded what
end-users can do on a day-to-day basis and strongly proliferated the points
38
of contact large user crowds have with the media platforms and the entire
internet ecosystem. In the next section, we briefly consider the early history of
social media.
3.5 Web 2.0 and the advent of social media sites

Consistent with the principles outlined above, the advent of Web 2.0 in
the early 2000s introduced the concept of the ‘web as platform’, that is,
as a dynamic and constantly evolving system sustained by the collective
participation of users. In this regard, as many commentators noticed, Web 2.0
or the idea of the web as platform can be seen as a return to the internet’s
roots: an open system to facilitate communication and information exchange
between users (Kaplan and Haenlein 2010). But what is Web 2.0 and how
does it differ from the initial web design? In contrast to what we have been
describing so far, Web 2.0 moves the attention away from an individual
(end-user) design to the web as interactive system or better platform. That is,
‘content and applications are no longer created and published by individuals,
but instead are continuously modified by all users in a participatory and
collaborative fashion’ (Kaplan and Haenlein 2010, p. 61).
Activity
Tim O’Reilly coined the term ‘Web 2.0’. Go to O’Reilly Media (www.oreilly.com/pub/a/
web2/archive/what-is-web-20.html) and explore the history behind the contested
definition of Web 2.0.
How many of the early promises on a more democratic web have been maintained?
Discuss the Web 2.0 rhetoric in a short critical essay of 1,000 words.
A key passage in Web 2.0 architecture by O’Reilly Media explains the point: ‘A
key trend in Web 2.0 is the inclusion of the user as a core part of any model…
Online applications are more than mere software: they represent a process
of engagement with users’ (quoted in Gehl 2014, p.81). The initiative of
end-users, however, is continuous and collective. Many users are involved
in building content and applications on a continuous basis facilitated by a
platform modular architecture and the procrastination principle it embodies:
most problems confronted by a network can be solved later by others (Zittrain
2008).
Web 2.0 was developed as the result of the concurrent hype concerning the new
participatory culture empowered by social technologies. Collective intelligence,
the wisdom of crowds and the participation of many were the central ideals
around which a new significant development of the web was taking shape. Web
2.0 transformed the networked, open and distributed structure of the early web
and the internet into an interactive two-way communication and interaction
platform able to foster a real-time, networked sociality.
From the late 1990s, new services mushroomed around these core concepts,
with functionalities that derived from the ideals of the collective creation
and sharing of content, connectivity and communication. Some of the
most famous of these services, later known as social media sites, were: Six
Degrees (1997), Friendster (2002), LinkedIn (2003), MySpace (2003), Last.
fm (2003), aSmallWorld (2004), Facebook (2004), YouTube (2005), Twitter
(2006). When first implemented, these new services were perceived as the
new infrastructures of online interaction, hence their juxtaposition with the
web itself (Van Dijck 2013).
The first recognisable social media site was SixDegrees. Launched in 1997
(Boyd and Ellison 2008), the site exhibited many recognisable features: users
39
were able to create their own profiles, list their friends and browse their
friends’ lists. The site managed to attract millions of users yet it failed to
implement a viable business model and closed down in 2000.
Friendster launched in 2002 as a competitor of Match.com. Differing
from other online dating sites that were based on matching strangers, the
site was designed to let friends of friends meet.
Match.com is an online dating service with websites serving 25 countries in more

than eight languages. Founded by Gary Kremen and Peng Ong in 1993, it was initially
a concept developed to provide classified advertising systems for newspapers.
See: https://en.wikipedia.org/wiki/Match.com
Before its official launch, Friendster grew to a staggering 300,000 early

adopters reached just through word of mouth. The extraordinary success
of the site was in some way also the main reason for its decline. Friendster
was neither technically nor socially prepared to manage the scale of its
speedy growth. Friendster’s servers and databases were not able to handle
the volume of interactions and data procured by its massive user adoption
and as a result the site crashed regularly. Also, the friend-of-friend culture
nourished by the common background and interests of the early adopters
of the site rapidly went astray. With the escalating adoption by external
groups, the social milieu of music lovers and festival goers that constituted
the initial social core of the site was watered down by out-of-context
groups. To add to this, a massive infiltration of fake profiles further
complicated the matter. These fakester profiles, as they were famously
known, were fictional characters acting as real profiles on the site,
collecting friends and browsing friend-of-friend lists. The company reacted
forcefully to this fakester culture and started implementing a no-fakester
policy, but this didn’t stop Friendster from declining. Early adopters left,
other social media sites opened and Friendster collapsed (Boyd and Ellison
2008).
One of the main competitors of Friendster was MySpace. Founded in
2003, the site grew by attracting dissatisfied Friendster users. Like its
predecessor, MySpace was initially adopted principally by music lovers and
indie-rock bands. The homogenous social milieu was further cultivated by
initiatives supporting music venues, clubs and live gigs.
The main characteristic of MySpace was the possibility given to users to
personalise their own pages. A copy/paste code culture emerged from the
web supporting users’ creativity in generating personal MySpace pages
(Boyd and Ellison 2008). This feature of the site emerged because users
were allowed to add HTML to restructure their pages. This meant that
a MySpace page used roughly five times the code of a page of Facebook
(Gehl 2014, p.84) making the site very slow. MySpace’s story of decline
resembles closely Friendster’s demise: that is, the mix of technical
difficulties, the lack of a recognisable business strategy and social issues
arising from a too rapid growth prematurely ended the success of the site.
In early 2004, a new social media site was founded. Facebook eventually
grew to become one of the biggest high-tech corporations of our day.
Among the many things that differentiated Friendster and MySpace from
Facebook’s highly successful course is the wise initial strategy Facebook
adopted: it opened first to Harvard University students, then to other
US college students and only after three years to anyone. Its design was
relatively simple and uncomplicated, and even if this meant that users
had far fewer possibilities of personalising their profiles, the choice led to
40
fewer technical problems in comparison with MySpace. One of the main

characteristics of Facebook was also the different weight given to real-life
identities of users. Since the beginning, Facebook social media adopted a
zero-fake profile policy, which eventually paid off. We will refer to Facebook
in subsequent chapters. The important thing now is to consider how some
of these elements are at the core of the platform’s take-off and development
strategy, which is the core theme we develop in the next chapter.
3.6 Statistics and figures

Follow this link in the Online Library http://onlinelibrary.london.ac.uk/
resources/databases/statista and search for the following figure: ‘Share of
adult internet users in the United States who use social networking sites
from 2005 to 2015’. It shows the share of adult social networking users in
the USA from 2005 to 2015. In the last measured period, approximately
76 per cent of US internet users accessed social networking sites, up
from 67 per cent in 2012. According to the study, the most popular social
networks in the USA are Facebook, Pinterest, Twitter and Instagram.
Then search for ‘Number of mobile monthly active Facebook users
worldwide from 2009 to 2016’. This figure shows a timeline with the
worldwide number of monthly active Facebook users from 2008 to 2016.
As of the second quarter of 2016, Facebook had 1.71 billion monthly active
users (MAU). In the third quarter of 2012, the number of active Facebook
users had surpassed 1 billion. Active users are those who have logged in
to Facebook during the last 30 days. Furthermore, as of that quarter, the
social network had 1.57 billion mobile MAU. The platform is also the most
popular social network worldwide.
Now search for ‘Facebook’s annual revenue and net income from 2007 to
2016’, which illustrates Facebook’s annual revenue and net income from
2007 to 2015. Facebook’s revenue grew from $7.87 billion in 2013 to
$17.93 billion in 2015. That year, Facebook accumulated a net income of
$3.69 billion.
Finally, search for ‘Facebook’s average revenue per user, 2012–16’. This
figure shows Facebook’s average revenue per user from 2012 to 2015. In
2015, Facebook’s average advertising revenue per user was $11.96. The
social network’s advertising revenue in 2015 was $17.08 billion.
3.7 Conclusions
In this chapter, we have briefly considered the history of the internet
and traced the emergence and diffusion of social media platforms to the
federated principles and architecture of the internet.
We first considered the building of the TCP/IP protocol as a content
agnostic, data linking and transference mechanism that embodied the
ideal of decentralised data exchanges on which the end-to-end architecture
of the internet was to emerge. We then moved on to describe how the
end-to-end architecture is closely associated with the design of modular
systems that technically support the idea of decentralisation and provides
the internet and the web with the technical requirements for a ceaseless
growth that is based on the recombination and steady development of
individual components.
Finally, we considered the proto social media environment that followed
the development and embedding of Web 2.0 as a platform of social
participation until the establishment of Facebook, which marked a new
stage in these remarkable developments.
41

Having completed the essential readings and activities, you should be able
to:
• explain the roles TCP/IP and HTTP play in sustaining the web and the
internet
• describe what ‘architecture’ is
• explain the design of end-to-end architecture and how it is linked to
the principles of modularity and layering
• describe the technical foundations of the empowerment of users and
user communities
• link the development of the internet to Web 2.0 and social media.

1. Why is the TCP/IP protoco an agnostic machine/network linking and
data transference protocol?
2. What are the key elements of end-to-end architecture?
3. How are the design principles of modularity and layering connected to
end-to-end architecture?
4. How is the participatory culture of the Web 2.0 linked to the early web
and the internet?
5. What are the key stages in the development of social media platforms?
42
Chapter 4: Social media as multisided

platforms
4.1 Introduction
This chapter considers how social media operate as multisided platforms,
enabling transactions between different types of economic actors, such as
suppliers and buyers, producers or service providers and customers, app
developers and users. Multisided platforms represent a relatively recent
development and a characteristic business format of the digital economy.
The chapter first analyses multisided platforms and describes the network
dynamics that condition their establishment and market diffusion. It
subsequently considers how social media can be regarded as a particular
type of multisided digital platform, marked by the omnipresence of large
user populations, whose activities are essential in sustaining the services
social media deliver to several stakeholders.
• networks effects
• cross-side network effects
• multisided markets
• user-generated content
• social data.

In this chapter, we describe the specific nature of business arrangements
associated with multisided platforms. The key aims of the chapter are to:
• explain the dynamics that characterise the diffusion and market
establishment of multisided platforms by reference to a type of
network effects known as indirect or cross-side network effects
• describe the role that a large and active user base plays in sustaining
social media as multisided markets
• link user engagement with user-generated content and social data
• explain the key role social data play in sustaining social media as
multisided platforms.

By the end this chapter, and upon completion of the essential readings and
activities, you should be able to:
• define what digital platforms are and discuss their modus operandi
• explain how digital platforms are, in essence, multisided markets
• define the concept of network effects
• distinguish between direct and cross-side network effects
• explain the role of cross-side network effects in forming multisided
platforms (markets)
• explain how social media platforms operate as multisided markets
• discuss the role that user-generated content and social data play in
social media platforms.
43

Norton, 2016) Chapters 1–2, pp.1–34.

platforms. (Cambridge, MA: Harvard Business Review Press, 2016) Chapters
1–3, pp.7–51.
(London: Morgan Kaufmann, 2014) Chapters 1–2, pp.3–48.

Anderson, C. Free: the future of a radical price. (London: Random House, 2009).
Hanseth, O. ‘The economics of standards’ in Ciborra, C. (ed.) From control to
drift: the dynamics of corporate information infrastructures (Oxford: Oxford
University Press, 2001) pp.56–70.
Katz, M.L. and Shapiro, C. ‘Systems competition and network effects’, Journal
of Economic Perspectives 8(2) 1994, pp.93–115.
Mintzberg, H. The structuring of organizations: a synthesis of the research.
(Englewood Cliffs, NJ: Prentice-Hall, 1979).
Mintzberg, H. Structure in fives: designing effective organizations. (Englewood
Cliffs, NJ: Prentice-Hall, 1983).
Rogers, E.M. and D.L. Kincaid Communication networks: toward a new paradigm
for research. (New York: Free Press, 1981).
Rysman, M. ‘The economics of two-sided markets’, Journal of Economic
Perspectives 23(3) 2009, pp.125–43.
Schmalensee, R. and D.S. Evans ‘Industrial organization of markets with two-
sided platforms’ Competition policy international 3(1) 2007.
economy. (Cambridge, MA: Harvard Business Review Press, 1999).

www.opentable.com/start/home
www.tripadvisor.co.uk/
www.spotify.com/uk/
www.google.co.uk/adwords/
www.ebay.co.uk/
4.2 Introducing digital platforms

Over the recent past, digital platforms have emerged as widespread
arrangements through which different types of economic actors, such as
suppliers and buyers, producers or service providers and customers, app
developers and users engage in commercial exchanges with one another
(see e.g. Schmalensee and Evans 2007, 2016; Parker et al. 2016; Tiwana
2014). Operating most of the time as profit-seeking organisations, digital
platforms are characteristic business formats of the digital age that mark
a substantial innovation of the very process of value creation, and the
production and distribution of goods and services. Companies such as
eBay in retailing, Expedia in the travel industry or PayPal in electronic
payments are typical examples of digital platforms, whereby a range of IT
facilities and resources are deployed by platform owners to provide the
services through which different parties (individuals and organisations)
can get involved in market exchanges with one another. But even more
emblematic and diversified companies such as Amazon, Google or Apple
44
utilise digital platforms as the key business format to deliver a great deal
of their services. For instance, Amazon Web Services, Google AdWords and
Apple’s iTunes operate as digital platforms. Each of them provides a range
of facilities and resources through which different types of actors in the
corresponding industries engage in transactions with one another.
Social media platforms share many important attributes of digital
platforms. In fact, for most purposes, they can be seen as a specific type
of digital platform. There are no straightforward standards or principles,
however, for separating digital from social media platforms. We hope
to do so throughout this subject guide, using a range of criteria and
considerations. Suffice it here to say that social media platforms are one
particular type of digital platform, marked by the omnipresence of large,
often very large, groups of users whose platform activities are essential in
sustaining the image of these platforms and the services they offer.
User platform activity in social media most often takes the form of user
content and data generation. This is what arguably separates Facebook
and YouTube from Google AdWords or Amazon Web Services, and
TripAdvisor from Expedia, eDreams or Skyscanner. The dividing line
separating digital platforms from a social media platform is, admittedly,
less clear than it may seem at first sight. For instance, established digital
platforms in retailing such as Amazon.com or eBay have increasingly
been using user-generated content in the form of reviews and ratings as a
means of navigating through user experience, mapping consumer habits,
and advancing recommendations and personalised offerings. Furthermore,
as we demonstrated in Chapter 2, social media platforms are not
themselves a unified category, which further complicates the comparison
with digital platforms.
Even so, user platform participation and the content and data it generates
stand as the crucial attributes that distinguish social media from the wider
category of digital platform. In any case, analysing and explaining the
work of social media as platform-based business organisations requires
understanding the role digital platforms play in the current global digital
economy. It is against such a background that one can hope to account
for and explain the distinctive ways by which social media adopt and
transform the function of technology-based intermediation that digital
platforms perform.
4.3 Defining digital platforms

Digital platforms can be defined as the IT-based facilities and resources
developed by business-oriented platform owners to enable economic
exchanges between two or more groups of economic actors that would
have otherwise remained unconnected, or connected in cumbersome
and cost-inefficient ways. TripAdvisor, for instance, connects travellers to
hoteliers and other travel-related businesses; OpenTable enables diners
to browse the restaurants in a certain area and book tables as they wish.
Alibaba, the Chinese e-commerce giant, connects a range of industry
suppliers and buyers in China and across the world while its B2C platform
Taobao enables Chinese consumers to buy products from a great range of
Chinese retailers (Evans and Schmalensee, 2016).
Economists refer to the market-spanning arrangements digital platforms
provide as two-sided or multisided platforms (or markets). The term
‘multisided’ refers to and underscores the critical role such platforms play
in bringing together two or more types of economic actors that would
have otherwise had few opportunities to engage in valuable economic
45
transactions with one another (Evans and Schmalensee, 2016; Rysman

2009). This spanning function that connects different types of actors
or market participants with one another is essential for understanding
the distinctive nature of digital platforms. Viewed in this light, digital
platforms are resourceful intermediaries that use a range of IT-based
facilities and solutions to enable smooth and quick exchanges between
suppliers and buyers and customers and service providers or retailers. In
bringing together different types of actors, digital platforms help reduce a
range of transaction costs, including search costs.
Digital platforms are, however, more than just simple intermediaries that
link different actors together via digital paths. Neither intermediation
alone, nor the development of IT facilities and resources required for
monitoring exchanges of different types of actors, suffices to establish a
successful digital platform. The function of intermediation that digital
platforms fulfil cannot be successfully performed, unless such platforms
manage to recruit enough of either type of actors or market participants
that have or can develop an interest in transacting with one another.
This mutual, two-way transactional dependence of each side on
the other is a defining quality of digital platforms; hence the terms ‘two-
sided’ or ‘multisided’ platforms. It is such transactional dependence that
makes digital platforms a distinctive and innovative type of coordination
mechanism and business arrangement.
Table 4.1. compiles a few key terms that have been used to describe digital
platforms and the characteristic issues they raise. In one way or another
we make use of these terms throughout the chapter.
Concept Definition
platform An open and evolving arrangement in which different types of
actors engage in economic exchanges with one another
multisidedness The need to attract at least two distinct mutually interdependent
groups (such as app developers and end-users) who interact more
efficiently through a platform
network effects A property of a service or device whereby every additional user
makes it more valuable to every other user on the same side (direct,
one-side network effects) or on the other side (indirect, cross-side
network effects)
lock-in The ways in which a platform can make it undesirable for existing
adopters to switch to other services or platforms
architecture A conceptual blueprint that describes components of a technology
solution, what they do and how they interact
governance Who decides what in a platform ecosystem. This encompasses
partitioning of decision-making authority between platform owners
and app developers, control mechanisms and pricing and pie-
sharing structures
Table 4.1 Core concepts in platform studies (adapted from Tiwana (2014), p.25).
It is of the utmost importance for the study of multisided platforms to
point out that the dependence of one side of the platform on the other
runs in both directions and requires each side to be steadily available
to the other. In other words, each side presupposes the other and
cannot function in its absence. If, for example, a digital platform such
as OpenTable had failed to recruit enough restaurants (both in terms
of quantity and diversity) in an area then it would have had serious
difficulties in attracting a critical mass of diners in that area (see Figure
46
4.1). By the same token, restaurant owners would not have had enough
of an incentive to join the platform, unless there were enough prospective
diners on the other side of the platform. In fact, as Evans and Schmalensee
(2016) demonstrate, this happened for several years in the case of
OpenTable before the platform eventually managed to take off. Digital
platform take-off is thus a complex and delicate accomplishment.
OpenTable Platform
Diners Restaurants
Figure 4.1: Illustration of OpenTable as a two-sided platform.

This type of fragile and omnipresent transactional interdependence
between different types and sides of platform participants is critical for
understanding the challenge digital platforms confront. It is also important
for assessing the kind of contribution they make to the digital economy
once they have managed to cope with such a challenge. The dependence
is not simply mutual but, crucially, time bound. Platform participants
on each side cannot be bought and stocked in the same way one buys
and stocks products and materials for subsequent use. The standard and
venerable practices of managing people and resources are not available to
digital platforms, whose organising and coordinative function requires the
availability and active involvement of platform participants on either side
(Mintzberg 1979, 1983). It is important to realise that digital platforms
are not supply chains and must be distinguished from any IT-embedded
one-sided, retailing digital business. For this reason, we need better to
grasp the types of network effects and positive externalities involved in the
case of digital platforms.
Activity
Use the essential readings for this chapter and other web-based resources and
information to describe how Google AdWords and TripAdvisor operate as multisided
markets. Identify and describe the groups of platform participants these two multisided
platforms serve. Describe the participation and involvement of customers and users in the
making of the services these platforms deliver.
4.4 Network effects and the dynamics of multisided

platforms
It is a well-known fact that the utility or value of a great deal of products
or services is not straightforwardly related to the intrinsic attributes or
functionalities they embody. It is, instead, positively associated with
the number of the same or similar products being used by others. Such
a condition is well illustrated by the case of telephone or messaging
subscription services. A telephone or messaging service subscription in an
area obtains a greater utility or value for a user the higher the number of
47
corresponding subscriptions/users in the area. At the opposite end of the

spectrum, a telephone or messaging service subscription may have little
value in an area with few subscriptions/users. All other things being equal,
the fewer the users in an area the smaller the number of people each
user can reach and the lower the usefulness of a telephone or messaging
subscription for each subscriber or user.
Economists use the concepts of network effects and positive
externalities to refer to the value or utility enhancement that a product
or service obtains for a user or consumer, thanks to its diffusion across
the user population (Katz and Shapiro 1994; Rogers and Kincaid 1981;
Shapiro and Varian 1999). Many products and services that are subject
to these conditions are, quite understandably, dependent on a critical
mass of users or, in the case of platforms, participants, without
which a product or service is unlikely to diffuse and win a market. Such a
critical mass provides the threshold, as it were, above which the value of a
product or service is increasingly viewed favourably by a larger population
of actors or users and thus obtains the necessary (but not sufficient)
conditions for further diffusion and eventual take-off (Hanseth 2000).
These concepts and the processes they refer to are important for
apprehending key challenges that multisided digital platforms confront.
They are also essential for understanding what makes them quite a
different beast from ordinary businesses and one-sided platforms.
Multisided digital platforms must obtain a critical mass of platform
participants on each side. This is a requirement for attracting participants
on the same side of the platform. In this regard, multisided platforms are
subject to the same ordinary, direct network effects as are single-
sided platforms, but for each side of the platform for the participants
they serve. For instance, in the case of TripAdvisor, the higher the number
of users the more detailed the information provided for each user as
regards travel destinations and the greater the value the platform delivers
for each user, independently of what happens on the other side of the
platform. The same holds true to a certain degree for service providers
such as hoteliers, car rentals or restaurants that constitute the other side
of the platform. Relationships are obviously more complex on this side for
platforms such as TripAdvisor. The positive network effects that accrue as
the outcome of the links tying hoteliers to, say, car rentals and restaurants
are to a certain degree offset by the growing competition that results
from the congregation of similar and competing service providers in the
corresponding side of the platform.
For this reason, it rarely makes sense to separate multisided markets from
the type of cross-transactional dependencies mentioned above. What
distinguishes digital platforms, as multisided markets, are the indirect or
cross-side network effects that each group of platform participants
on each side has on one or more platform participants on the other side.
Without an adequate number of users, for instance, businesses such as
hoteliers, holiday rentals, flight operators and other travel-related services
may find little value in joining TripAdvisor and the other way around. The
same holds true for the case of OpenTable. Without an adequate number
of restaurants, diners may see little value in using the platform. By the
same token, an insufficient number of users may provide little incentive
for restaurants to join the platform (Evans and Schmalensee, 2016; Parker
et al. 2016; Schmalensee and Evans 2007).
Indirect or cross-side network effects and the positive externalities they
implicate are characteristic of multisided platforms and, therefore, form
48
the basis for understanding their growth dynamics. They play a crucial
role in shaping the conditions that determine the market prospects of a
multisided digital platform and, ultimately, its success. Short of a critical
mass of participants on each platform side that acts as a strong attractive
force for the other side(s) to join, it is rather unlikely that a multisided
platform will offer a convincing value proposition and eventually succeed.
The perplexing nature of this challenge can be apprehended with
reference to the aforementioned time-bound character of many of the
services multisided platforms offer. It is not impossible to recruit on or ‘fix’
one side first as a means of convincing the other(s) to join the platform.
However, such a strategy is subject to strong time pressures, at least for
digital platforms for which a service is contingent upon the interaction of
the two sides, as often happens in digital retailing platforms. It is usually
difficult to address the challenge in two distinct steps, separated by large
time intervals, since each side is a prerequisite for attracting the other(s).
This is a version of the chicken and egg problem. One must have the one
in order to obtain the other.
Things are slightly different for other types of multisided platforms, such
as Facebook, that trade platform-user participation and user attention
to advertisers. In the next section of this chapter, we briefly consider the
ways through which social media, as distinct from digital platforms, seek
to address the cross-side transactional dependence and the network effects
it implicates. Suffice it here to note that the game is delicate, risky and
complex and requires strategies and business models that depart from the
standard ones and help attract large user crowds. In some instances, it is
necessary to offer services free of charge or even reward at least one type
of platform participant (for more details, refer to Chapter 8) as a bait for
attracting platform participants on the other side (Anderson 2009; Evans
and Schmalensee, 2016; Schmalensee and Evans 2007).
Activity
Use the essential readings for this chapter and other web-based resources and
information to describe how TripAdvisor and Facebook feature different types of network
effects and transactional dependencies between the various sides that make up these
platforms.
4.5 Network dynamics in social media

Social media platforms are multisided platforms marked, as already
indicated, by the participation of large user groups, whose activities are
essential for the services these platforms provide. The most populous
and certainly emblematic of social media organisations, Facebook, stands
as the epitome of this fundamental condition. But most successful and
well-known social media platforms such as Pinterest, LinkedIn, Instagram,
Spotify, Last.fm, YouTube, TripAdvisor, Wikipedia or Flickr are examples of
multisided platforms whose services critically depend on the participation
and active contribution of large user populations.
It is the content and data generated by users and user populations that
essentially constitute social media platforms as the distinctive entities or
business organisations they are. Little wonder, the role and contribution
of users varies between the different types of social media we identified
in Chapter 2; that is, networking-based (Facebook), content-based
(Spotify) and service-based (TripAdvisor). Still, user participation and
engagement cut through all these different types of social media and
provide the meaningful and largely unequivocal criteria for distinguishing
49
social media as multisided platforms from other types of multisided digital

platforms.
As we explain in considerable detail in Chapter 5, user platform
participation entails specific actions, that is, viewing, commenting,
uploading, posting, tagging, liking and so forth. As distinct from the
content they generate, actions such as posting, uploading, tagging and
so forth have significant technical and business value of their own.
They indicate for platform owners and other platform participants (e.g.
advertisers) the preferences and choices of users. In other words, such
actions produce what is often referred to in the literature as social data.
Social media platforms thrive on user platform participation to leverage on
the production and circulation of social data, which oftentimes represent
the core of their own functioning and business model.
Viewed in this light, social media platforms are data-driven organisations
that use platform participation as the means (or bait) to produce a variety
of data on people’s behaviour. For platform owners, such data form
the basis for developing revenue-generating services such as building
up audiences for advertisements or sharing the data with data-mining
analytics companies and other data brokers of the internet data ecosystem.
Social data can also be used by platform owners for improving platform
functioning and user experience – both essential for user retention and
active platform participation.
Social media platforms are therefore multisided platforms of a rather
particular kind. Similar to traditional ad outlets (such as newspapers,
TV or radio programmes), the revenue-generating services social media
provide become attractive for advertisers or third parties only when there
is a large number of users on the other side of a social media platform. But
this dependence of advertisers on users often (though not always) comes
into play only after users congregate in sufficiently large numbers on the
platform.
In other words, in social media platforms, the transactional dependence
of the two or more sides may not run in both directions. For example, in
social media platforms such as Facebook or Twitter, users are not attracted
to the platforms because of advertisers on the other side and often, as
the case of Wikipedia attests and the history of YouTube reminds us, may
revolt against such a platform move. It is the direct network effects on the
side of users that play a crucial role in attracting users, and thus securing
a large platform user base. In this regard, social media platforms can be
said to differ from traditional ad outlets that are usually devoid of direct
network effects. In other cases, however, such as TripAdvisor (recall that
TripAdvisor is a service-based social media platform), the transactional
dependence of one side (e.g. users) on the other side(s) runs in both
directions. It is a genuine cross-side dependence.
All other things being equal, the larger the population of users a social
media platform commands the higher the value potential of the platform.
Once again, Facebook stands as the epitome of this fundamental condition.
The looser transactional dependence of the two sides probably makes
social media platforms relatively easier to manage. At the same time, the
significance of network effects on the user side confers on social media
platforms an elusive nature that is anchored on impression and social
recognition rather than the transactional utility of e-commerce platforms
and the tangible realities of productivity and physical resources that have
been characteristic of traditional business organisations.
50
4.6 Conclusions
In this chapter, we have sought to explain how social media can be
regarded as digital multisided platforms. We have first considered the role
of multisided platforms in the current digital economy and the different
type of network effects that are characteristic of them. In doing so, we
have paid due attention to the concept of indirect or cross-side network
effects that we claimed are the defining attributes of multisided platforms.
Social media are multisided platforms whose services are crucially
dependent on user participation and the content/data that user platform
involvement generates. These conditions modulate the ways network
effects play out in the case of social media platforms. In many cases, social
media platforms are first required to establish a populous user base and
thus deal with ordinary network effects on the user side, before they can
open the platform to service providers, advertisers and other third parties.
These conditions of course vary with respect to the type of social media
platforms mentioned in Chapter 2, that is, network-based, content-based
and service-based. Over the next few chapters, we try to qualify our claims
and show how different social platforms deal with the sine qua non of their
existence, that is a large and actively engaged user base and the types of
transactional cross-dependencies and network effects involved.

Having completed this chapter and the readings suggested, you should be
able to:
• distinguish between one-sided platforms and multisided platforms
• explain the difference between direct network effects and indirect or
cross-side network effects
• link cross-side network effects to the operations of multisided
platforms and discuss the challenges they confront
• distinguish between digital retailers and digital, two-sided or
multisided platforms
• assess and discuss the particular kind of multisided platforms social
media epitomise
• distinguish between user-generated content and social data.

1. How do network effects operate? How would you account for the
fundamental fact that the value of a product or service is positively
related to the number of users that use the same or similar type of
product or service?
2. What are cross-side network effects and how do they underpin
multisided platforms?
3. What is the difference between single-sided platforms and multisided
platforms?
4. Are there any differences between standard service- or product-based
multisided markets and the ways social media platforms operate as
multisided markets?
51
Notes
52
Chapter 5: The structure of platform

participation
5.1 Introduction
In this chapter, we unpack platform participation and analyse the process
by which social data are produced. Platform participation, as we have
indicated already, is usually organised along specific and stylised types
of activities such as following, liking, commenting, posting etc. These
activities become the engine of data production as they are repeated
recursively and amass. Consider, for instance, Facebook likes and
how many times during a day users perform that activity. Each liking
(the action of like) produces data on each user’s likes and on her/his
behaviour. If these miniscule actions are multiplied by Facebook’s 1.71
billion monthly active users (as of 2017) one can get a glimpse of the
massive amount of data which the platform generates. Social media use
the data produced by platform participation for a range of purposes: they
may compute insights about users’ taste, consumption habits, political
orientation and so forth at various level of generality (such as individuals,
age groups, communities etc.). Sometimes these data are just packaged
and sold to analytics companies or data brokers that use them for one or
another purpose. We deal with these issues in more detail in Chapter 9,
when we discuss how social media platforms produce value for businesses.
This chapter covers the fundamental principles and mechanics of social
data production. This is a precondition for understanding how social
media innovate and thrive as economic organisations. In the first section,
we introduce platform participation and explain how social media encode
the everyday: how they structure user daily participation so as to produce
specific types of social data. In the second section, we define social data
and introduce some important distinctions. We move subsequently on to
considering how core and peripheral interaction is associated with social
data. We deal with how each type of social media platform (recall Chapter
2) is linked to social data through the ways it designs its core interaction
and further qualifies it by a set of peripheral interactions. We conclude
the chapter by considering the implications (as well as the limitations)
of this ‘datification’ of user daily engagement. One of the most important
implications is the rating and measuring of the daily and informal fabric of
life of each and every user.

In this chapter, we aim to provide an in-depth view of how social media
organise and structure user platform participation. We focus on the back
end of social media platforms with the view to explaining how platform
participation works and the data it produces. Platform participation and
data production on social media cannot be studied separately. The social
data produced by user platform activities are new kinds of data that are
becoming increasingly important for businesses and organisations. One of
our purposes is to give you a sufficient understanding of the modalities of
social data production and how they differ from other kinds of data. Some
additional aims of this chapter are to:
• distinguish between user-generated content and social data
• explain the difference between different types of data.
53

By the end of this chapter, and upon completion of the essential readings
• define user-platform participation in terms of platform design and
implementation
• explain how encoding of user participation works
• define social data and relate them to platform participation and
platform strategy
• distinguish different kinds of data produced by social media
• define core and peripheral interaction
• elaborate on different types of designing and implementing core and
peripheral interactions and the strategies social media platforms use to
accomplish these objectives.

Alaimo C. and J. Kallinikos ‘Encoding the everyday: the infrastructural apparatus
of social data’ in Sugimoto, C., H. Ekbia and M. Mattioli (eds) Big data is
not a monolith: policies, practices, and problems. (Cambridge MA: MIT Press,
2016) pp.77–90.
platforms’, The Information Society 33(4) 2017, pp.175–91.
Norton, 2016) Chapter 3, pp.35–59.

Bowker, G.C. and S.L. Star Sorting things out: classification and its consequences.
changing context of strategy’, Journal of Information Technology 30(1) 2015,
pp.44–57.
Kitchin, R. The data revolution: big data, open data, data infrastructures and their
consequences. (London: Sage, 2014).
5.2 Platform participation

Social media platforms are economic intermediaries, social and
communicative arrangements and complex technical architectures of
modules and functionalities at the same time. Against this background, it is
scarcely surprising that social media platforms accomplish much more than
just facilitating user interaction, collaboration or communication. They also
shape the terms on the basis of which users get involved and interact with
other users on the platform to serve the objectives they pursue as business
organisations.
We begin our analysis by considering what kind of activities social media
platforms organise and what these activities represent. Sharing, posting,
liking, commenting are all familiar activities. The majority of social
media platforms formalise in well-defined online activities behaviours
and attitudes that were part of a diffuse or informal daily social life
such as commenting on news, chatting in a bar, liking a movie or a play,
recommending a restaurant to a friend and so forth. When performed on
social media these diffuse activities take on a (digital) shape and make
visible (and, in a sense, also permanent) something that was fleeting
54
or ephemeral before: a chat with a friend, booking a restaurant for a

dinner, listening to a song and so forth. Even more important, some of the
activities we usually undertake on social media platforms did not even
exist before or, at least, they did not exist in a similar shape. We do not
normally follow friends offline! On social media, by contrast, following
a friend or another user has become the familiar action by which we
connect to others. Even though the majority of the activities we perform
online have already taken a familiar shape, this chapter invites you to
rethink them and consider to what extent they are also the result of careful
platform design and data engineering.
The main operation of social media, we suggest, is to cast in an online
social context most of the common, widespread and often lone activities
we perform in our everyday life (such as watching, reading, listening,
eating) and then code them as data. How do they do that? This is what we
call the encoding of social media (Alaimo and Kallinikos 2016, 2017).
We use the term to denote the ways by which social media formalise
a diffuse and largely informal social ‘everyday’ into a set of platform
activities that produce social data whenever they are performed.
What the early rhetoric of digital enthusiasts defined as spontaneous user
participation (recall the history of the web as platform in Chapter 3), in
reality constitutes the strategic core of every social media platform. Such
participation is designed to procure the data that platforms need to sustain
their functioning and business objectives. It would be naive to think of
user participation on social media as spontaneous. It comes, no doubt,
as a surprise that such a vital and pervasive element as user platform
participation needs careful planning. In reality, each of the activities users
carry out on social media is mediated by a careful design that reflects the
business objectives of social media platforms and the ways these objectives
can be accommodated by technological functionalities or affordances.
In this respect, it is important to think about user-generated
content (UGC) as not just something that has value solely on its
own, as a participative practice or as the result of collaboration. User-
generated content is often one of the main drivers of user engagement
and participation (we discussed it briefly in Chapter 4). Social media
participation is often orchestrated around user content generation. The
actions of uploading or sharing, for instance, make sense only if they are
related to a piece of content. Most of the innovativeness of social media
companies derives from the fact that a particular kind of social interaction
is made visible as data, thus becoming the basis for new business
initiatives or the source for a new kind of service provision.
5.3 Encoding user participation

Social media platforms therefore produce data on user interaction and
communication as they happen online because they program platform
participation along standardised activities: tagging, following, liking
and so forth. These activities are extremely important because they
leave a computable digital footprint. Whatever users do on social media
platforms is connected to technologies of data generation and recording.
Sharing, posting, uploading are not just online activities but are also
a means to procure data of one kind or another. The ways in which
platform participation is structured should thus be interpreted as one of
the most interesting innovations brought about by social media. Platform
participation recreates online a social context whereby a set of well-
defined interactions can be performed by users and directly encoded
55
into data by the platform’s system. Social data are produced through the
encoding of online interaction and user platform participation.
How do social media transform the complex texture of online platform
participation into data streams? To produce social data, the platform
needs to program activities that are both easy to master and interesting
enough to be repeatedly and recursively enacted by very large numbers
of users. The encoding of platform participation into data follows a very
simple structure. As indicated, participation is disassembled into easy-to-
do actions that, thanks to how easy they are to perform, facilitate user
engagement and participation and are constantly repeated.
The key principle is the following. On social media, everything is defined
as ‘objects’. Users are defined as objects, as are videos, comments, photos
and so forth. For reasons of automated data-harvesting and processing, no
qualitative or ontological difference is made between a human user and
what usually passes as an object. Every platform designs a set of
predetermined actions such as following, clicking, sharing etc. with which
two objects can be connected. For instance, when a user follows another
user, two user objects are connected; similarly, when a user likes a photo
these two objects become connected.
follows
likes
object interaction object

Figure 5.1: The logic of encoding.
Figure 5.1 illustrates the logic underlying platform interaction. Every
action structured by this simple action script becomes a micro-narrative,
a statement or miniscule story that indicates something about users or
any other objects: ‘Cristina likes a book’ or ‘Cristina follows Jannis’. On
the basis of these elementary facts, social media disaggregate platform
participation into stylised behavioural choices – minimal action scripts that
produce data streams. Once platform participation becomes standardised
in these terms, it becomes possible to recombine the standardised data
so obtained along many different and new paths (we deal with how this
happens in the next chapter). Social data are thus ready to be counted,
correlated, stored and eventually reutilised by third parties in a number
of ways. This is the power of social media encoding: it makes visible,
standardised and countable social interactions that were invisible (perhaps
even non-existent), variable and not amenable to calculation before.
Activity
Compile a list of all the activities you normally do on your favourite social media platform.
Can you identify and single out the core interaction of that platform?
56
5.4 Social data

Before moving forward with the operations of social data production and
processing, we need to introduce some useful distinctions of data types
that further help us understand the distinct quality of social data.
An important distinction is that between data produced in traditional
commercial platforms and data generated by social media. Consider, for
instance, what separates ‘buy’ on Amazon and ‘like’ on Facebook. In the
first case, a user completes a transaction, buying something online that
will be delivered to their home or streamed to their device. But what does
a user do exactly in the second case? A like is no more than an expression
of an opinion or sentiment. An action of this type generates a different
type of data than simply recording a fact (a transaction). Opinion,
sentiments, comments (even friendship) are ambiguous actions and all
highly dependent on the context in which they occur. It matters, in other
words, where a user is and who they are with when they express a belief,
an idea, a preference. Accordingly, how user participation is encoded into
data is a much more complex and delicate task than is the case when
recording ordinary transactions (e.g. buying an item). This is the reason
why platform participation and social data need to be studied
together and the process of encoding understood in all its details. Because
of the massive relevance of social data for social media platforms, we need
first to unpack how these data are produced. This is the precondition for
understanding the value and possible use of social data.
The actions by which platform participation is disaggregated into distinct
types of activities can now be encoded into data. In this sense, social data
are data of a new kind. They are surely very different from traditional
online data that are generated by online transactions. It may be useful
to restate the distinction between social data and transaction data, or
between social data and the data produced by cookies and tracking
devices. Cookies and tracking devices (such as beacons, for instance)
record simple online behaviours (time spent on websites, searching habits
etc.). Meanwhile, transaction data usually record an exchange. Social data
instead are produced by social activities carried out on the platform by
users. Activities of this sort are pre-programmed by platforms in an online
space that is constantly tuned in and adjusted to user behaviour. Platforms
are purposely designed to let users participate in specific ways.
On Twitter, for example, users will only see the tweet stream of the
users they follow, ordered by the Twitter’s algorithm on the basis of the
most relevant tweet. What users tweet or retweet is based on what users
see; this in turn is based on algorithmic, filtering mechanics and user-
following data. Tweeting is the core interaction of Twitter. The tweeting
action produces different data. It produces social data from the action of
tweeting, content in the form of text and location data (if the location
function of the device in use is turned on). Additionally, a single tweet may
produce content data of another kind, if users upload a picture or link an
article. Even more interestingly, a single tweet may embed other actions
such as, for instance, a user’s mentioning of other users or a hashtag,
which we call peripheral interactions (mentioning, hashtagging, etc.).
Are all of these data the same? Social media produce vast volumes of
data but not every kind of data produced is social data. On Twitter, as on
every other social media platform, in order to participate, a user needs
to have a profile that usually contains descriptive data on themselves.
These kinds of data are called profile data. They are usually traditional
demographic or occupational data, such as the profile holder’s name,
57
gender, occupation, marital status etc. Other data may be automatically

sent by digital devices, as in the case of location data enabled by GPS.
These are machine-generated data that we include in the broader category
of sensor data (they may include location, time, IP address etc.). All of
these kinds of data acquire value when correlated to social data. At the
border of being tedious, we would like to restate that social data are the
data produced by platform participation as this is programmed by social
media. We may think of social data as a sort of behavioural data because
they describe the behaviour of users as this is conditioned by the specific
platforms on which users participate. Where else are users tweeting but
on Twitter? Social data is the result of a designed platform participation
which disaggregates and typifies that participation into actions and
encoded into data. Tweeting, following, clicking and liking are all forms of
encoding whereby a real-time, constant-platform everyday engagement is
rendered as data. Much of the innovativeness of social media relates to the
ways they produce social data (Alaimo and Kallinikos 2016, 2017). Table
5.1 summarises the differences between these types of data.
profile data User-generated, usually when joining a platform, stored in the profile
page. They may include: name, gender, occupation, marital status etc.
sensor data Machine-generated. In social media, such data are commonly
automatically generated by mobile devices every time users
participate on the platform. They may include location, time, IP
address etc.
social data User-generated, the result of platform participation as it is designed
by a platform’s systems. They encode the core and peripheral
interactions a platform orchestrates. Some of the actions encoded
into social data may include: uploading, sharing, liking, following,
tagging, commenting, tweeting etc.
content data User-generated, they are video, text, pictures users create, upload,
view, share on any social media platforms
Table 5.1 The different data produced by social media platform participation.
5.5 User-generated content and social data

One of the main drivers of user platform participation is the production,
consumption and sharing of content. User-generated content entails the
creation and subsequent posting or uploading of content such as video,
text-based comments or views, photos. User platform participation
evolves, in fact, around user-generated content and the specific actions
we have been describing as encoding – that is, viewing, commenting,
uploading, posting, tagging, liking and so forth. User-generated content
provides high volumes of data, such as images, posts of various kinds
and written comments that, being in the format of text, are usually called
unstructured. As a rule, user-generated data are more difficult to compute
and correlate by using the current database techniques and available
technologies.
However, user-generated content provides the means and the context
by which platform participation can be performed and encoded as social
data. It is also very important to point out that when users act on a piece
of content – for instance, when users like a photo – they link that content
to structured data which make user-generated content computable as a
reference object. For instance, when ‘Cristina likes a video’, the action
of liking produces social data that qualify both the object Cristina and
the object video. In this sense, even if the video is unstructured data,
58
the structured data generated by performing liking or tagging make

it referable and ultimately computable. A tag is a descriptive label
(metadata), attached to the video allowing it to be measured and related
to other videos with the same tag. In this sense, the content data from
unstructured data become semi-structured data.
It is thus important to distinguish between the content, say, of an upload
or post (what users generate as content) and the act of uploading or
posting that content (social data). As distinct from the content itself,
posting, uploading, tagging and so forth have significant value of their
own, as we have already mentioned. They indicate for platform owners
the preferences and choices of users – for instance, what types of videos
or photos they upload, what people or content they are tagged to, who
they interact with and so forth. Users’ choices, therefore, expressed in acts
such as posting, uploading, viewing or liking, provide structured data (that
is, discrete clicks) that can be stored, counted, aggregated, computed or
scored to produce a range of user profiles and chart the patterns of their
platform participation.
Social data are structured data and, for this reason, have a strong potential
value for platform owners and, by extension, advertisers and third parties
such as data analytics companies. Compared with user-generated content,
social data are much easier to crunch, to variously characterise individuals
and their preference profiles and to group users together in terms of
preferences they may have in common – for example, viewing certain
types of videos, liking or following particular individuals, uploading
video or other content, listening to particular artists or genres of music
and so forth. Viewed in this light, social media platforms are data-driven
organisations that use platform participation as the principal means for
producing a variety of data on people’s behaviour. Such data can be used
to tailor advertisements and other platform interventions of a commercial
or operational (to improve platform functioning) nature.
It is important to understand the methods and techniques through which
data generated on platforms are involved in value creation for platform
owners, partners and third parties. Consider, for instance, the huge
number of CVs LinkedIn has at its disposal. Such data are generated
by following standard templates made of specific data entries such as
professional specialisation or expertise, education and work experience.
Data entries provide substantial information about individuals but, more
importantly, they standardise that information and make it amenable
to machine reading, aggregation and various forms of quantitative
comparison (Bowker and Star 1999). Standardised data of this sort are
also structured data. Social media platforms seek to shape platform
participation along routes that generate structured data because such
data can relatively smoothly be processed by machines at the same time
as they address in advance specific information needs of the platform.
Ratings offer another widely used technique for eliciting structured data in
numerical forms that can be easily aggregated, and filtered and scored in a
variety of ways (aggregation is the main topic of the next chapter).
Social media platforms also generate a huge amount of data of an
unstructured or semi-structured nature (Constantiou and Kallinikos, 2015;
Kitchin, 2014). In fact, as we have already indicated, much user-generated
content is predominantly of an unstructured character, usually cast in the
form of text – verbal narration such as stories, opinions, blogs on politics –
or in the form of images such as photos and videos. Clearly, stories cannot
easily be added or multiplied, subtracted or divided in the same way as,
say, ratings of hotels or places, Facebook’s likes or structured information
59
about individuals obtained by following standard CV templates. Currently

there are important techniques for parsing and analysing texts, usually
referred to as text data mining or text analytics. This usually
involves the categorising and clustering of text, concept extraction and
word frequency measurements. These techniques basically transform the
open nature of texts into distinct fields that are registered into a database
that can be ploughed by a machine and computed or otherwise filtered
through key words and other data queries. Sentiment analysis is another
similar technique of parsing unstructured data with the view to identifying
attitudes, values and opinions expressed in the form of texts.
Both computer-based text and sentiment analytics have made important
advances over the last couple of decades. Yet the functional utility and
achievement of such analytic ventures often remain questionable both
in terms of validity (what they measure) and relevance (how useful is
what they measure). Furthermore, text and sentiment analytics require
considerable specialised human resources to be carried out successfully.
It is thus preferable, at least often if not always, to define as closely as
possible the data format which a successful platform may require and to
design the system in ways that ensure a steady flow of machine-readable,
good-quality structured data. This is exactly what the identification of the
core interaction of a platform achieves, together with the specification of
the routes along which platform participants interact.
5.6 Core and peripheral interactions

From what has been said so far it ought to be clear that platform interaction
is of capital importance for platform functioning and the business models
social media platforms employ. As we have seen in Chapter 2, social media
platforms design their core interaction based on the business area in which
they operate. Platforms that are mostly dedicated to facilitating connection
or communication fall into the networking-based category we described in
Chapter 2. Because of this, they design their platform participation around
the core interaction of friending or following. On Facebook, sharing happens
because you connect with ‘the people you love’. But the core interaction
of a social media platform is always complemented by what we have
occasionally referred to above as peripheral interactions with which the core
interaction is variously intertwined.
We would like to draw attention to this inter-dependency between core
and peripheral interactions because it usually tells us quite a bit about
the functioning of the social media platform and about the business of
the social media platform. Take, for instance, Ello, a social networking
site that, similar to Facebook, facilitates connection with fellow creators:
artists, designers, photographers, architects, etc. In both cases (Ello and
Facebook), following or connecting are the core interactions, but not the
only interactions performed on this platform. There are a few other things
users can do on Facebook, as on Ello, beyond connecting with other users,
such as: commenting, posting, liking. In fact, every social media platform,
irrespectively of its type (networking-, content- or service-based), rests
on a core interaction complemented by a set of peripheral interactions
that together create the suitable blend of actions required to sustain and
promote user platform engagement.
Let us go back to the Twitter example. Tweeting is the core interaction of
the platform. A single tweet can produce social data (the act of tweeting),
60
sensor data (i.e. location), content data (i.e. the text of the tweet), but it
can further embed other actions. In this case, we may talk of peripheral
interactions, which is the case for the act of mentioning, hashtagging, or
linking. Furthermore, another user viewing that same tweet may like, retweet
or mention it. All of these actions, and the social data they procure, are in some
sense triggered by the action of tweeting. Tweeting is the action that produces
social data as a granular and countable instance of user behaviour on the
platform. It is the core activity that the platform promotes, but tweeting is also
the activity that somehow triggers all the others. In Figure 5.2 we illustrate
Twitter interactions starting from its core interaction, tweeting.
ng
e eti g
tw win
o
foll weeting
ret
a s h t a gging
h
liking
Figure 5.2: Core and peripheral interactions on Twitter.

Despite some ambiguity, Twitter may be considered as falling into the
second category of content-based platforms in the sense of being a means for
spreading brief text-based content. Similar to Twitter, Instagram operates with
a core interaction which triggers a complex pattern of platform participation.
On Instagram, the main activity is certainly uploading photos, the core
interaction of uploading procures both social data and content. As tweet-
texts are the main content on Twitter, insta-photos are the main content on
Instagram. However, following and liking are of capital importance for the
platform functioning and business model. Think about a Kim Kardashian
without followers!
For the third category of the service-based platforms, the core interaction
is usually designed as collaboration or collective creation or sharing of a
service that may derive from knowledge or information, a good that may
be leased out or collectively shared, a skill or even time (we go back to this
in subsequent chapters). TripAdvisor orchestrates its platform functioning
and its entire business model around the core interaction of user rating and
reviewing. Peripheral interactions on TripAdvisor have grown immensely
over time and now span from viewing, to liking and comparing, to booking.
As these observations indicate, platform participation, cast in terms of both
core and peripheral interactions, has become a central element in supporting
innovation in the travelling sector and bringing forward an entirely new
organising logic of travelling, triggered by the participation of the crowd.
Activity
Choose three different social media platforms, one for each category we discussed, and
briefly describe their encoding, their core and peripheral interaction and their business
field. Did their core interaction change over time? Have these platforms added different
peripheral interactions over time?
61
5.7 Conclusions
In this chapter, we have sought to lay open the mechanics and logic
of how and why social media platforms design user participation. The
chapter is essential to the task of analysing and understanding how social
media operate and innovate. Social media are based on the production
of social data. The ways they design platform participation is integral to
this data strategy. The encoding of platform participation happens along
simple yet effective routes. Participation is decomposed into action-data
connecting objects. The data thus produced open a huge spectrum of
opportunities for data use and recombination. Patterns can be detected
that reveal user consumption habits, political orientations, opinions and
tastes. But to what extent are these data reliable? To what extent does
participation so constructed represent a real picture of user opinions
and tastes? As we have seen, platform participation is designed for data
(platform functioning) and business purposes. Certain platforms design
a specific set of actions because of the data they procure (Instagram);
others start from a core interaction in a specific business sector to develop
a host of subordinated interactions that relate to the provision of services
(TripAdvisor). Some platforms remain generally oriented in supporting a
core networking interaction (Facebook).
It is important to understand how platforms design participation, what
data they produce and for what reasons. Only in this way it is possible to
obtain a fuller appreciation of the waves of innovation social media bring
to the economy and to society.

able to:
• explain the link between social participation and social data
• explain what encoding means and how it operates
• make a distinction between core and peripheral interaction
• explain the different kinds of data produced by platform participation
• distinguish between structured, semi-structured and unstructured
data.

1. In what ways are user-generated content and social data essential in
sustaining social media platforms and the services they provide?
2. What is the difference between user-generated content and social
data?
3. Based on the readings suggested, explain the process of encoding of
a social media platform of your choice, making a distinction between
core and peripheral interaction.
62
6.1 Introduction
This chapter follows the life-cycle of social data along two of the
most important data-processing operations following encoding: data
aggregation and the construction of measures. Understanding these two
fundamental operations is a prerequisite to grasping the personalised
suggestions and the business embedment of social media. In the first
section of this chapter, we expose and explain the logic of data aggregation
which is the obligatory passage point of almost any data analytics process.
The way in which data aggregation works is indicative of many social
media operations such as the construction of data entities and the ways
such entities can be correlated. After having exposed the mechanics
of data aggregation this chapter delves into the case of FashionMe – a
social media for shopping – and its encoding, aggregation and measure-
making operations. The case is used to explain how social media construct
measures such as popularity and similarity and how such measures impact
on the operations of social media and their business pursuits.

This chapter aims to explain the logic of data aggregation and
commensuration. Although these two operations can appear abstract, at
a remove from real-life processes, they lay down the foundation for the
computability of social data and, in so doing, for the ways social media
work. In tandem with the preceding chapter, this chapter aims to unpack
the functioning of a social media platform, the production of social data
and the main data operations underlying it. Additional aims of this chapter
are to:
• describe and explain the logic of data aggregation
• describe the role that data aggregation has in the construction of
fundamental social media data entities
• explain how data aggregation relies on conventions and rules
• explain the logic of commensuration.

By the end of this chapter, and upon completion of the essential readings
• define data aggregation and explain its logic
• explain how social media form new data entities by means of
aggregation
• explain why aggregation is important for the computability of social
data entities
• describe and explain the fundamental role that the construction of
units of measurements and measurement have for the functioning of
social media.

63

Desrosières A. The politics of large numbers: a history of statistical reasoning.
(Cambridge, MA: Harvard University Press, 2002).
Espeland, W.N. and M.L. Stevens ‘Commensuration as a social process’, Annual
Review of Sociology 24 1998, pp.313–43.
6.2 Disaggregation into data

In Chapter 5 we explained why user platform participation is more subtle
and complex than the usual depiction of social media as networks that
facilitate social interaction and communication. We showed that platform
participation is organised with the predominant objective of procuring the
type of data (predominantly social data) that are required for the services
social media produce. Specific actions such as sharing, posting, uploading
and so on that we referred to as encoding decompose platform participation
into narrow and standardised action types and procure social data on
user behaviour and platform participation. The recipe of encoding is easy:
participation is disassembled or disaggregated into simple and easy-to-do
actions that are repeated constantly by massive numbers of users.
However, by encoding social participation into such formalised actions
something is always lost in translation: social context, meaning, purpose
and details. As we have seen, social media platforms do not copy real-
life customs and habits of people’s interaction and communication. They
instead establish, in fact they engineer, an online social context that does
not exactly exist in real life (offline everything is a little bit messier). Taken
individually, mini-stories, such as the ones we have used as examples in the
previous chapter, do not procure much insight. By contrast, the well-defined
user interactions that are directly encoded into data by the platform’s
system establish the conditions for the computability of user participation
that is unique to social media.
User participation, user profiles and other elements get translated into
types of data that are readily countable, combinable and amenable to
computational operations and methods. In other words, when something
gets disaggregated into standardised and granular elements and encoded
into data it becomes much easier to handle by technological means.
Standardised data are possible to compute and recombine in a variety
of ways that may lead to discovering new knowledge, obtaining insights
or making better predictions in a number of fields. However, for this to
happen it is necessary to pile up the small and granular data units provided
by encoding to bigger data entities that can be used to describe platform
user participation. This piling up of granular data tokens into larger data
clusters is called ‘data aggregation’. Cast in this light, data aggregation is a
fundamental and required operation that links encoding to measurement
and the production of scores that are so characteristic of social media. In
the next section, we deal with the concept of aggregation and the way it
works in social media.
6.3 Data aggregation

Data aggregation can be defined as the piling-up of the granular and
standardised social data into larger data objects that are created by data
aggregates. A typical example of such data objects may be putting together
a group of users on the basis of shared characteristics, such as age, gender,
location, type of device used etc. In this case, the aggregation of all the
64
users aged 21–31 constitutes a cluster of users called ‘millennial’. Once

such a group is created, it triggers a set of correlation and computation
possibilities that are almost infinite. A good example of this is to think
about how profiles can be aggregated on the basis of their ‘following’ data.
For instance, let us say Instagram creates a cluster of the ‘most popular
profiles’ by piling up all the profiles with more than a million followers.
The piling up of following data into aggregated objects creates a new
object, in this case ‘popular’ profiles (popular being defined by counting
the number of followers). This in turn creates the possibility of correlating
those new objects, like ‘popular profiles’, to other objects or data (e.g.
posts, likes, age, location etc.).
Aggregation thus constitutes the second critical step (encoding is the first
step) in the operations of social media platforms. It provides the link that
connects the data streams of encoding into larger data entities that form
the springboard for further data operations: data mining, data analysis and
the calculation of measure and scores. It is on the basis of data aggregates
that critical scores such as similarity, popularity and trending can further
be deduced. In the case of social media, encoding actions such as liking
something on Facebook, to give yet another example, creates data-like
tokens that are piled up together by the system to create, for instance,
a Facebook page or a Facebook post, or a Facebook profile. Remember
that online everything is translated into a (data) object. This means that
a user profile can be read by a computer only insofar as that profile is
made of countable data. Once these data are procured by the encoding
of platform participation, and stored, they can be clustered together to
form the system’s database objects. Aggregation operates in the back end
of the system and reassembles out of the disaggregated singular choices
of individual users a new object: a new user, a post, a comment, a page.
Representing these larger objects as aggregation of smaller data entities
makes them easily computable and relatable. Once a user profile is defined
as an aggregation of data it can be computed by using the automated
rules and conventions of the system in place. Because they are now bigger
data entities made out of aggregation of small data, a single user or a
group of users can be further mined and correlated to other users or to the
entire network of users more easily and efficiently and at various levels of
generality.
More formally, aggregation is ‘a principle of creating equivalence that
allows events to be combined by making them appear as contingent
manifestation of a more general cause of a superior level’ (Desrosières
2002, pp.86-90). If, say, Facebook users are rendered as aggregates of their
Facebook likes, the system can easily make visible to what extent two users
differ from or are similar to one another with respect to their Facebook
likes. Aggregation creates equivalence; in this case the equivalence
between likes, making events (likes) appear as the varying response
of a cause of a superior level, which is the aggregate object: user as an
aggregate of likes. Likes appear as a contingent manifestation of a bigger
cause, the expression of the user (a superior entity), even if this entity has
been created by grouping his or her own likes in the first place.
Activity
Briefly describe how Netflix make movies comparable. Does it use aggregation? What
does it aggregate? How does aggregation create equivalence in this case? Read about
the Netflix data driven approach here: www.theatlantic.com/technology/archive/2014/01/
how-netflix-reverse-engineered-hollywood/282679/
65
It is important to uphold that aggregation and the majority of

computational operations that create data and digital objects are
conventions. If you realise at what scale the massive disaggregation and
re-aggregation of social data operate you understand the importance of
applying conventions, rules and practices to data mining. It would simply
not work otherwise. At the same time, it is very relevant to bear in mind
that those conventions actively shape the data outputs of social media.
They are correct only insofar as they are evaluated by the rules and
practices they themselves help establish. Be aware that social life is made
computable not because it is recorded or tracked. Rather it is because
social life is represented in certain ways by applying the practices
and conventions of encoding and aggregation which construct, formalise
and make visible certain social participation and patterns of user activities.
6.4 Social data as units of measures: establishing a

common denominator
Let us go back to our example of Facebook users. Figure 6.1 illustrates
how two Facebook users that are rendered as aggregates of their
Facebook likes are made comparable. It is because they are now defined
as an aggregation of likes that the two users become comparable in
computational terms. It means that all the different qualities that make
two users different (or similar) are reduced to one metric: the number
or frequency, for instance, of the specific social data, in this case of their
Facebook likes.
This process is well known in social science as commensuration. On
social media, it acquires new importance because these social media
platforms make commensurable entities that were not commensurable
before; in fact, such entities didn’t and cannot exist, as we have repeatedly
claimed, apart from the ways social media platforms design and thus
create these entities. Commensuration is crucial to constructing fast and
efficient ways of ranking and classifying disparate objects by creating a
common metric (Espeland and Stevens 1998). This is the case, to give
another example, with reviews and ratings in TripAdvisor that thus
commensurate and measure user travel experience.
In a certain way, commensuration and aggregation can be considered
as coterminous. They both select one aspect of something (the likes of
users, the rating of places) and make that something commensurable only
by looking at that one selected (measurable) aspect. Examples abound,
and perhaps the greatest example of all is the most diffuse modern tool
of commensurability: money. Something very disparate such as, say,
a car and a medical treatment can be quantitatively compared (made
commensurable) just because their intrinsic properties and qualities are
abstracted away thus leaving space for measurement along one dimension,
namely monetary value.
66
Like Like Like Like

Like Like Like Like
Like Like Like Like
Like Like Like Like
Figure 6.1: Commensuration between two users as aggregate objects.

On social media, this practice of commensuration takes new life. Many
social media platforms use the conventions and rules of aggregation and
commensuration to produce new information about every kind of objects.
New information often, means new services. Consider TripAdvisor again.
By structuring its platform participation in terms of ranking and starring
hotels or restaurants, it creates a smooth way of making disparate objects
commensurable. Even more importantly, being a social media platform,
TripAdvisor characteristically opens up the process of ranking and
commensuration to everyone. In turn, TripAdvisor can rely on these data
to create multiple services and establish partnerships that evolve around
the metrics of destinations: booking top romantic hotels in London, or
offering discounts on the 10 best attractions in Madrid. Consider the
difficulties in comparing two hotels in terms of quality of services. What
do you measure? How? If two different people assess the two hotels,
would they use the same criteria? Commensuration reduces qualities into
quantities. Instead of offering a comparison of the qualities of two hotels,
TripAdvisor offers the quantification of two hotels by reducing their quality
assessment into ratings. TripAdvisor simplifies the assessment of hotels
by reducing it simply to the counting of the number of reviews, or the
number of stars, plus it lets users do the rating.
Commensuration, in this sense, is a form of standardisation which differs
from other forms of standardisation because it provides a common metric.
When used in decision-making, the procedures for deriving this metric
amount to a series of aggregations. (Espeland and Stevens 1998).
Activity
Read Espeland and Stevens (1998) and write a brief summary of the paper reviewing its
fundamental concepts in a short critical essay of 1,000 words.
67
6.5 Similarity, popularity and trending: measuring

shopping
In this final section, we will use the example of a social media for shopping
to rehearse the fundamental passages of social data from encoding,
through aggregation, to commensuration. We conclude by describing the
creation of standard measures such as similarity and popularity that social
media employ constantly to organise and display information and produce
services.
The example we use is a social media for shopping called FashionMe.
Although the name is fictional, FashionMe is a real London start-up which
personalises shopping of fashion design items by relying on the data
produced by its user base. Defined as a Pinterest with shopping features,
FashionMe is a classic service-oriented social media (see Chapter 2) which
relies mostly on social data and social media functionalities to innovate
retailing and marketing services.
FashionMe structures its platform participation in a set of well-defined
activities such as tagging, following, clicking, browsing etc. Among these
activities, tagging is the core platform-user activity. Tagging procures
the most important data for the technological and business operations
of the platform. By tagging, users save the products they like with a
bookmarklet system based on tags. By letting users tag, the platform
sustains user platform participation allowing users to display their tastes
and curate their own shopping profiles; in turn, the constant and repeated
action of tagging generates large volumes of social data on shopping.
Tags are the principal social data the platform uses to personalise
shopping suggestions. The action of tagging works well in sustaining user
engagement on the platform. It allows users to curate the display of their
taste by updating their selection of products. By tagging recursively users
signal their preferences and also generate important data and metadata
for the platform business. By leveraging on user participation, the platform
is able to aggregate and compute social data on taste and product
preferences.
A bookmarklet is a bookmark stored in a web browser that contains

JavaScript commands that add new features to the browser.
See https://en.wikipedia.org/wiki/Bookmarklet
The social shopping platform offers personalised suggestions integrated

with the possibility of shopping. The platform displays both a feed of
images for the most recent products as well as a personalised feed for
each user, computed on the basis of past behaviour and the behaviour of
similar others. There is also an editorial feed in which the products are
handpicked by the platform editors. Users have their own profile, which
is made up of images of products saved and tagged, other users, stores or
brands followed and curated lists of products. Users can sign up and log in
using their Facebook account. Apart from tag, users can follow other users,
brands or stores they like, comment, like and buy products. The company
operates with an affiliate marketing model in which FashionMe receives a
fee every time a click through to an online shop leads to a purchase.
Tag-data encode a user’s intention to buy. The system assumes that by
saving products into their own profiles, users manifest their own taste by
tagging. The system thus encodes user intentionality – the social side of
shopping – as tag-data.
68
tags
Figure 6.2: The encoding on FashionMe, a social media for shopping.

Once an intention to buy is encoded into data the system needs to
define its main objects. Perhaps you may have guessed that for a social
media interested in innovating shopping, gathering enough data on
the taste of consumers is paramount in order to produce relevant
personalised offers or services. Aggregation and commensuration
are employed to render users’ tastes computable. The system defines
users on the basis of what they have been saving: user-object is the
object defined as aggregation of tag-data. The aggregation of tags makes
users commensurable because it establishes the equivalence between
users by creating the units of measurement (tag) along which disparate
objects (users) can now be made commensurable. By creating objects of
a ‘superior level’ as aggregations of tags, the system does not establish
comparison among users, it instead makes them computable along a
common metric (the count, frequency, or correlation of tags). As we have
seen, tags are events that have value as manifestations (occurrences) of a
cause of a more general level, the user intention to buy.
user
Figure 6.3: The definition of users as aggregations of tag-data on FashionMe.
The rules and conventions of aggregation and commensuration make
users computable. Now the platform can suggest relevant products to
buy to users that are similar, or it can suggest the most popular products
to users. Because users are defined with respect to how they function
when they related quantitatively to one another as aggregation of data
rather than in terms of what they are, similarity between them becomes
a matter of counting the number or the typology of tags (tags metadata).
The computation of tags under common metrics creates scores (measures)
such as popularity, similarity and trending that are very important for the
personalisation of information on social media.
Once the system is able to structure and to sustain platform participation
and establish its rules and convection for the creation of structured data
and new data objects, computing personalised suggestions for all these
operations is just a matter of counting and correlating. In our example of
FashionMe, for instance, a popular product is a product that is re-tagged
many times. The platform homepage displays personalised feeds of
products tagged, ordered on the basis of the most ‘re-tagged’. Additionally,
product feeds can be filtered on the basis of taste similarity or under the
most recently tagged product. The platform has profile pages for users
where users display their own selection of products together with whom
they follow and who is following them.
69
A newcomer joining FashionMe is prompted to follow some of the

suggested users based on common Facebook likes and other data obtained
from their Facebook profile. Before the implementation of the system’s
suggestions, the very same activity was completely automated. Following
is a fundamental platform activity insofar as it procures the ‘raw’ data
for the computation of similarity of taste (where two users following
each other are deemed similar in taste). The measure of similarity so
constructed enters actively in shaping the social data that feed back
to the platform at many other layers. On FashionMe, the similarity of
two or more users constructed out of following data partially defines
the ‘community of taste’ of any users. Such a grouping is essential in
computing personalised suggestions at various levels. It is by using such
data-based representations that the majority of personalisation systems
implement personalised recommendations, that is, their core functionality.
Remember that what counts on these platforms is the interest-graph, the
like-minded community of users. On FashionMe, for instance, following
data and its derived measure of similarity enter in the computation on
whom to follow.
Table 6.1 recaps the three fundamental operations of social media and
the data journey whereby the initial data procured by coding platform
participation are transformed to measures that variously describe life on
the platform.
From data to measures Definition Examples

encoding Makes aspects of user tagging, following, liking etc.
behaviour the granular,
discrete data tokens
on the basis of which
it becomes possible to
formalise and count
social media platform
participation
aggregation Creates a new computable ‘user’ as aggregation of tags
entity out of data.
Aggregation helps
establish out of the
enlisted, singular choices
of individual users larger
social objects
measures By making entities popularity as re-tag counting
commensurable,
aggregates serve as a pool
for establishing a set of similarity as following data
measures that are used to counting
define further the context
on which user activities
take place
Table 6.1 A summary of the encoding, aggregation and measure-making through

which social media construct value.
Social data obtained by the encoding of platform participation in certain
ways enter in the shaping of larger data objects (a user or a community of
users) and in the construction of measures (popularity or similarity) that
are in turn used to suggest what product to save (tagging) or what user to
follow (following). In short, by constructing similarity scores, social data
70
and their operation of encoding, aggregation and commensuration also

actively shape the very context of user platform participation.
6.6 Conclusions
In this chapter, we have sought to provide an account of the fundamental
data operations of social media platforms. Building on the previous chapter,
we have reviewed the role of encoding and how it disaggregates platform
participation into small, standardised data points. Viewed in this light,
encoding provides the essential condition and the data pool for the system
to perform its second important operation: data aggregation. Aggregation
can be performed only if something has been first disaggregated into
standardised and granular elements. It is in this sense that encoding
provides the necessary condition for this piling up and clustering of data
to take place. We have provided the example of Facebook likes forming
posts, comments or pages but also the example of FashionMe tags forming
new users. These objects so formed become amenable to commensuration
and computation; a user object formed by aggregated tags becomes
immediately commensurable to other users and to the platform user base
and it can be further correlated to other data such as products or stores.
We have concluded the chapter by reviewing the concept of measure and
measure-making. The constitution of measures together with encoding and
aggregation provide the backbone for social media functioning and many
of their data operations, personalisation included, on the basis of which
social media acquire their business relevance.

able to:
• define data aggregation and explains its logic
• define the new data entities formed by aggregation
• explain why these new data entities or objects are important for social
media operations
• describe and explain similarity.

1. Why is the encoding the precondition for the functioning of social
media?
2. How does aggregation happen?
3. Can you describe the encoding of any social media platform of your
choice and justify it in the light of the constitution of new data
entities? What is it that needs to be rendered computable?
4. Define the process of commensuration in social science and explain
how it works with an example of your choice.
71
Notes
72
7.1 Introduction
This chapter deals with the value creation process in social media
platforms and multisided platforms more generally. Value creation has
traditionally been seen as coterminous with the production of physical
goods and predefined services. On this view, value is a function of the
worth or usefulness of a good or service. Social media and multisided
platforms more generally redefine this product-centric view of value. As
we have explained in the last three chapters, digital multisided platforms
provide a context in which value accrues as the outcome of specific forms
of interaction between groups of platform participants or users. In the
case of social media platforms, in particular, such forms of interaction
are closely linked to the production of data on the basis of which value is
produced and traded to platform participants. In this sense, value creation
in platforms is, primarily, a social, communicative and data-based process
rather than a physically embedded process of producing predefined goods
and services out of available resources.
The chapter provides you with a broader overview of digital multisided
platforms and the innovations they bring about in value creation. It is
against such a background that you can better understand and appreciate
the distinctive contribution that social media platforms, as a species of
multisided platforms, make to the current digital economy.
• value
• value creation
• markets
• organisations
• exchange
• data and value.

This chapter aims to explain the process of value creation on social media
and multisided platforms more generally. Some additional aims of this
chapter are to:
• define the process of value creation
• distinguish between different forms of value creation
• explain how value creation occurs on social media
• link value creation on social media with data.

• define the concept of value
• explain the process of value creation
• distinguish between product-centric, firm-centric and platform-
engendered value creation
• explain how value creation takes place in multisided platforms
73
• distinguish how multisided platforms differ from the standard

arrangements in which value has traditionally been generated
• connect value creation in multisided platforms with information
architecture
• distinguish value creation in social media platforms from value
creation in digital multisided markets
• explain the role data play in value creation in social media.

Norton, 2016) Chapters 3–4, pp.101–34.
2008) Chapters 1, 2, 4, pp.7–35 and 63–100.

Ciborra, C. Teams, markets and systems. (Cambridge: Cambridge University
Press, 1993).
platforms. (Cambridge, MA: Harvard Business Review Press, 2016).
(London: Morgan Kaufmann, 2014) Chapter 3, pp.49–59.

Aaltonen, A. and J. Kallinikos ‘Coordination and learning in Wikipedia:
revisiting the dynamics of exploitation and exploration’, Research in the
Sociology of Organizations 37 (2013), pp.161–92.
Arrow, K.E. The limits of organization. (New York: Norton, 1974).
Barrett, M., E. Davidson, J. Prabhu and S.L. Vargo ‘Service innovation in the
digital age: key contributions and future directions’, MIS Quarterly 39(1)
2015, pp.135–54.
2015, pp.44–57.
Lusch, R.F. and S. Nambisan ‘Service innovation: a service-dominant logic
perspective’, MIS Quarterly 39(1) 2015, pp.155–75.
possibilities. (Cambridge: Cambridge University Press, 2014).
Mintzberg, H. Structure in fives: designing effective organizations. (Englewood
Cliffs, NJ: Prentice-Hall, 1983).
Piore, M.J. and C.F. Sabel The second industrial divide: possibilities for prosperity.
(New York: Basic Books, 1984).
Prahalad, C.K. and V. Ramaswamy ‘Co-creation experiences: the next practice in
value creation’, Journal of Interactive Marketing 18(3) 2004, pp.5–14.
Simon, H.A. ‘Organizations and markets’, Journal of Economic Perspectives 5(2)
1991, pp.25–44.
Sundararajan, A. The sharing economy: the end of employment and the rise of
crowd-based capitalism. (Cambridge, MA: MIT Press, 2016).
Williamson, O.E. Markets and hierarchies. (New York: Free Press, 1975) pp.26–30.
Zuboff, S. In the age of the smart machine: the future of work and power. (New
York: Basic Books, 1988).
74
7.2 Multisided platforms and social media

Multisided platforms bring about far-reaching changes in the processes
through which value has traditionally been created and consumed (e.g.
Evans and Schmalensee, 2016; Parker et al. 2016; Tiwana, 2014). In fact,
the significance of digital platforms and their rapidly ascending economic
power (Shapiro and Varian, 1999; Sundararajan, 2016) owe a great deal
to a distinctive model of generating value that we have touched upon
several times in previous chapters but not dealt with in detail.
The standard conception of value is coterminous with the creation of
worth or usefulness associated with the production of physical goods
and packaged or predefined services such as transport, entertainment or
financial services. Such a conception of value can be said to represent a
product-centric view of value. At the heart of the processes of value
creation, understood in these terms, is a physical value unit or output unit,
produced by a firm or an organisation. Under such conditions, economic
entities such as a firm or organisation are clearly demarcated from the
external environment. They feature considerable resource investments
and, crucially, strong membership rules and elaborate recruitment
procedures that strongly control who is admitted to work and contribute to
value creation. In such settings, value accrues within the confines of firms
and organisations. Value creation is a process of skilfully transforming,
matching or combining different materials and resources (Mintzberg,
1983; Zuboff, 1988) to produce a predefined product or service; hence the
product-centric practice or view of value.
Multisided platforms are very different in this respect. In the digital
economy of platforms, value is a social and communication-
based process. It is predominantly generated through the massive
online congregation of users or platform participants (recall the
concept of network effects) and the structured forms of interaction
and communication they maintain with one another. The examples
we have given so far in this guide (e.g. OpenTable, TripAdvisor,
Facebook, Instagram, etc.) all clearly demonstrate that value creation
is predominantly a social and communication-based process by which
various groups or types of platform participants reach out to others as a
means of pursuing their objectives and satisfying their own needs.
It is true that the standard conception of value described above has
over the last couple of decades been subjected to serious criticisms. An
alternative view of value has been proposed away from a product-centric
view towards the interaction firms maintain with their customers. These
last are not simply the final consumers of predefined products and
services but important participants in the process of value creation. Such
participation presupposes an extensive interaction between a firm and
its customers which is closely associated with how value is perceived and
consumed. It is through such interactions that firms seek to sustain and
improve customer experience and the growing importance it acquires in
the current context of capitalist affluence (Prahalad and Ramaswamy,
2004; Lusch and Nambisan, 2015; Lusch and Vargo, 2014).
While recognising the importance of such an alternative conceptualisation
of value, we maintain that it does not address the type of economic
entities social media platforms are and the distinctive ways they operate
as business organisations. Despite its considerable reframing of the value
creation process, the experience view of value basically remains
firm-centric. In this respect, it fails to appreciate the far-reaching
significance of platforms as places of congregation in which platform
75
participants interact and communicate with one another as a means of

pursuing their objectives (Parker et al. 2016). Digital platforms are not
simply experience oriented, nor can such experience evolve around a
physical value unit such as a car, device or appliance, piece of furniture or
predefined service such a film, a dining experience, a flight (to name but a
few such services). On digital multisided platforms value is contingent on
communication and the information and data produced by the large-scale
communicative exchanges of their open and continually shifting user base.
It is perhaps important to remember that many of the services platforms
produce are data-based services.
Better to grasp the differences involved, it is necessary to take a step back
and briefly reconstruct the process of product-centric value creation.
This has had and still has a huge impact on how we think about value.
Understanding the economic context within which standard economic
entities such as firms and organisations have traditionally operated and
generated value thus provides an instructive contrast with the current
practices of multisided platforms.
7.3 Markets, organisations and platforms

For a long time, the disciplines of management and economics have
sharply distinguished markets and organisations one from the other (see
e.g. Simon, 1991; Williamson, 1975). Organisations have commonly
been viewed as economic units (e.g. firms or government agencies) that
produce physical products or services through considerable investments in
resources and an elaborate, often hierarchically organised, distribution of
work roles and positions. Markets, on the other hand, have been looked
upon as places where goods produced by firms and organisations are
exchanged and revenues earned. Such a state of affairs implies that an
organisation invariably confronts the critical decision as to the range of
materials or components that it decides to produce in-house rather than
acquire from other organisations (that is, the market) and use them as
inputs for the final products or services it offers to the market.
The decision what to produce in-house rather than acquire from the
market usually reflects the history of an industry and the forces of
specialisation and deepening division of labour in the industry (Piore
and Sabel, 1984). Car-producing companies, for instance, utilise a
considerable network of suppliers from which they buy a large number
of car components. Similarly, banks procure a considerable part of the
skills and services required to deliver their final services from the market.
Specialisation is a driving force behind such decisions but so are the
market conditions (competition, communication, payment systems,
tax regimes) that facilitate the smooth exchange of goods and services.
The decisions what to produce in-house rather than acquire from the
market are therefore complex and often shifting, as the consequence of
the growing division of labour and other contingencies. Transaction cost
theory in economics is a systematic body of knowledge that has sought to
explain when and under which conditions it pays to produce a product
component, service or material in-house or acquire it from the market
(Arrow, 1974; Ciborra, 1993; Williamson, 1975).
The understanding of markets and organisations as different yet
complementary systems for the production and exchange of goods derives
from the organisational principles and business practices characteristic
of industrial capitalism (Piore and Sabel, 1984). The ideas of digital
multisided platforms we have explained in the previous chapters put,
76
however, this wisdom under a hard test (see e.g. Evans and Schamalensee
2016; Parker et al. 2016). Digital multisided platforms do not easily
conform to the binary distinction of markets and organisations. Their
diffusion and quick and massive economic success render awkward some
of the traditional analytical tools derived from management theory and
economics (Shapiro and Varian, 1999).
In many ways, multisided platforms transcend the distinction between
markets and organisations and combine practices and principles that
derive from both sides of the divide. As we saw in Chapter 4, multisided
platforms can in fact be viewed as a specific type of market that serves
the interests of a range of platform participants that engage in exchanges
(often exchanges of information) with one another. At the same time,
platforms are settings in which value is produced (rather than being
simply exchanged), yet in different forms than in factories and offices,
often requiring the reciprocal interactions and attention of platform
participants. In the case of social media platforms, in particular, value is
generated through the active involvement and engagement of platform
users or is, at least, inseparable from such involvement and engagement,
as we have repeatedly shown in the preceding chapters.
Digital multisided platforms are thus different beasts whose importance
cannot be explained solely by reference to concepts and frameworks
derived from the standard principles of economics and management.
Activity
How does Airbnb create value? How does it differ from traditional hoteliers such as
Hilton? Write a short essay in which you compare and contrast their different value
creation models.
7.4 The value creation process

In this section, we describe the key dimensions along which multisided
platforms differ from standard organisations and show how these
differences should be understood and explained. We focus in particular
on exposing in greater detail the processes of value creation and its
implications. To this aim, we review the main differences in the process of
value creation between traditional organisations (a product- and firm-
centric view of value) and platforms. Table 7.1 succinctly summarises
these views:
Product-centric view Firm-centric view Platform-based view

of value of value of value
Value is a function of Value is the outcome Value is a social and
the worth or usefulness of customer experience communication-based
of a particular product that evolves around the process that takes place
or service designed in consumption or use of a via direct or indirect
advance largely predefined product interaction between
or service platform participants
Value creation is basically Customer experience Platforms are contexts or
a production process that is sustained by firm– infrastructures in which
occurs within bounded customer interaction platform participants are
economic entities (firms centred on a product or able to perform a range of
and organisations) service actions
77
Value is created by the Value is created by the Value is created

employees of the firm or specific actions and on platforms by
the organisation initiatives firms undertake the interaction and
to involve and satisfy communication of platform
customers and elevate participants and the data
customer product or footprint of their actions
service experience
Table 7.1 Three basic conceptions of value creation.
Traditional organisations are production apparatuses in which the creation
of value is crystallised in pre-designed products or services, produced
through labour and the exercise of human skills upon available resources.
By contrast, digital multisided platforms are settings in which value is
created through the interaction and coordination of platform participants.
As we have seen in some detail in Chapter 4, a critical mass of two or
more groups of platform participants is essential for the establishment and
eventual take off of a platform. Interaction and communication rather than
physical toil and work is the essence of platforms. Multisided platforms
thus signify an entirely different context of creating wealth, marked by the
presence, attention and eventual engagement of platform participants. In
platforms such as Airbnb or Uber, value is created through the structured
interaction and coordination of platform participants around the key
service (accommodation, taxi) such platforms mediate. In other instances,
characteristic of social media, user participation and attention are critical
resources for the establishment and success of a platform. In fact, the
business models many social media platforms rely on trade the attention of
their user base to advertisers and other third parties. TripAdvisor, Facebook
and Instagram are typical cases.
Unlike standard organisations, therefore, digital multisided platforms
do not produce a final product or predefined service. They rather
provide the technical infrastructure, together with a minimum of social
rules or conventions (the structure of platform participation described
in Chapter 5) through which platform participants interact with one
another. This may seem as an obvious or even trivial observation but
it is the distinguishing mark of digital multisided platforms. It is what
makes them such a different type of arrangement in which value is
produced and also consumed. In some essential respects, platforms are
just service contexts that provide the avenues (that is, technologies, rules
and resources) through which platform participants themselves structure
their interactions as a means of satisfying their own needs and objectives
(Parker et al. 2016).
Avoiding commitment to a specific product or service in principle
implies the separation or, at any rate, loose coupling of the technical
infrastructure of the platform from the uses which such technical
infrastructure can accommodate (Kallinikos et al. 2013; Yoo et al. 2010;
Zittrain 2008). This is left to users or platform participants to figure out
within the overall context of the platform and the technical solutions and
social rules each platform establishes. By avoiding a commitment to a fixed
product or service and by coupling the technical infrastructure flexibly to
the behaviour of platform participants, the platform becomes responsive
to the pursuits and goals of an amazing and hugely diverse number of
participants. Such a condition helps explain the rapid uptake and growth
of digital platforms as well as their innovative and scalable nature.
Scalability is an important attribute of platforms and a fundamental
condition for platform productivity. The spectacular user growth of
78
platforms such as Wikipedia or Facebook owes much to the loose coupling

of their corresponding technical infrastructure from the behaviour of
platform participants. Such growth is of course related to the crowd
dynamics associated with the network effects analysed earlier in this
guide. But it is important to understand that by avoiding commitment to a
fixed product or service, digital platforms remain open, in principle if not
always in practice, to everyone and are thus able to tap into the resources
and creativity of large user crowds (Aaltonen and Kallinikos, 2013; Parker
et al. 2016).
By contrast, standard organisations and the commitment to fixed products
and predefined services ties them rather tightly to particular resources and
people, such as employees. Contemplate, for instance, how constrained
is the expansion of employees of an organisation. No matter how rapidly
an organisation grows, the number of employees it can add is always
severely constrained by the availability of suitable or available people and
the existing structure of organisational machines and resources. Platform
users or participants are not employees and the contingent connection
they obtain with the platform allows expanding or shifting their numbers
in ways that are unthinkable for standard organisations (Constantiou and
Kallinikos 2015).
Activity
Many platform-based businesses have been accused of exploiting their workforce. Uber,
for instance, does not hire its drivers but enters in a ‘partnership’ with them. Inform
yourself of the latest developments in the case (the ‘Data and Society’ Institute is a
good starting point; see https://datasociety.net/’) and write a brief critical essay on the
sustainability of platform value creation.
Seen in this light, the layering nature of digital platforms and the
loose coupling of the technical infrastructure with the interaction of
platform participants are fundamental elements of the value creation
process. The expandable and generative (innovative) nature of digital
multisided platforms is very closely associated with the variable nature
of actions and behaviours of platform participants that the
technical infrastructure of platforms is able to support.
Actions and behaviours are, no doubt, shaped by the overall purpose
each platform serves and the ways it structures user participation, as we
have shown in the preceding chapters. Yet, such actions and behaviours
remain in principle open to everyone and can accommodate a huge variety
of human purposes, interests and preoccupations. Everyone can edit an
article in Wikipedia, produce a review on TripAdvisor, upload a photo on
Instagram or a video in YouTube under conditions that reflects his or her
own capacity and time availability (Zittrain 2008). The incomplete, under-
determined or procrastinated nature of digital multisided platforms is part
and parcel of their capacity to tap into the resources and inclinations of
huge masses of people and create new products and services in novel and
often efficient ways.
These ideas thus strongly support the claim that value creation is a social-
communicative process distinct from the physical status of industrial
products and the nature of many traditional services whose essential
components are determined in advance (e.g. amusement, bank services).
Value is created through the interaction of platform participants and the
things that matter to them, many of which emerge as the outcome of
their platform interaction. This is, perhaps, a distinguishing mark of the
79
age and, most probably, the outcome of a long evolutionary process that
bespeaks the importance of services and the so-called servitisation of
the current economy. (Barrett et al. 2015; Lusch and Nambisan 2015;
Lusch and Vargo 2014).
7.5 Conclusions
This chapter has discussed the transition of the process of value creation
signified by the diffusion and economic importance of digital multisided
platforms in general and social media platforms in particular. Platforms,
we have claimed, are complex infrastructures of technical solutions and a
minimum of social rules that support the interaction and communication
of platform participants. Value creation on platforms is primarily the
outcome of the interaction of platform participants.
In many instances, value creation is the outcome of exchanges of platform
participants with respect to the contingencies (when, where, how) that
surround the use or delivery of a service. OpenTable, Airbnb, Uber and
Lyft represent typical examples of such a process. In other instances, value
creation reflects a much more complex journey whereby the interaction
of platform participants and the data it creates serve as the basis for
the development and delivery of many services. Facebook, TripAdvisor,
Spotify and Instagram illustrate this second context of value creation. The
distinction between content-based, service-based and networking-based
social media platforms introduced earlier in Chapter 2 is perhaps the best
way of capturing the differences in value creation underlying different
species of multisided, social media platforms.
Whatever the differences involved, however, multisided platforms,
we maintain, signify a context in which value creation moves furthest
away from a specific product or service. In this respect, it differs rather
drastically from previous economic practices and views of value creation.

able to:
• explain the process of value creation
• distinguish between product-centric, firm-centric and platform-based
value creation
• explain how value creation differs in digital multisided platforms
• explain to what extent value creation in multisided platforms depends
on information architecture
• distinguish value creation in social media platforms from value
creation in multisided markets.

1. What does value mean?
2. How historically has value been produced?
3. To what extent does platform-based value creation differ from
traditional models of value creation?
4. Explain the value creation process in one social media platform of your
choice.
80
Chapter 8: Business models and social

media platforms
8.1 Introduction
The concept of the business model refers to the characteristic ways
through which firms choose to market their products and monetise the
value they create. A few standard and widespread families of business
models are reviewed and related to social media platforms. We feature
the practice of cross-subsidisation whereby a firm variously combines
low- and high-margin products or services to penetrate a market and
achieve its monetary objectives. Cross-subsidisation represents the spine
of many contemporary internet-based business models. We subsequently
outline the conditions on the basis of which social media platforms further
develop and transform cross-subsidisation and the way it has been used
by traditional commercial media. While relying on a traditional three-
party (media producers, consumers, advertisers), media-based business
model, whereby a media company uses advertising to subsidise content to
consumers, social media platforms extend and, in certain cases, radically
transform that model.
The chapter features key concepts including:
• the business model
• value-creation and business models
• cross-subsidisation models
• the media-based business model
• the freemium business model
• commons-based models
• digital goods
• reproduction and distribution costs.

This chapter aims to provide the basis for discussing the innovative ways
by which social media platforms reframe traditional business models.
Some additional aims of the chapter are to:
• review the concept of the business model
• describe the principle of cross-subsidisation on which many innovative
business models rely
• define the conditions by which social media innovate on the traditional
media business model
• link the preceding value-creation concepts to the concept of business
models and monetisation.

• define the concept of the business model
• explain the pricing practice of cross-subsidisation and the ways it is
involved in business models
81
• distinguish between different types of business models

• define and explain the media-based business model and the ways
social media platforms extend and modify that model
• explain how the web and the digital economy is tied to the media-
based business model
• discuss and assess the business model known as freemium
• connect business models to multisided markets and the process of
value creation.

Anderson, C. Free: the future of a radical price. (London: Random House, 2009)
Chapter 2, pp.17–33.
Teece, D.J. ‘Business models, business strategy and innovation’, Long Range
Planning 43(2–3) 2010, pp.172–94.

Benkler, Y. The wealth of networks: how social production transforms markets and
freedom. (Cambridge, MA: Yale University Press, 2006).

Aaltonen, A. ‘Manufacturing the digital advertising audience’ (PhD dissertation:
LSE, 2011).
Aaltonen, A. and N. Tempini ‘Everything counts in large amounts: a critical
realist case study on data-based production’, Journal of Information
Technology 29(1) 2014, pp.97–110.
Baden-Fuller C. and M. Morgan ‘Business models’, Long Range Planning 43
2010, pp.156–71.
Benkler, Y. ‘Sharing nicely: on shareable goods and the emergence of sharing as
a modality of economic production’, Yale Law Journal 114 (2003), pp.273–
358.
Benkler, Y. The penguin and the leviathan: how cooperation triumphs over self-
interest. (New York: Crown Business, 2011).
Carr, N.G. The big switch: rewiring the world, from Edison to Google. (New York:
W.W. Norton, 2008).
media audiences. (New York: Columbia University Press, 2011).
Osterwalder, A., Y. Pigneur and C.L. Tucci ‘Clarifying business models: origins,
present, and future of the concept’, Communications of the Association for
Information Systems 16(1) 2005, p.1.
Raymond, E. ‘The cathedral and the bazaar’, Knowledge, Technology and Policy
12(3) 1999, pp.23–49.
Shirky, C. Here comes everybody: the power of organisation without organisations.
(London: Allen Lane, 2008).
Varian, H.R. ‘Computer mediated transactions’, American Economic Review
100(2) 2010, pp.1–10.
Weinberger, D. Everything is miscellaneous: the power of the new digital disorder.
2008) Chapters 1–4, pp.7–100.
82

https://hbr.org/2014/05/making-freemium-work
www.business2community.com/business-innovation/breaking-netflix-business-
model-history-future-vod-giant-01582436#PYyHywzPhVGki3rP.97
https://mic.com/articles/137400/how-does-spotify-make-money-here-s-the-
business-model-behind-the-streaming-service#.cFYqWcnbl
https://en.wikipedia.org/wiki/Cross_subsidization
https://en.wikipedia.org/wiki/Commons-based_peer_production
8.2 The concept of the business model

The concept of the business model refers to the characteristic ways or
mechanisms by which a firm or organisation chooses to transform the
goods and services it produces to revenues and, ultimately, profits. Put
differently, a business model is the format or conduit through which a
firm delivers the value it creates and captures it through the appropriate
monetisation mechanisms. Viewed this way, the concept of the business
model is largely coextensive with what economists call ‘pricing’ and
‘pricing strategies’. The emphasis is on the architecture of revenues and
costs and how such architecture is designed to ensure an adequate profit
and a strong market position.
A straightforward and familiar way of capturing the value a firm creates
is by selling goods or services for a price that ensures a profit margin. This
is a venerable and still widely diffused monetisation route that has been
characteristic of the industrial age. But a firm can choose other revenue
paths. For instance, it can opt to bundle its market offer together and sell
one or more of its products or services of the bundle below cost, with a
view to boosting demand for others that can be sold with margins high
enough to generate profits. In certain cases, it may even pay to give a
product away to boost demand for another product or service whose sales
more than offset the original costs incurred of having a product given
away. These revenue strategies work well in products and services that are
complementary or can be reasonably bundled together, such as flights/
hotels/car hire, mobile phone/network services, credit card/credit card
transactions. These are all typical examples of what is often referred to as
cross-subsidisation. Cross-subsidisation is a complex and delicate revenue
strategy whereby a firm variously combines low- and high-margin products
or services to penetrate a market and achieve its monetary objectives
(Anderson 2009; Carr 2008; Teece 2010).
In this chapter, we consider some of the most prevalent business models
and the ways they are used and transformed by social media platforms,
and internet-based businesses more generally. We have touched upon
these issues in many of the previous chapters and revisit them in those
that follow. The business model which a firm deploys is inextricably
bound up with the process of value creation (that is, how customers and
users are involved in value creation) and the overall position and image
a firm maintains in the industry in which it operates (Osterwalder et al.
2005; Teece 2010). Value-creation and its monetisation are better seen
as flip sides of the same coin. Teece (2010, p.172) defines the concept of
the business model as ‘the design or architecture of the value creation,
delivery and capture mechanisms (a firm) employs’ (see also Baden-Fuller
and Morgan 2010). But it pays to distinguish the ways an organisation
captures value creation from the process of value creation itself if for no
other reasons than those of exposition, clarity and simplicity. This chapter
deals with business models in this more restricted sense of revenue
models.
83
Activity
Use the essential readings of the chapter and other online-based resources and
information to provide a brief description of Spotify’s business model.
8.3 Types of business models

Our awareness of revenue models other than selling a single product with
adequate margins has widened with the proliferating routes along which
a firm can generate revenues. Such a state of affairs has certainly been
associated with the diffusion of digital goods, the internet and internet-
based businesses. It is possible to combine digital goods and resources
in ways that were previously severely constrained by the physical and
depletable nature of material goods (Kallinikos et al. 2013; Shapiro and
Varian 1999; Weinberger 2007). They can accordingly be bundled and
unbundled to alternative business models that are underlain by different
revenue and cost architectures.
However, alternative revenue paths to the familiar model of selling a good
or service for a price that ensures an adequate profit margin are not new.
A relatively straightforward and prevalent alternative that we mentioned
above is the cross-subsidisation of the products or services that make
up the portfolio of a firm’s offer to the market. For decades, standard
commercial media used advertising to subsidise content to consumers.
Gillette was one of the pioneers of this strategy, Anderson (2009)
claims, opting to sell razors cheaply to boost demand for highly priced
razor blades. More recently, low-cost air carriers such as EasyJet and
Ryanair pioneered ways for delivering and pricing their services that are
characterised by a complex architecture of cross-subsidies that raise the
attractiveness of their total offer while improving price flexibility to their
customers (Anderson 2009). Air travel, tourism and the travel industry
more generally provide a good example of how services such as flights,
accommodation, car hire, sightseeing and others can be bundled together
and priced in ways that exemplify varying architectures of revenues and
costs. Different versions of cross-subsidisation are widely used today in a
number of market contexts, particularly those associated with social media
and internet-based businesses.
A radical version of cross-subsidisation entails giving a product away
with the view to spreading its use and charging the services which the
use of the product requires with high margins. Mobile network services
operators have given away mobile phones bundled together with monthly
payment plans priced in ways that more than offset the costs of giving
away costly gadgets, such as mobile or smart phones, to each customer.
Banks seldom charge these days for the issuing of credit cards. They opt
instead for charging users and/or retailers for credit card transactions.
Giving something away and charging for its use is a smart revenue strategy
that can turn out to be lucrative in the case of digital goods or services,
whose reproduction and distribution costs are often low or close-to-
zero (Anderson 2009; Shapiro and Varian 1999; Varian 2010). Linked
to advertisers and other third parties, cross-subsidisation furnishes the
business principle upon which digital platforms and social media rely.
Google is perhaps the most conspicuous contemporary illustration of this
revenue strategy. We deal with these issues later on this chapter and in
significant detail in Chapters 9, 10 and 11.
Cross-subsidisation thus represents a straightforward alternative to the
standard business model of selling a single product or service for a price.
Cross-subsidisation is an attractive revenue and cost strategy under
84
conditions in which a business offers a number of related products and

services that can be orchestrated in various and shifting ways. Usually,
the more complementary the services or products that make up the
cross-subsidised bundle the more meaningful and rewarding a cross-
subsidisation strategy can be. Cross-subsidisation is therefore a complex
and delicate issue insofar as the products or services that make up the
portfolio of a business’s market offer can be variously priced to support
different revenue streams. What to sell at low rather than high margin
becomes an issue of great importance as different combinations support
different business models that vary in terms of attractiveness and so have
unequal prospects of success.
The media-based business model provides a second, well-known
alternative revenue strategy that draws on but also extends cross-
subsidisation. It is a distinctive attribute of media organisations to bring
together not simply a producer and a buyer/consumer but also other
parties, most often advertisers with an interest in the attributes of the
audience of the media business. There are, therefore, a minimum of three
parties in this model – that is, producers, final consumers and advertisers.
The revenue flows are such that advertisers provide a considerable part
or even the bulk of a business’s revenues and thus indirectly subsidise
the primary product or service (such as content) given to consumers
who would otherwise have to pay a much higher price for accessing that
content. Advertisers do so, of course, in exchange for being given the
opportunity to reach out to media audiences (Aaltonen 2011; Anderson
2009; Napoli 2011). This business model has traditionally provided the
spine of the revenue flows characteristic of many pre-internet media-based
businesses such as newspapers, and radio and television broadcasting.
Activity
Use this source: www.business2community.com/business-innovation/breaking-netflix-
business-model-history-future-vod-giant-01582436#rzvKpAzS7UIyLQP6.97 to describe
the business model of Netflix.
In the media-based business model, the indirect or cross-side

network effects that underlie two-sided platforms (see Chapter 4) are
translated into a cross-subsidisation revenue architecture in which
advertisers and other third parties become key monetary providers. It is
a characteristic of internet-based businesses and social media to bring
this relationship outside the traditional context of broadcasting and
printed media and make it a diffuse attribute of the digital economy. For
instance, revenue from advertising can be employed to subsidise network
subscription services and its monthly payment under conditions that
bind users to respond to advertising messages sent off to their mobile
phones (Aaltonen 2011; Aaltonen and Tempini 2014). The strength of this
business model is to distribute or hide costs in ways that make the primary
business offer of a firm attractive to a wide audience (Anderson 2009).
Social media platforms are flourishing on this model. Content-based social
media platforms (see Chapter 2), such as, for instance, Spotify or Netflix,
provide a good approximation of how this business model works in the
distinctive context of streaming digitised content that constitutes the
primary service these companies offer to end consumers.
Social media and other digital businesses have made use of another
business model, widely known now as freemium. That is to say, they
offer their services free of charge to a certain, usually the largest, segment
of their customer base while they reserve more advanced service offerings
85
for premium-fee customers that are willing to pay for such services. The
low or close-to-zero reproduction and distribution costs of many digital
goods (Shapiro and Varian 1999) make the freemium model a suitable
revenue strategy of the digital age and characteristic of the revenue
strategies of many digital content providers. The online transition of most
major newspapers has as a rule been supported by versions of a freemium
model. But, also, content- and service-oriented social media platforms
have made use of such revenue strategies, whereby different segments of
their user base have been given the option to choose between free versus
premium-fee access. Spotify, Netflix and Flickr are among those that use
versions of the freemium business model.
8.3.1 Commons-based models

The brief account of business models given so far would remain partial
and incomplete without mention of a radical alternative to the revenue
models of profit-seeking organisations, variously known as peer-
based, commons-based or, more frequently, commons-based peer
production models (Benkler 2006, 2011). In a sense, commons-based
peer production is more than a model. It is in fact an alternative work
and civil regime that stresses the communal ownership of resources and
the inherently cooperative nature of human work whose outcome must
accordingly be made available to everyone. Commons-based models thus
contrast sharply with the proprietary nature of firms and the ways markets
operate. Wikipedia is, perhaps, the most prominent contemporary example
of this gift or commons-based economy (Raymond 1999). Open-source
software development is another context in which commons-based ideals
have been successfully tried out with such impressive outcomes as the
development and free distribution of highly sophisticated software, such as
Linux or Firefox, under the legal convention of the General Public License
(GPL) (Benkler 2006, 2011; Zittrain 2008).
Joint ownership may seem to be a strong and, in a sense, very restrictive
ideological corset. Be that as it may, there is another side to commons-
based models of producing and making available services that connects to
some pervasive practices of the digital economy that we have frequently
referred to in this guide. In one way or another, commons-based peer
production models stress the significance of open participation and
sharing. Ideological as these principles may seem, they are also vital
mechanisms of extraordinary functional ability that result from pooling
together the resources, diverse skills and talent of large numbers
of participants. Crowdsourcing is just a mundane reminder of this
fundamental condition in which broad participation promotes enough
diversity of skill and talent to accomplish things that would otherwise have
been very costly or simply impossible. As Raymond (1999) felicitously
put it in the context of open-source software development, ‘given enough
eyeballs, all bugs are shallow’. Commons-based regimes and the peer
production models they sustain are, of course, more complex social
environments than crowdsourcing and the ways this is currently being
used by firms to boost their productivity. We refer to this here to indicate
how the belief in cooperation that is intrinsic to commons-based peer
production promotes skill diversity and is a potent force of innovation and
productivity (Benkler 2011).
Clearly, commons-based peer production models have to operate side by
side with the dominant regime of the market economy and the relentless
commercialisation of services this last often implies. Yet, as we have shown
in Chapter 3, the collaborative ethos and communal spirit of commons-
based models have had and continue to have a significant impact upon the
86
entire digital economy. It is important not to lose sight of the far-reaching

significance of the ideology of commons and the ways it pervades the
digital age. In fact, widespread habits characteristic of the digital economy
and social media platforms, such as community participation and sharing,
originally sprang from commons-based ideals and practices (Benkler 2003;
Raymond 1999; Shirky 2008).
8.4 Business models, social media and the digital

economy
The current significance which business models assume for firms and
organisations cannot be properly understood separately from the wider
context of the digital economy that we have repeatedly referred to
throughout this guide. Awareness of the critical role business models play
today has been growing in conjunction with the proliferating paths along
which a product or service can be sourced, made available to the market
and monetised. As mentioned above, internet connectivity, internet-based
ventures and the nature of digital (as opposed to physical) goods have
considerably shifted the conditions under which a product or service
can be produced, bundled with and unbundled from other products and
services, marketed and, eventually, monetised.
It is within such a broader context that social media platforms and the
internet more generally have pioneered ways of capturing value that have
moved far away from the standard and venerable practice of selling a
single product or service for as high a margin as possible. In this respect,
social media and internet-based businesses have developed, modified and,
in many instances, radically changed our perception of what it means to
produce a good or service and, ultimately, sustain a business. Most of the
examples of social media we have given in this chapter and throughout
this guide are closely associated with new business models that ride on
the fundamental idea of cross-subsidisation of products and services, yet
extend and reframe it in many and interesting ways.
In the place of a single product sold for a price, the prevalent business
models of the digital economy reveal an intricate orchestration of
several products and services. These are tied together into market
offerings through complex monetary flows in which the cost and benefits
of each individual component are not immediately evident (Anderson
2009; Parker et al. 2016; Teece 2010). Google and Facebook are only
the most prominent examples of this complex and delicate orchestration
of revenue flows of cross-subsidised products and services. A constantly
growing and variegated business landscape is emerging as digitisation and
the technological developments with which it is associated increasingly
support revenue and cost architectures and the design of business models
by which products and services can variously be bundled together.
Social media platforms operate within such a technological and business
context. In some basic way, social media platforms continue the tradition
of media and the advertisement-based, three-party business model we
referred to above through which media have traded the attention of their
users to advertisers and subsidised content. But social media platforms
are more than just online versions of traditional media outlets, such as
newspapers, radio or television services. They are, as we have repeatedly
claimed throughout this guide, market entities in which platform owners,
users and other types of platform participants are connected together in
many ways that heavily condition what can be produced (and how it can
be produced) and shape the mechanisms by which they can be monetised.
87
It is important in this context to remember that social media platforms are

media organisations in a rather loose and general sense that very much
conditions the ways through which they monetise their services. Social
media platforms do not exactly produce and transmit packaged content
as traditional broadcast and print media have done. As we have claimed
throughout this guide, social media leverage user participation in the
platforms they build to produce data that can be used variously to describe
the preferences and profiles of user populations. It is therefore such data-
based services that social media make available to the platform participants
and other market actors. The conditions under which such services are
produced considerably shape the range of the business models they can
make use of. The fact that social media platforms operate as multisided
(rather than two-sided) markets is closely connected with the fact that the
data they produce and ‘mash up’ can be made available to different parties,
under very different terms and conditions. It is in this respect that social
media platforms extend and, in many cases, such as TripAdvisor or Facebook,
radically transform the traditional three-party (media owners, audience,
advertisers) media-based business model. Cast in this light, the process of
value creation itself emerges as inseparable from the mechanisms through
which services are delivered and monetised (Teece 2010).
Finally, it is important not to lose sight of the economics of digital goods
that underlie the business models we have outlined. The innovations in
business models which the internet and social media have introduced
are closely related to the nature of digital goods or services that we
have touched upon above and in earlier chapters. Recall that digital goods
exhibit qualities that set them drastically apart from physical goods and
pre-packaged, often physically embedded, services. Most important among
them is the digital constitution of digital goods that makes them subject
to low or often close-to-zero reproduction and distribution costs (Shapiro
and Varian 1999). Even digital products or services that may take a lot of
effort to develop and, thus, incur significant costs to produce (and how
it can be produced), do not reclaim the resources that physical products
and services inevitably require when they are reproduced and distributed.
Such a state of affairs obviously has far-reaching implications with respect
to how a large number of digital products or services can be marketed and
monetised.
Activity
Summarise Teece’s 2010 article included in the essential readings for this chapter in a
short critical essay of 1,000 words.
8.5 Conclusions
In this chapter, we have outlined key business models of the digital age
and the digital economy. We have identified three distinct market-based
models (that is, cross-subsidisation, the media-based model and freemium)
and the commons-based peer production paradigm that dispenses with
market mediation and straightforward service monetisation. It should be
made clear that each one of these models supports various versions. There
are, for instance, several versions of freemium that share, as it were, the
family resemblance of some basic services made available free of charge
to customers or users and other more elaborate service packages that are
variously priced and directed to particular customer or user segments. The
same holds true for each one of the basic business models reviewed.
88
Social media, we claimed, ride on but also considerably transform the

three-party model of traditional media. Such a state of affairs variously
relates to the fact that social media are usually not producers of traditional
content but above all of data. Mashed up in one way or another, data are
sold or made available to a range of third parties under conditions that vary
considerably from the indirect consumer subsidisation of content through
advertising revenues characteristic of traditional commercial media.
Most of the business models we have reviewed reflect and are variously
connected with the attributes of digital goods and the low reproduction
and distribution costs which digital goods occasion. Clearly, such conditions
acquire critical importance in the context of the internet and the current
digital economy that hugely amplifies the means through which digital
goods can be produced, reproduced and distributed.

able to:
• explain the role business models play in capturing and monetising value
• distinguish between different business models
• explain the rationale that justifies the choice of a business model
• explain how cross-subsidisation of products and services is at the heart
of most contemporary business models
• explain how social media platforms extend and transform the three-
party model of the traditional media industry
• connect the broader context of the digital economy with business
models.

1. Why do firms need to have a business model? What are the business
objectives such models serve?
2. What is cross-subsidisation in the context of business models? Describe
the concept and explain how cross-subsidisation provides the backbone
of most contemporary business models.
3. Describe the traditional media-based model. What are the basic
components of this model?
4. Explain how social media extend and transform the traditional media-
based business model.
5. In which way is the business model known as freemium connected to
social media platforms and online content provision?
6. Why are reproduction and distribution costs of digital services low or
close-to-zero?
7. Describe the key attributes of the commons-based model of producing
and making available online digital goods and services. How does such
a model differ from the prevalent market-based business models?
89
Notes
90
9.1 Introduction
In this chapter, we describe how social media platforms create value
for platform owners and key platform stakeholders. We deal first with
the differences between traditional commercial media and social media
platforms with respect to identifying audiences that may be of interest to
advertisers. By decoupling user behaviour from packaged content (e.g.
news, sport) characteristic of broadcast and print media, social media
platforms establish new methods and practices for identifying advertising-
relevant audiences that go beyond readership or viewership. We then
move on to discussing the role of social media platforms in the data
internet ecosystem. We deal, in particular, with how they create value
by means of integrating social data with traditional data sources (e.g.
transaction data, offline loyalty card data etc.) and data from other social
media platforms. Much of value creation for business is nowadays closely
associated with the opportunities to mix and match data from various
sources. Through data analytics and other data management techniques,
social media platforms produce information that can be used for a variety
of purposes, from advertising to product development. Finally, we discuss
the significance of social data for organisations and organisational strategy.
We point out some of the issues that traditional (non-digital native) firms
and organisations confront with respect to integrating social data into
their operations.
• audience and value
• social data and audiences
• data filtering
• data brokerage
• data integration
• data and text analytics
• organisational strategy.

This chapter aims to provide a more detailed account of how social media
platforms produce value for platform owners and stakeholders. The
chapter builds on and expands some of the concepts developed in the
previous chapters and describes the practices through which social media
create business services, then market and monetise them. We aim, in
particular, to describe how social media platforms:
• create and trade audiences to advertisers
• enter into partnerships with data analytics companies and other
data brokers with the view to developing new services through data-
recombination strategies
• provide data and data management systems and applications to third
parties
• provide data-based services to traditional, non-digital native
organisations.
91

• explain how social media platforms and social data are involved in the
making of audiences
• distinguish social media audiences from the traditional, mass media
audiences
• couple audience-making with value-creation and the business models
utilised by social media
• explain the brokerage and data-exchange ecosystem of the internet
and how social media platforms and their business objectives form an
integral part of that system
• link social data and the internet data ecosystem with the dynamics of
value creation
• explain how organisational strategy is linked to social data.

2015, pp.44–57.
Kallinikos, J. and N. Tempini ‘Social data as medical facts: web-based practices
of expert knowledge creation’, Information Systems Research 25(4) 2014,
pp.817–33.

Kitchin, R. The data revolution: big data, open data, data infrastructures and
their consequences. (London: Sage, 2014) Chapter 4, pp.67–79.
media audiences. (New York: Columbia University Press, 2011).
Oestreicher-Singer, G. and L. Zalmanson ‘Content or community? a digital
business strategy for content providers in the social age’, MIS Quarterly
37/2 2013, pp.591–96.

Aaltonen, A. and N. Tempini ‘Everything counts in large amounts: a critical
realist case study on data-based production’, Journal of Information
Technology 29(1) 2014, pp.97–110.
Alaimo C. and J. Kallinikos ‘Encoding the everyday: the infrastructural
apparatus of social data’ in Sugimoto, C., H. Ekbia and M. Mattioli (eds)
Big data is not a monolith: policies, practices, and problems. (Cambridge MA:
MIT Press, 2016) pp.77–90.
Brynjolfsson, E. and A. McAffee ‘The digitization of just about everything’ in
Brynjolfsson, E. and A. McAffee The second machine age. (New York: Norton,
2014).
Capon, N. ‘Credit scoring systems: a critical analysis’, Journal of Marketing 46
(1982), pp.82–91.
Kallinikos, J. The consequences of information: institutional implications of
technological change. (Cheltenham: Edward Elgar, 2007).
(New York: Times Books, 2007).
Wigan, M.R. and R. Clarke ‘Big data’s big unintended consequences’, Computer
46(6) 2013, pp.46–53.
92

http://the.echonest.com/
http://s3.amazonaws.com/academia.edu.documents/5877243/ismir11.pdf?
AWSAccessKeyId=AKIAJ56TQJRTWSMTNPEAandExpires=1477666918a
ndSignature=KTwK7VJp8SAnu7jllPK68ROYybk%3Dandresponse-content-
disposition=inline%3B%20filename%3DThe_million_song_dataset.pdf
https://blog.hootsuite.com/social-media-advertising-stats/
www.ft.com/content/e8ccd7b8-6459-11e6-a08a-c7ac04ef00aa
www.nielsen.com/uk/en.html
www.patientslikeme.com/
9.2 Social media and value creation

This chapter deals with how social media platforms create value for their
owners and other important platform stakeholders. Being multisided
markets, social media platforms cannot exist as business entities apart
from the interactions on the basis of which platform owners, users
and third parties create value for one another. As distinct from other
multisided platforms, social media platforms are inconceivable without
a large user base. We have pointed out throughout this guide that value
creation on social media platforms is inseparable from user engagement
and the ways users create and consume value. But it may pay off to see
the entire process of value creation from the point of view of platform
owners. It would be important in this respect to identify the activities and
partner alliances through which platform owners seek to create value
for themselves and other platform stakeholders such as advertisers, data
brokers and analytics companies, app developers and other business
partners.
In earlier chapters, we have shown how platform participation must be
organised along stylised routes that produce data on the basis of which
platform participation becomes easier to summarise at various levels of
generality (see Chapters 5–6). Such aggregate data can subsequently
be mashed up in a variety of ways and monetised following the
standard media-based business model (Chapter 8), that is to say, by
selling this ‘attention’ to advertisers. But data of this sort can also be
turned to revenue through several other ways that platform partners
and third parties find useful. In what follows, we describe how social
media platforms’ owners create value for themselves and their business
partners. We first discuss value creation for advertisers, a vital source of
revenue for social media. We then move on to the complex internet data
ecosystem and the business relations through which data brokers and
other data intermediaries work in tandem with social media platforms
across industries and social sectors. This is followed by an account of
how data from social media platforms enter organisational life and vital
organisational activities such as decision-making, product development
and strategy.
9.3 Value for advertisers: audience-making

Social media platforms make a considerable part of their revenue from
advertising, although the revenue share from advertising varies across
industries and media platforms. Instagram revenue, for example, comes
almost exclusively from advertising and TripAdvisor’s advertising income
is as high as 80 per cent of its total return, while LinkedIn’s and Spotify’s
corresponding figure ranges between 15 per cent and 17 per cent.
LinkedIn, as we discussed in Chapter 5, makes the bulk of its revenue
by delivering specialised services (talent identification and recruitment 93
services) to companies. Spotify obtains an essential part of its revenue via

premium subscription services.
Advertisers are willing to pay social media platforms in exchange for
accessing the attention of their users. All other things being equal, the
more populous the platform user base, the higher the value advertisers
place on the platform. The size of platform user population is, however,
only one aspect of the value social media platforms bring to the
marketplace. Audience-making activity on social media platforms differs
from the ways traditional media outlets have dealt with the matter.
Marketers and advertisers have always found it problematic to reach out to
segments or communities that they wanted to address through commercial
media. One of the most daunting problems of marketing has always
been the risk associated with money spent on advertising campaigns.
Advertising has always been an uncertain business. In the pre-internet age,
advertisers and marketers placed their ads in media outlets with general or
specialised content, hoping to reach the sought audiences on a scale large
enough to boost their sales. In this context, paying for advertisements was
a deal price that was closely related with the popularity or reputation of
media outlets and the type of content they produced. In other words, in
standard commercial media, there is usually a close association between
the type of content produced and the type of audience commercial media
attract. While various techniques have been developed over the years
to measure the precision or efficiency of such conditions of exposure
– namely, the audience size and audience receptivity of media outlets
such as radio and TV stations or programmes – the business of audience
identification has remained routinely tricky and notoriously uncertain
(Napoli 2011). This state of affairs has been immortalised by the poignant
statement attributed to the Philadelphia department store owner John
Wanamaker (1838–1922), who is reputed to have claimed, ‘half the
money I spend on advertising is wasted; the trouble is I don’t know which
half’.
Technical IT advances and the internet have considerably changed the
conditions under which advertising takes place. Digital advertising today
is a very complex and fragmented field where clicks have become the real
currency. At first glance, it may seem that clicks and impressions make the
association between content and audience redundant. Coupling a click to
a message and, eventually, to buying behaviour of individual users tends
to render useless the identification of an anonymous mass of people,
who are supposed to share certain attributes such as the readership or
viewership of particular content and whatever lifestyle can be associated
with it (Napoli 2011). No matter how tenuous and open to fraud (such as
clicks performed by bots rather than people), these ways of tracking the
reception of a message have made their way into the digital marketplace
by offering some assurance that advertising money is spent on real, rather
than evasive or imaginary, audiences.
Social media have, however, gone ways beyond clicks. They have also
given the concept of audience new significance that still retains its
usefulness in identifying collective attributes of potential consumers and
its economic way of linking a message to a population. As we have shown
in previous chapters, on social media platforms, an audience is identifiable
on the basis of a continuous updated platform participation rather than a
priori user attributes that produce market segments. Platform participation
is no longer confined to viewership or readership of content. It instead
offers a more nuanced and granular understanding of user behaviour that
creates new value and opens up new possibilities for targeting audiences.
94
Such audiences are claimed to differ from the diffuse nature of audiences
of traditional media by having the lifestyle preferences of users deduced
from the data procured by user platform engagement: the types of activity
performed (posting, uploading, sharing, liking and so forth) as well as
the activities performed by friends or followers. Interestingly, the data
harvested from user platform participation and the connections of users
with one another are employed to craft ‘lookalike audiences’, that is, to
single out new segments that are likely to be profitable because they are
similar to already existing customer groups. In this respect, audiences
assembled by recourse to social data are assumed to offer more value
because they are better attuned to user preferences and thus have a
stronger reality purchase (Weinberger 2007). Users can be grouped
into audiences by employing a myriad of data points generated by their
platform behaviour (for more details refer to Chapter 6). Crucially, such
audiences can be made and remade by filtering data in a variety of ways
that respond to the requests of different marketers.
TripAdvisor, for example, can offer audiences to travel and booking agencies
and hotel and restaurant chains, on the basis of the travelling behaviour of
their users and other user preferences, as these are expressed in reviews and
ratings but also in fora discussions on the platform. In an analogous fashion,
LinkedIn can filter out its user base in a variety of ways that captures
education, location, real work experience, shifts in employment and career
trajectories as well as engagement and social connections on the platform to
address requests from companies (usually recruitment companies) seeking
certain types of job profiles. Spotify offers another example in which user
profiles and user audiences can be identified on the basis of their musical
tastes, their making of playlists and also through social engagement
expressed through the subjects, music genres or artists they talk about,
the links they maintain with other platform participants, and the like
(Oestreicher-Singer and Zalmanson 2013).
By using various data filters, audiences can be compiled out of the
platform social data in ways that are variable and extremely flexible
and thus adjustable to the requests of a great number of marketers and
advertisers. Furthermore, user preferences such as those revealed on the
platform can be combined in a variety of ways with traditional behavioural
and demographic attributes thus strengthening and qualifying the process
of audience-making, as the example of LinkedIn and the others mentioned
above illustrate. It may be worth restating that platform data, as distinct
from the stable nature of traditional market segments, are steadily
updated and thus more closely attuned to shifting user preferences
expressed in real time.
These qualities confer social media platforms distinctive competitive
advantages in the advertising industry that are clearly shown by the
enormous amounts of revenue they generate.1 Even though the sum of 1
See e.g. https://blog.
money spent on social media is still small when it is measured against the hootsuite.com/social-media-
advertising-stats/
total sum of advertising spending (roughly one-sixth of total advertising
spend by early 2017), it is quickly growing. Social media are in the unique
position of being able to filter their data out in smooth, flexible, scalable
and efficient ways that benefit from the structured nature of data procured
by the way core interaction is designed and platform participation
standardised, aggregated and scored (see Chapters 5 and 6).
In view of a rather bewildering picture often conveyed by the literature
but also popular discourses, it is of utmost importance to clarify once more
the process by means of which social media construct audiences. The
usefulness, granularity, scalability and flexibility of audiences assembled
95
out of the populous user bases of most successful social media platforms
owe very much to the specific attributes of social data as distinct from
user-generated content (Alaimo and Kallinikos 2016, 2017). It goes
without saying that the type of social data social media platforms generate
is closely associated with the key activity or social field in which the
platform operates and, by implication, the ways the core interaction is
designed. TripAdvisor data are obviously different from Spotify’s and
the data of both differ in most respects from Instagram’s, Twitter’s or
Facebook’s data.
The audiences that social media platforms offer to advertisers and
marketers go in tandem with the development of a range of information
management tools and techniques (APIs and data management
applications) on the basis of which advertisers can themselves monitor
their platform advertisements and track the efficiency of their marketing
campaigns. We deal with these in the next section of this chapter as they
are part of a broader value strategy of social media platforms.
9.4 The data internet ecosystem and social media

Social media platforms are central actors in the current internet data
brokerage system and the big data circuit through which data across the
internet ecosystem are collected, mixed, aggregated and traded. Analysing
and explaining the business value social media platforms create for
advertisers, data mining and analytic companies and other organisations
therefore requires understanding of how social data are exchanged across
social media platforms and between social media platforms and the rest of
the internet ecosystem (Alaimo and Kallinikos 2016).
Data brokerage is a key vehicle of value creation in the current internet
ecosystem. Data brokers are ubiquitous traders that collect data from a
variety of public and private, online and offline sources. By integrating,
comparing and analysing such data, data brokers are able to offer a range
of services to other economic actors, including corporations, international
bodies and governments. The roots of information brokerage are deep and
old but a modern beginning is often traced to the sources of information
which the calculation of credit scores required. To calculate the probability
of an individual paying back their debts (their credit score), credit score
institutions needed to integrate and analyse data from different sources
and repositories (e.g. census data, individual consumption data, credit
records, employment records, housing rental and utilities records and the
like) (see e.g. Capon 1982).
Since the hesitant beginnings signified by the advent of credit scoring in
the early 1950s, data brokerage has steadily grown in conjunction with the
growth of data and data management technologies, characteristic of most
advanced capitalist societies. (Kitchin 2014). These trends have been given
a powerful push by the diffusion of the internet, the proliferation of new
data sources and the standardisation and portability of digital data. They
have further been reinforced by the diffusion of software-based analytic
techniques through which different data can be mashed up and mined and
new composite data sources created (Kallinikos 2007). Data brokerage is
today a multi-billion industry, in the grey zone between transparent and
stealthy behaviour that makes it both contested and feared (Wigan and
Clarke 2013). Data brokers collect, analyse and trade data from a large
range of social and economic domains including insurance, health care,
finance and, of course, consumer spending. Obviously, decisions made
about individuals and groups on the basis of such data whose collection
96
and flow are often beyond inspection and regulation may have serious life
consequences.
We discussed above how social data can be used to understand and
assess audiences on the basis of user engagement on platforms and the
preferences such engagements entail. But social data, as we noted, are
an important part of the data brokerage circuit characteristic of most
advanced digital economies. Social data can be variously combined with
consumer data (e.g. the buying records of individuals and groups, store
purchases) and other traditional behavioural and demographic data,
such as gender, education, location and life-style better to understand
audiences and their behaviour. For instance, relatively recently, the media
research giant Nielsen combined the traditional TV programme ratings (a
standard service the company has been offering the industry for decades)
with post-programme impressions analysed from people’s remarks and
commentaries on Twitter. Facebook has entered in partnership with one
of the biggest traditional data brokers, Axciom, whereby Axciom provides
life-style and other behavioural data it keeps on populations to qualify,
strengthen and variously complement the profile of audiences compiled on
the basis of Facebook social data. Advertisers can access these data and use
a suite of Facebook-offered data management solutions such as Ads API,
Ads Manager and Power Editor to deepen their understanding of audience
behaviour and develop strategies that better map the distinctive attributes
of the audiences they seek to address. In a similar venture, Facebook
collaborated with Axciom and Epsilon (another giant data broker) to
match Facebook user profile data and social data with store purchases. In
the UK and in Europe, Facebook has entered into various partnerships with
major food store chains such as Tesco in its effort to show how Facebook
ads impact on purchases in store.
Echo Nest provides another illustrative example of the business
opportunities created by the integration and combination of social data,
in this case music data, across social media platforms. Echo Nest describes
itself as a ‘music intelligence platform that synthesises billions of data
points and transforms it to musical understanding that powers smarter
music applications for our customers’.2 Recently acquired by Spotify, Echo 2
See http://the.echonest.
Nest is a digital hub that gathers and aggregates data across music social com
media platforms (including YouTube). Via this route, Echo Nest connects
social media music platforms with a broader ecosystem of companies
whose activities are, in one way or another, associated with music.
Customers of Echo Nest include companies from the traditional media and
broadcasting industry (such as the BBC), the music industry (such as EMI)
and music social media platforms. Collecting, cleaning, standardising,
clustering and analysing user listening data (a form of social data) across
most social media platforms, Echo Nest provides value to its customers
through access to data and data management tools such as music
discovery and personalisation, audio fingerprinting, dynamic music data
and interactive music and remix applications.3 Recall that most of these 3
See http://the.echonest.
solutions entail working on aggregate and standardised data along the com
lines described in the preceding sections and earlier in Chapter 6.

These are some of the characteristic ways through which data from various
sources and, crucially, across diverse social and institutional fields, can
be integrated and analysed. Of course, there are many other paths along
which social data can be clustered and combined with other data sources
kept by data brokers and analytics companies to provide insights into
the behaviour of users and audiences (Kallinikos 2007). For example,
there have been a few recent efforts to tie social data to credit scoring.
97
Text mining social data in search of attitude predicting words, assessing

the networks of friends that users maintain on social media platforms
and analysing other activities users perform on social media can surely
be tied to credit scoring. There is little doubt that the predictive value
of these indicators is questionable but social data-based credit scoring 4
See e.g. www.ft.com/content/
is admittedly only in its early days. But established actors such as the e8ccd7b8-6459-11e6-a08a-
well-known USA-based credit data analyst FICO and the mushrooming c7ac04ef00aa
peer-to-peer lender platforms are claimed to be experimenting with social 5

See e.g. www.dailymail.
data.4 It is reasonable to assume that as social data expand and acquire co.uk/news/article-3051671/
historical legacy they will be brought to bear, in one way or another, upon Holidaymakers-post-information-
such critical and widespread activities as credit scores and insurance trips-Facebook-face-having-
insurance-claims-rejected-home-
(Brynjolfsson and McAffee 2014),5 or, to refer to a more positive
targeted-burglars-away.html
development, the planning and delivery of public services such as city
transport services that map crowd behaviour in cities.6
6
See e.g. https://blog.tfl.gov.
uk/2015/12/09/is-customer-
Health care is another social domain in which social data and the networks flow-data-useful-to-developers/
of communities that people are able to construct on social media may
contribute to the delivering of care in new ways and even advancing
medical research. It has been claimed that social media platforms offer
a distinctive window on the details of the lives of patients that have
remained outside traditional health care and certainly outside medical
research and discovery. As in previous cases, such data can be clustered
and combined with other more established expert-based medical records
to illuminate the state of serious diseases and their course. Achieving such
goals may, however, require specific and dedicated social media platforms
such as PatientsLikeMe rather than just relying on social data from generic
social media platforms. PatientsLikeMe has over the last decade gained
wide social and also medical recognition and certainly helped realise
what may have originally looked as an overstretched idea, namely to use
social media to map a patient’s daily life and to use the data to advance
our knowledge of the course and development of many serious diseases
and the progress of medical research (see Kallinikos and Tempini 2014).
PatientsLikeMe has definitively helped lend credibility to the far-reaching
potential of social data. It is a very positive example of the ability of social
media platforms to cast light on aspects of our living that have hitherto
remained unknown or with little systematic information.
These examples are indicative of the power and promise of social
data. They provide enough of evidence with respect to how the data
internet ecosystem and social media platforms are able to create
value for themselves and their partners. But they also show how the
accomplishment of social goals (e.g. improving health care, managing
city congestion) can also be advanced by the use of social data. The
business and social opportunities that this quickly growing data ecosystem
gestates are huge. Much of value creation currently evolves around ways
of generating new types of data and around methods for clustering,
combining and analysing data from different sources or fields. Social
media platforms are central actors in this game.
Activity
Use the Wikipedia entry below and other internet sources to describe some of the data
operations of Echo Nest. Take care to connect this with what above we called the internet
data ecosystem. Describe the data management services the company makes available to
its customers in the form of data management tools and applications.
https://en.wikipedia.org/wiki/The_Echo_Nest
98
9.5 Value for non-digital natives

The two preceding sections show how social data are part and parcel of
the emerging digital economy and the ways it operates. But social data
can also be useful to traditional, non-digital native organisations. Data
derived from social media can be variously used to improve the efficiency
of these organisations internally, as far as these data can tell a story about
a company’s products and services and the reaction of their customers
to these. TripAdvisor data can, for instance, be drawn upon to improve
the delivery of services in the travel industry through the redesign of
organisational processes, the refinement of existing services and the
development of new ones. Similarly, data from LinkedIn, as we have
shown above, can be used in various ways to improve the efficiency of the
recruitment function in organisations and shape its outcomes in desirable
ways. By these means, social media companies begin to impact upon the
traditional economic landscape and the operations of industrial firms and
organisations that have initially remained distant and hesitant as regards
the business value of social data. Either by prescience or because they
do not have any other option left, or simply by going with the flow, an
increasing number of digital native firms and organisations begin to use
social media and internet data sources.
The most dramatic organisational change may be in data-hungry fields
such as organisational strategy, which has traditionally been one of the
major avenues along which organisations scanned and monitored their
external environments. Much of what we have said in the preceding two
sections can be closely associated with central strategic issues such as
the market an organisation chooses to address and the ways it positions
itself vis-à-vis other competing organisations. For, through social data,
the integration of social data with more traditional sources of data (e.g.
behavioural data or transaction data) and, crucially, the crunching and
analysis of these data, organisations can gain essential insights into
how their services are bought, experienced and consumed, how their
competitors are doing as well as how markets and buying attitudes
develop.
But, of course, this is easier said than done for companies that are non-
digital natives. Traditionally, strategy making in firms and organisations
has taken place in ways that gravitated around the firm or the organisation
itself. Strategy was a top priority and entailed decisions that, no doubt,
involved intuition yet made systematic use of forecasting models by expert
staff. Such models utilised past data and information that related to the
products and services of the organisation and its market performance,
and other more generic industry or macro indicators. In these models, the
firm or the organisation was the centre of gravity around which strategy
developed. Social data are of an entirely different nature and for this
reason are hard to integrate with purposeful and highly specific data
that formed the stuff of traditional organisational strategy (Constantiou
and Kallinikos 2015). Social data are not purpose specific, they are often
generic, vague and trivial and hard straightforwardly to relate to the
strategic goals of a firm or an organisation. However, as we have implied
several times throughout this guide, in large numbers even the most trivial
and purposeless data may turn out to be useful (Aaltonen and Tempini
2014). This is basically the fundamental statistical principle (i.e. the so-
called law of large numbers) upon which social media platforms operate
and which has proved so far to have a remarkable revenue power.
99
Activity
Use Kallinikos and Tempini (2014) and other internet sources or articles to describe in a
short critical essay of 1,000–1,500 words how medical data can assist medical research
and the process of medical discovery.
In the case of companies such as Google, Amazon, Ebay and many other
digital natives, the integration of social data into their operations has
become a matter of routine. The strategic value of these companies
is complexly intertwined with various forms of data, including social
data and user-generated content. But for the old incumbent firms and
organisations that are non-digital natives, the most probable route of
integrating social data into strategy making is through decisions on
specific fields we have analysed above such as marketing and advertising,
product and service development or recruitment.
9.6 Conclusions
In this chapter, we have considered how social media platforms create
value for their owners and third parties. We have initially reviewed value
creation for advertisers that is a fundamental social media revenue-making
activity. Social data, we claimed, can be filtered out in a variety of ways
to construct varying advertising audiences tailored to specific business
objectives of marketers and advertisers. We have subsequently looked
at the internet data ecosystem. The ability to transport and trade data
from different sources, we noted, is a distinctive mark of the current age
and the internet. Such conditions set the stage for integrating data and
developing tools and techniques through which social media platforms
create value for a range of market participants. Finally, we considered
possible avenues along which business value can be created for non-digital
natives through the incorporation of social data into their operations. We
briefly considered how internal operations can be improved on the basis of
information provided by social data as well as the shifts in organisational
strategy that the incorporation of social data into organisations seem to
require.

Having completed this chapter and the essential readings and activities,
you should be able to:
• explain how social media platforms and social data are involved in the
making of audiences
• distinguish social media audiences from the traditional, mass media
audiences
• couple audience making with value creation and the business models
utilised by social media
• explain the brokerage and data exchange ecosystem of the internet
and how social media platforms and their business objectives form an
integral part of that system
• link social data and the internet data ecosystem with the dynamics of
value creation
• explain how organisational strategy is linked to social data.
100

1. What is an audience and how can an audience be tied to advertising in
the context of social media?
2. What is social data filtering?
3. How do audiences constructed on the basis of social data and other
user-generated content differ from the audiences of traditional media?
4. What sort of companies are data brokers?
5. Describe how data from different sources form the basis for the
development of data analytics solutions and other data management
tools.
6. How can social data be drawn upon to improve the internal operations
of traditional organisations?
7. What is the impact of social data and big data on organisational
strategy?
101
Notes
102
10.1 Introduction
This chapter describes the ways through which social media platforms
create value for users. We build on and extend the ideas advanced in
Chapter 7. Recall that in social media value creation is a social and
communicative process rather than a physically embedded process of
producing goods and services. Social media are generative platforms
relying on the participation and involvement of heterogeneous publics.
It is through the socio-technical dynamics of platform architecture and
user participation that social media platforms are able to produce value
for users. Indeed, one of the main problems platforms confront at the
original stages of take-off and development is to establish who are (or will
be) the users of the platform and define how such users may benefit from
the services of the platform. Defining the value produced by platforms
for end-users is essential, not least for maintaining and expanding the
platform user base. In this chapter, we explain how social media platform
create value by reviewing the main routes along which users benefit from
social media platforms. These routes in turn, often become the strategic
blueprint for platform evolution and sustainability.

This chapter aims to describe how social media platforms create value
for their users as distinct from advertisers, data brokers, data analytics
companies and other third parties. Creating value for end-users becomes
a critical activity, given the central importance that a large, active and
populous user base plays for social media platforms. More particularly we
aim to:
• explain what for users is ‘value’
• describe and explain the significance of personalisation as a key value
for users
• link personalisation to recommender systems
• describe how recommender systems work.

• define the concept of value creation for users
• explain the ubiquitous strategy of personalisation
• explain the differences between app developers and end-users in value
creation
• explain how the process of value creation is directly connected to the
participation and collaboration of users
• list the most common ways social media platforms generate value for
users
• describe the role of APIs and their contribution to the creation of value
on social media platforms
• describe the logic of item–item collaborative filtering.
103

Konstan, J.A. and J. Riedl ‘Recommended for you’, IEEE Spectrum 49(10)
2012a, pp.54–61.

Bucher, T. ‘Want to be on the top? algorithmic power and the threat of
invisibility on Facebook’, New Media and Society 14(7) 2012, pp.1164–80.
Konstan, J.A. and J. Riedl ‘Recommender systems: from algorithms to user
experience’, User Modeling and User-Adapted Interaction 22(1–2) 2012b,
pp.101–23.
(London: Morgan Kaufmann, 2014) Chapter 4, pp.61–72.

Baldwin C. and C.J. Woodward ‘The architecture of platforms: a unified view’
in Gawer, A. (ed.) Platforms, markets and innovation. (London: Edward
Elgar, 2009) pp.19–44.
2009) [ISBN 9781848447899].
Pariser, E. The filter bubble: how the new personalized web is changing what we
read and how we think. (New York: Penguin Books, 2011).
2008) [ISBN 9780141031590] Chapters 1, 2, 4, pp.7–35 and 63–100.
10.2 Value creation for users

How do social media platforms produce ‘value’ for users? To answer this
question, we should first make a distinction between two kinds of user –
app developers (or complementors) and end-users. Distinctions of this sort
are not always clear and very often the same person or entity (for instance,
a company) can be a business partner, an app developer or complementor
and an end-user at the same time. It is useful to bear in mind that
companies, app developers and end-users may have different and often
conflicting aims. In this case, platform owners would need to adjust their
overall platform strategy and architecture and find a balance among the
different stakeholders’ interests and platform’s objectives. Since we have
spelled out in the preceding chapter how value creation is usually achieved
for platform owners as well as for companies, this chapter focuses more on
the broader category of value for end-users.
Table 10.1 summarises social media value creation for users. App
developers benefit from social media through access to technical resources
and markets. End-users mostly benefit from a broader set of services
such as the technical infrastructuring that social media platforms provide
for a set of web-based daily activities (e.g. shopping, reading, browsing
the news, chatting etc.), lowered transaction costs and personalised
suggestions.
104
Users Value proposition

app developers or technological foundations that sharpen focus on app
complementors development (infrastructures, modules, APIs, data)
market access
end-users mix-and-match customisation
recommendation systems or personalisation
lower search and transaction costs
technological infrastructure that facilitates access
to other platforms or services (portability of user
identities/profiles)
Table 10.1 The value proposition of platforms for users: app developers and
end-users (adapted from Tiwana (2014), p.62).
The lower part of Table 10.1 describes the most common ways in which
social media platforms generate value for end-users. We do not make
here a distinction between the different types of social media we have
already introduced in earlier chapters, but it is a good activity for you to
try. For instance, you may want to consider how social networking-based
platforms produce value in slightly different ways from, say, content-based
or service-based platforms. Clearly, a social networking-based platform
would have an intrinsic value for users that relates to how the platform
allows communication or connection with friends. Equally, a content-
based social media would produce value for end-users mostly by streaming
content or otherwise making it available. Finally, depending on which kind
of service it provides, a service-based platform would make this provision
the core of its value proposition. Beyond these three fundamental types
of social media platforms and their related value production strategies,
however, any social media platform is bound to generate a set of generic
services that represent value for users. What we therefore describe in the
rest of this chapter is valid across all social media platform types.
To get into the nuts and bolts of social media platform value generation
for users, we first introduce the case study of Last.fm – one of the first
social media facilities for music discovery – and discuss the value it creates
for different types of users: technical accessibility, market accessibility,
personalisation and collaboration.
Activity
Based on the distinctions of Table 10.1, list an example of a social media platform
for each category as it has been described in Chapter 2 (i.e. social-networking based,
content-based and service-based) and describe the ways it creates value for end-users.
Highlight similarities and differences.
10.3 The case of Last.fm

Last.fm is one of the oldest and most popular social media platforms for
discovering music. It was established in 2002 and in 2007 was purchased
by CBS for $280 million. Since its inception, to early 2009, the platform
offered music streaming services. Over the last five years, Last.fm has
gradually wound down all streaming operations to focus its business
exclusively on music discovery. In this respect, we may say that Last.fm
started out as a content-based platform but transformed into a service-
based platform by virtue of closing down its streaming operations. The
platform currently offers music discovery and personalisation services
relying on a freemium business model, whereby basic services are
105
provided for free, and premium services are offered for a fee, which
together with advertising constitutes the source of revenue for the
company (see Chapter 8).
Last.fm’s core activity is to recommend music to its user base by computing
data on user listening behaviour collected through APIs that link it to 600
connected playback platforms (among which, the most famous are Spotify
and YouTube), applications and devices (e.g. Desktop, WebPlayer, iPhone,
iPad, Android). APIs connect Last.fm to external devices, applications
and platforms regulating the flow of data and functionalities across the
platform ecosystem. The Last.fm platform system will then ‘compute’
the ‘artist names’ data that the connected devices or platforms generate
every time a user listens to a song. This is how Last.fm produces ‘play
counts’ that is its main data entity. The Last.fm system uses a proprietary
technology called ‘AudioScrobbler’ with which it gathers play counts.
Unsurprisingly, playing music is the core interaction of the platform. Play
counts is the counting of ‘artist names’ submitted to Last.fm and represents
the primary data input that powers Last.fm’s item-based collaborative
recommender system. As we show in some detail below, item-based
collaborative filtering computes recommendations on the basis of a
similarity ranking (recommendations of the type familiar now from Amazon:
‘customers who bought this item also bought…’). In the case of Last.fm,
‘AudioScrobbler’ personalises music recommendation by mapping ‘playback
events’ of users (user listening behaviour) into ‘similarity networks’ on the
basis of similarity scores. In so doing, Last.fm computes the probability that a
user who listens to certain artists would like to listen to similar artists.
The Last.fm platform has a number of general social media features. Users
have profile pages, which display user activities as ‘playback events’, they
can friend other users and participate in different platform activities.
Some of the key user activities Last.fm encodes are the following:
creating and leading groups, joining existing groups, starting discussion
threads, writing blogs about music, writing biography (wiki) about
artists, uploading images, music or videos of their favourite artists. Users
can also add information regarding music events and invite other users
or join upcoming music events. One of the most important activities of
users (besides producing listening events) is to tag artists, albums and
tracks with keywords. In fact, the social data produced by the activity of
tagging enter into Last.fm’s recommender system to refine or qualify the
computation of ‘similarity networks’. The reason is simple: computing
similarity scores solely on the basis of users’ listening behaviour may be
problematic. For example, users who like to listen to Mozart may also
like to listen to Lady Gaga. A score based solely on listening data would
determine Mozart and Lady Gaga as being similar to one another. With
the help of user-generated tags, the system recognises the two as being
not similar by having Mozart tagged most probably as ‘classical’ and
Lady Gaga as ‘pop’. In this way, the platform system may avoid crude
distinctions and recommendations.
In what follows, we use the Last.fm example to discuss value creation
for users in more detail. Let us remind you that platforms are settings in
which value is produced (rather than simply exchanged) by the reciprocal
interactions and engagement of platform participants. In the case of social
media platforms, in particular, value is generated through the active
involvement and engagement of platform users. In other words, value
is co-created and appears to be inseparable from user involvement and
engagement (see Chapter 7).
106
10.4 A web of APIs

How then is value produced? To what extent do a platform’s characteristics
(core interaction, architecture and technologies) enable particular forms
of user participation and engagement on social media platforms to create
value for users? Let us go back to the Last.fm case.
Last.fm is a social media platform for music discovery that does not
directly stream music (not any longer). The platform simply personalises
music recommendations. To do this it relies on an ecosystem of more than
600 connected applications and devices through which it collects listening
data, the very stuff it uses to compute recommendations. APIs are one of
the most important elements in today’s social media ecosystem by which
platforms and other internet-based systems are connected to one another.
APIs, as reported in Table 10.1, are technological tools that direct the work
of app developers and sharpen their focus. Without APIs, app developers
would not be able to develop ad hoc solutions to connect different devices
to Last.fm. Thus, APIs are the elements of platform architecture and design
(Baldwin and Woodward, 2009, Gawer 2009) that help produce value
for app developers offering definitions, tools or procedures to build other
applications, creating a virtuous circle that also benefits end-users and
promotes platform diffusion.
In computer programming, an Application Programming Interface (API) is code or a

program that allows two software programs to communicate with each other. The
API specifies how a developer should write a program to request services from an
operating system (OS) or other application such as a database
See http://searchexchange.techtarget.com/definition/application-program-interface
In principle, an API consists of a set of subroutine definitions, protocols and tools for
building software and applications. A good API makes it easier to develop a program
by providing all the building blocks, which are then put together by the programmer.
An API may be for a web-based system, operating system, database system, computer
hardware or software library. An API specification can take many forms, but often
includes specifications for routines, data structures, object classes, variables or remote
calls.
See https://en.wikipedia.org/wiki/Application_programming_interface
As noted earlier, Last.fm stopped all streaming operations in 2009.

However, users are still able to listen to tracks on the platform because of
the cross-sharing of content and data the platform has established with
YouTube. Look at www.last.fm/music/Pink+Floyd which illustrates an
example of cross-sharing. When users click on tracks on Last.fm sometimes
these tracks are linked to YouTube; in this case on the Last.fm platform a
YouTube video makes it possible to play the song (in this case ‘Wish you
were here’ by the Pink Floyd).
The example shows that, once in place, social media platform APIs create
value for end-users by providing the means to access content across
platforms and platform ecosystems. The role of APIs is very relevant
across platform types and ecosystems. Perhaps one of the most widely
used of these access APIs is the Facebook Authentication API. Navigating
on the web has undoubtedly become easier since the introduction of
the Login with Facebook option. Now users don’t have to input personal
details when they join a new platform or a service around the web, they
just switch between platforms easily. In exchange for using Facebook
107
Authentication API, users allow the Facebook platform to swap their

profile and social data from Facebook to the host platform. The latter, in
turn, sends back to Facebook data on activities users perform on it (see
Chapter 5). Once again, in this case a complex exchange of data and
services is created: end-users benefit from access, but platform owners and
other stakeholders (e.g. the host platform) benefit from the social data
their participation generates that can be further converted into insights
and directly sold to third parties.
10.5 From mass-customisation to personalisation

Last.fm’s main service is the personalisation of music recommendation to
users. Personalisation is a pervasive operation in social media platforms
(Bucher 2012). It refers to the constant adjustment that the platform
system provides to match the personal preferences of users on the basis
of incoming (social) data. There are several techniques of personalisation
that are in use. The most common is ‘collaborative filtering’. As the name
suggests, the system filters the relevant information to suggest relevant
information on the basis of individual and collective user behaviour.
Collaborative filtering works by extracting recommendations from the pool
of data procured by user behaviour on digital platforms or on the basis
of social data on social media platforms. Recommendations are usually
computed with the aid of powerful algorithms and can be based on a user–
user or on item–item matching mechanism (Konstan and Riedl 2012a,
2012b). Collaborative filtering in short computes all the data produced
by user activities to produce affinities between user transactions or
behaviours/ratings on the basis of which it extracts personalised outputs
for each and every user (what a user can share with other users).
Last.fm relies on an item-to-item collaborative filtering recommender
system. It suggests new artists (items) to users by computing artists’
similarity on the basis of users’ rating proximity. This is taken as a good
proxy for the suggestion of relevant items to users. An ‘Item–item’ algorithm
(Figure 10.1) calculates the distance between each pair of items according
to how closely users who have rated them agree (Konstan and Riedl 2012).
The “distance”
between items is
determined by
how closely users
who rated both
items agree items that are
rated similarly by
many users form
“neighbourhoods”
Like Like Like Like Like Like of items.
Like Like Like Like
Like Like
Figure 10.1: The logic of the item–item algorithm.

For example, if Cristina rates Lady Gaga five stars and Jannis rates Mozart
five stars and this pattern remains constant across the sample of users (we
often talk about millions of users) then the two items will be defined as
neighbours and the system may pre-compute recommendations based on
this. If someone rates Lady Gaga five stars, the system will automatically
suggest Mozart. Despite some successful examples such as Amazon’s
‘Customers who bought this item also bought…’ feature, item-to-item
collaborative filtering recommender systems are not always effective in
recommending products. Particularly for complex products like music,
108
other factors may weigh heavily. Last.fm’s recommender system, for

example, suffers from a popularity bias, which means that the system
tends to recommend popular artists (artists that are already well-known).
Beyond this specific case, it is fair to say that personalisation is one of the
key features of social media platforms and one of the most compelling
ways in which social media create value for users. On the one hand, it is
simply not possible for users to keep pace with the abundance of choice
and information that pervades the web. Users need to be aided in filtering
the relevant information. Personalisation is an extremely significant
way by which social media create value for users and, ultimately, for
themselves. The production and utilisation of social data (for instance,
the tagging data Last.fm uses to mitigate the results of computing play
counts) into recommender systems such as the one we have described
(collaborative filtering) promises to solve some of the biases intrinsic
to these systems. The development of hybrid recommender systems or
user-centric personalisation systems aims to reach a satisfactory level
of personalised suggestion (Konstan and Riedl 2012). On the other
hand, these systems are becoming ubiquitous and transparent. They
often ‘seem to know users better than users do’, so the end result is
that they are gaining the trust of users and exercising a huge influence
on user behaviour. This is something that Eli Pariser has called ‘the
filter bubble’: an artificial world in which users are surrounded only by
preselected personalised results recommended by machines on the basis
of assumptions based on past behaviour (Pariser 2011). Users in filter
bubbles become increasingly separated from a diverse reality and isolated
from what they already know or would probably like to know.
Activity
What is a ‘filter bubble’? Do you think that Facebook’s NewsFeed algorithm produces a
filter bubble? Using this chapter’s resources (particularly Pariser 2011 and Bucher 2012),
write a brief essay in which you critically assess the implications of personalisation on
user behaviour.
10.6 Forms of user involvement and value

As we have seen, social media platforms presuppose various forms of
social interaction, sharing and collaboration. This is the outcome of the
ways the internet and the web are built (see Chapter 3 on the architecture
of the internet), the diffusion of Web 2.0 and also the more recent
developments associated with what is often called the sharing economy
(we review this in Chapter 11).
As we have claimed throughout this guide, in the overwhelming majority
of these platforms value creation is closely tied to user involvement.
However, user involvement takes different forms across platforms and
even within the same platform. A Wikipedia entry, an Instagram photo, a
Facebook post all presuppose different forms of user engagement, produce
different outcomes (an article, a photo, a comment) and are accordingly
variously related to the satisfaction or value a user obtains from platform
participation. The point we would like to make is that value for users is
considerably contingent on the degree or form of user engagement and
involvement within, of course, the overall framework of the platform
and what it enables. Even within the same platform, user engagement
differs substantially from user to user and so does the value users can
extract from the platform, including what the platform can customise or
personalise for its users.
109
Strange as it may seem at first glance, more intensive and complex

forms of user involvement may be inversely related to the value a social
media platform can extract from such forms of involvement. As we have
claimed throughout this guide, social media platforms need simple and
standardised data (social data) in large numbers that can be smoothly
aggregated and computed. This often implies standardising actions (recall
the logic of encoding, Chapter 5) in ways that are easy to accomplish for
all users. Ease of mastery (Zittrain 2008) increases the repeatability of
actions and therefore the volume of data produced. By contrast, complex
forms of user involvement are usually performed by few participants and
tend to produce less standardised forms of data (content) that may not
be possible to aggregate, compute by and reroute through the automated
data systems on which all social media rely.
If we go back to our Last.fm example, it is clear that different types
of value are obtained as the outcome of the degree and type of the
involvement of users. Figure 10.2 summarises how, even within the same
platform, user participation can take different forms, involving users
differently and therefore contributing to different platform strategies or
value production dynamics.
Developing
Writing
Commenting
Sharing
Tagging
Playing
0% 22.5% 45% 67.5% 90%
Figure 10.2: Illustrative representation of the different types of interaction users

perform on Last.fm.
Starting from the bottom of the graph in Figure 10.2, we can see that the
majority of users on Last.fm participate in the platform value creation
process by listening to music. Because of this core interaction the platform
gains data ‘play counts’ (recall that in Last.fm this encoding is produced
by the AudioScrobbler system which counts how many times users play a
track). We can consider playing a track as an ‘easy-to-do’ activity. If users
play a track within any of the connected 600 platforms, application or
devices the AudioScrobbler system automatically translates their playing
into play count data. Play count data are produced massively by the
majority of users.
The second form of participation is tagging. As we have seen, tagging is
the action whereby users tag a track or an artist with a music genre or
any other descriptor (e.g. mood, instrument, years etc.). Tagging requires
a more demanding form of involvement from users, and compared with
playing tracks is usually performed in smaller volumes. Playing and
tagging are actions that benefit the platform directly, so these may be
regarded as the platform’s core interactions. By producing behavioural
and social data, such actions generate the core value the platform offers to
end-users which is the personalised music discovery service. This produces
value for the platform-user base in its entirety, but it is indirectly and
perhaps more complexly related to the satisfaction of individual users.
110
Going back to the graph, the next form of user involvement is sharing.
Sharing a video, from YouTube, for example, requires a more complex
form of engagement on the part of the user than playing and tagging.
The action of sharing predominantly creates content. As we have seen
throughout this guide, content embeds value. We may say that content
is linked to the production of value for users more straightforwardly and
because of this it only indirectly serves the purpose of the platform. We
are observing an interesting dynamic which contributes to marking the
difference between content and data, which we have already outlined
in Chapter 6. The more complex user participation becomes, involving
creation or sharing of content, the more users may feel a direct benefit
from it. In this instance, platforms appear to benefit less conspicuously and
more indirectly. On the other hand, when user participation is engineered
as easy to master and to repeat, when it is linked to the production of
massive volumes of data, these data directly fuel platform functioning. In
this case, user participation conspicuously benefits platforms and creates
value for users in a more indirect manner.
Near the top of the graph in Figure 10.2, we find commenting and writing,
which refer to the option users have to generate pages, wikis or blogs
on artists on the Last.fm platform. The value these actions produce for
users is clear, but because of the effort and time required by such actions,
fewer users engage with them and the platform benefits in a more indirect
manner. Finally, at the very top of the graph, we find app development.
As we have seen, Last.fm is connected to numerous platforms and devices
because of the involvement of third-party developers that have adapted
Last.fm AudioScrobbler technology and APIs to the interfaces of other
external platforms. The skills and the amount of effort and time needed
to perform such an operation makes it the business of only a few users.
However, these efforts of external developers or ‘complementors’ are one
of the distinguishing characteristics of the social media platform economy,
benefiting both platforms and users. In fact, sometimes the benefits users
may gain from these endeavours are so great that the work may lead to
the creation of new applications or platform businesses.
10.7 Conclusions
In this chapter we unpacked some of the mechanics of social media
platform value creation for users. The chapter built on the overall
conception of value put forth in Chapter 7. Although this chapter mostly
focuses on end-users, we introduced a basic distinction between app
developers and end-users. App developers are relevant actors in today’s
platform economy and one of the most important forms of value social
media produce for them is the technical access to software, data and
protocols through APIs. Using Last.fm as an example, we have reviewed
some fundamental concepts: technical access, personalisation and
collaboration.
Social media are generative platforms resting on the participation and
involvement of heterogeneous publics. Not all social media platforms are
generative in the same way. When discussing value creation for users, it is
useful to bear in mind that it is the blending and coordination of platform
architecture and user participation which articulates the socio-technical
dynamics of value production and establishes who will benefit from that.
Some social media platforms such as Wikipedia produce public value,
others like Facebook are for-profit companies. Understanding who are (or
will be) the users of the platform and how they may benefit from platform
strategy is key for platform studies.
111

• define the concept of value creation for users
• explain the ubiquitous strategy of personalisation
• explain the differences between app developers and end-users in value
creation
• explain how the process of value creation is directly connected to the
participation and collaboration of users
• list the most common ways social media platforms generate value for
users
• describe the role of APIs and their contribution to social media
platform creation of value
• describe the logic of item–item collaborative filtering.

1. Why are APIs important for the functioning of social media platforms?
2. How does collaborative filtering work?
3. Compare and contrast different types of collaborative filtering.
4. How does the encoding operate in Last.fm?
112
Chapter 11: Digital innovation and social media platforms: roadmap to the future
Chapter 11: Digital innovation and social

media platforms: roadmap to the future
11.1 Introduction
This chapter focuses on how social media are intertwined with the broader
digital economy and digital innovation. Taking as a point of departure
the value creation framework put forth in Chapter 7, we consider how
the development and growth of the digital economy is supported by
the functional logic of social media platforms (Chapters 5 and 6), the
technological infrastructures social media develop and the business
formats or models (Chapter 8) they utilise.
In the first section of the chapter, we describe the role social media platforms
assume in digital innovation and the sharing economy. We then move on
to elaborate on the recombinant nature of much contemporary digital
innovation (Kallinikos 2007; Varian 2010; Weinberger 2007). We pay specific
attention to how different data types and sources, software components and
devices are combined across the offline, online and virtual spheres to create
multiple or mixed realities. This, we maintain, is one of the most interesting
and compelling contemporary trends that shows the road map to the future.
It is reasonable to imagine that such a trend will be further reinforced by the
diffusion of the Internet of Things. In the third section of the chapter, we pay
close attention to how social media pave the way for disrupting established
institutions, business models and economic practices by briefly exploring
the topic of what is often referred to in the current literature as ‘the sharing
economy’, a distinct development of the digital economy that features crowd
involvement, collaboration and sharing. The chapter cannot cover the whole
spectrum of issues that are or could be associated with the sharing economy
but it highlights a few central attributes of social media platforms that are
closely associated with the advance of the sharing economy. Throughout the
chapter, we use examples of innovative enterprises, services, data companies
or communities that illustrate the relevance of the concepts and frameworks
that we have put forward in this subject guide.

In this chapter, we outline some key ideas concerning the developmental
trajectory of the sharing economy. We review the impact of social media
platforms and the roles they assume in the current developments. Some
additional aims of this chapter are to:
• indicate how key concepts, approaches and frameworks put forward in
this guide can be used for understanding patterns of innovation in the
sharing economy
• introduce important current trends in the sharing economy
• elaborate on the connection between social media platforms and the
sharing economy
• discuss the technological foundations of some sharing economy
companies and their links with social media-enabled innovation
• assess the role of technologies and technological innovation in the
development of the sharing economy and the organisational forms and
models it promotes.
113

• explain how social media are underlain by technological infrastructures
that accommodate a functional logic and distinct business models that
are likely to impact on the development of the sharing economy
• define the concept of mixed reality and discuss some of its digital
determinants
• define the sharing economy and crowd-based processes of value
creation
• assess critically the difference between a commons-based business
model and a data-based business model.

Norton, 2016) Chapter 12.

Brynjolfsson, E. and A. McAffee. The second machine age. (New York: Norton,
2014).
Rosenblat, A. and L. Stark ‘Algorithmic labor and information asymmetries: a
case study of Uber’s drivers’, International Journal of Communication 10
2016, pp.3758–84.
Sundararajan, A. The sharing economy: the end of employment and the rise of
crowd-based capitalism. (Cambridge, MA: MIT Press, 2016) Chapters 1–2.

Benkler, Y. ‘Sharing nicely: On shareable goods and the emergence of sharing as
a modality of economic production’, Yale Law Journal 2004, pp.273–358.
Kallinikos, J. The consequences of information: institutional implications of
technological change. (Cheltenham: Edward Elgar, 2007).
Varian, H.R. ‘Computer mediated transactions’, American Economic Review
100(2) 2010, pp.1–10.

www.disperse.io
http://datasociety.net
http://theodi.org
11.2 At the frontiers of innovation

Social media platforms thrive on heterogeneous, voluntary contributions
from users. They feature new ways to produce value out of massive user
contributions to what is variously called the digital or platform economy
(Parker et al. 2016), data economy, sharing economy or crowd-based
capitalism (Sundararajan 2016).
As we have seen, on social media platforms value is generated by shaping
user platform participation along standardised types of user actions. The
forms of interaction and user involvement platforms pioneer are sustained
by a complex technological infrastructure through which the operations of
114
social media platforms mingle and intercept with those of the entire web
(see Chapters 3 and 7). Most of the value platforms generate for platform
owners and stakeholders derives from either the exchanges sustained by
these hybrid (platform/web) infrastructures or the data produced within
and across platforms, often by both. Networking-based platforms, content-
based platforms and service-based platforms all produce value out of the
data procured by their own core and peripheral interactions (Chapters
5, 6 and 9). However, underneath this composite reality of social media
platforms there is a complex and layered technological infrastructure
made of distributed databases, automated procedures and algorithms and
a range of hardware, software and system interfaces (Chapters 3 and 10).
As explained in some detail in Chapter 3, social media platforms emerge
on the top of a generic infrastructure which provides the foundations for
these platforms. At the same time, the unprecedented development of
social media platforms infiltrates the entire web and the internet, mingles
with their operations and, in a sense, expands them. Consider, for instance,
the cases of Facebook and Echo Nest we dealt with in previous chapters
and the impact their APIs and data management applications have upon
the entire web.
The modular and layered nature of digital platforms in general and
social media platforms in particular (recall Chapter 3) implies that each
module or layer – from the infrastructural to the service layer – is loosely
coupled to the others. In this respect, it is ready to be reengineered,
recycled, recombined, reshuffled or substituted by new technologies, new
apps, newcomers or incumbents that have the power to buy and quickly
assimilate the latest technological innovations (Yoo et al. 2010; Varian
2010). Many important sectors of our economy and of our society are
constantly disrupted by the technological advancements that generate
new patterns for social interaction and exchange and models for service
provision and monetisation.
Consider again Facebook’s constant investment in innovative technologies
and its concurrent expansion into numerous sectors, including artificial
intelligence and machine learning. By steadily acquiring companies such as
Instagram, WhatsApp and Oculus VR, and developing its own capabilities,
Facebook has been steadily expanding beyond its original business at the
frontiers of technological innovation by providing, for example: automated
services (with Messenger and its ChatBot), communication services (with
WhatsApp) and virtual reality services (with Oculus), among others.
Facebook is not an isolated case. Social media models and technological
functionalities have been at the centre of digital innovation. In the broader
context of the digital economy, innovation is not simply restricted to
particular industries, products or services. By contrast, it often derives
from general principles (e.g. user involvement, sharing, social data),
cumulative technological developments (e.g. APIs and social buttons,
machine learning) and functional approaches (e.g. core/peripheral
interaction, freemium business models) that have been pioneered by social
media platforms. Companies like Uber and Airbnb would not have been
in business without the quick adoption of functionalities, cooperation
and sharing models and web technologies first developed by social media
platforms.
At the current stage of the digital economy, social media platforms have
become so pervasive that it is difficult unambiguously to distinguish
them from the infrastructure of the internet and the web (recall Chapter
3). Much of the febrile innovation currently taking place in almost
every economic sector derives from, or is at any rate associated with,
115
data management systems and applications, business models and social

infrastructures (user communities and participations) pioneered by social
media platforms. In what follows, we review and discuss a few of the most
promising digital and sharing economy trends.
11.3 A mixed reality

When Facebook acquired Oculus VR in 2014, the investment was met with
mixed reviews. Since then, things have moved fast. Pokémon Go broke the
record for the most used and profitable app of the year (2016) and
became a global phenomenon. What the two events have in common
should be rather clear: they both use the technological advancements in
mobile data and smart devices to play with the idea of mixing real and
augmented or virtual reality for the provision of new services across
industries. But they have more in common than just the mixing up of
different regions of reality.
Pokémon Go is a free, location-based augmented reality game released in 2016. Players use
a mobile device’s GPS to capture Pokémon who appear on the screen of the mobile as if they
were in the real-world location of users.
See https://en.wikipedia.org/wiki/Pokémon_Go
Pokémon Go was conceived and developed as an April Fool’s Day

collaboration with Google Maps. Using the infrastructure and the data
developed by Google and the crowdsourced data from a trans-reality
game, Tsunekanu Ishihara of ‘The Pokémon Company’ populated Google
Maps with virtual creatures called ‘Pokémon’. The game has been called
a ‘social media phenomenon’: following its launch and huge success,
231 million people engaged in 1.1 billion interactions on Facebook and
Instagram that mentioned Pokémon Go in the month of July 2016 alone.
How the game was kick-started is illustrative of many of the principles of
digital platforms discussed so far, such as: data and component reusability,
the mashing up of several data sources, the juxtaposition of several
infrastructural layers and the reliance on crowdsourcing (Brynjolfsson
and McAffee 2014). But the most conspicuous trait of the example is the
use of embedded technologies in mobile devices to pierce through several
‘realities’ that so far have remained separated from one another.
Magic Leap is perhaps the most innovative start-up that is engaging with
mixed reality. In this new technological shift, your vision of the real world
is maintained because you wear a device that directly projects an image on
your retina. The device will also constantly gather data at different levels
(scanning both the environment and your behaviour) and making mixed-
reality objects aware of their environment and able to interact with the
real world.
Activity
Go online and read about Magic Leap at
www.forbes.com/sites/davidewalt/2016/11/02/inside-magic-leap-the-secretive-4-5-
billion-startup-changing-computing-forever/#49f511dbe83f
Can you individuate the different sets of data (recall Chapter 6) the device would be able
to gather and mix?
116
As digital technologies continue to develop, and as sensors, chips and

software continue to be embedded in lightweight communication devices,
the number of data and – with them – realities spanned by digital services
rises exponentially. Some realities are created from scratch, and interfere,
for better or worse, with real life. Pokémon Go uses GPS technology
embedded in mobile phones to locate fantasy creatures. It smartly reuses a
piece of technology designed for other purposes, a principle that we have
reviewed as one of the fundamentals of platform architecture (see Chapter
3 and 4). Magic Leap promises to deliver interacting digital objects
projected into real life environments by mixing sensor data, behavioural
data and social data. It is one interesting next step to watch.
Many other companies are heading in similar directions. A London start-up
founded by two of LSE’s brilliant students has found a way of using mobile
phone wireless data to manage large city crowd movements. Disperse.io
repurposes wireless data to count and map the movement of large crowds
that, in a city like London, and in sectors concerned with urban mobility
or public transport, represent a huge issue. Developing ways of reusing
existing data sources and matching them with social data or with existing
infrastructure is becoming a requirement for solving entrenched socio-
economic problems.
In some sectors, such as finance and government, this trend is accelerated
by the open data initiative. Open data is a practice whereby data sources
previously hidden from public view become publicly available for reuse.
A shift towards open data and transparency is likely to condition how
innovation takes place, as it provides incentives for start-ups to explore
service innovation in highly regulated and structured sectors (Parker et al.
2016).
Activity
Discuss the benefits and perils of open data in a short critical essay of 1,000 words. To
know more about open data and the ways it impacts on specific sectors such as public
transport go to The Open Data Institute and read their last report at
http://theodi.org/the-value-of-open-data
With the embedment of sensors and chips into any device, in what is
called the Internet of Things, the opportunities of reusing and repurposing
any data stream from any device and juxtaposing them with social data
will be many. Think about a platform of platforms that gathers social
data from all social media (actions like liking, sharing, posting) but
also offline domestic spending habits and consumption patterns. These
new data super-structures will derive their power and value from their
connectedness (the use of smart interface) and the possibility of matching
data from different sources with user profiles thus developing predictive
algorithms that empower personalised services in almost any sector. Recall
Chapter 9 on the data internet ecosystem, data brokers and social media.
A new generation of companies is flourishing by exploiting the business
opportunities which are created by the integration and combination of
social data with other data sources (we mentioned the example of Echo
Nest and the Facebook/Axciom alliance). The potential of data integration
and mashing up will only continue to grow as the varieties of data sources
and smart devices expand.
Against this background, it is reasonable to assume that the Internet
of Things and the massive amounts of data it will inject into the web’s
big data circuits and platform-based networks will contribute to many
117
disruptive trends. The most conspicuous and, in a sense, disturbing of

these trends seems to be the mixing up of different realities that have so
far lived separate lives. The lines along which mixed reality will develop
are hard to foresee but it will surely impact upon our domestic and private
life as well as upon our professional and public life.
11.4 The sharing economy: crowd-based capitalism or

data-based capitalism?
A new economy in which platforms play a central role is emerging.
Enabled by digital technology, a new generation of platform-based
businesses are blurring the boundaries of online and offline worlds and of
traditional distribution or production channels. What was formerly known
as an organisation is increasingly becoming temporary tacit contracts
between parties who are coordinated by a platform intermediary (Parker
et al. 2016). This is only half of the story, however. As we have seen in
the case of social media platforms, the other (invisible) half of the story
is made of the technologies used in these operations, the kind of data
produced, and the ways in which technologies and data come together in
creating new digital objects: users, services, resources.
One of the classic examples of this new wave of companies that are based
on a platform model and disrupting entire economies is Uber.
Uber is an American transportation company that develops, markets and operates the Uber
app, which allows people to submit a journey request and for a driver to be automatically
alerted to their location. The app automatically calculates the fare and transfers the payment to
the driver, computing the shortest path to the destination. The company is part of the sharing
economy but very much based on data: it uses a complex system of social data (reviews from
drivers and clients) and sensor data and a digital interactive map where offers (drivers) and
demand (clients) meet.
See https://en.wikipedia.org/wiki/Uber_(company)
Uber represents one of the most conspicuous examples of the disruption

brought about by these platforms and the practices and business models
on which they rely. Uber has seriously disrupted a highly regulated sector
in which services have been delivered for decades through established
standards and working agreements (in many countries you need to
pay a large fee for a licence to work as a taxi driver). Drawing on the
affordances of digital technologies (i.e. lightweight location-tracking
devices, Google Maps), Uber has been able to improve accessibility,
minimise coordination costs and offer on-demand fares and services on a
global scale. How does it accomplish all this? The widespread notion of the
sharing economy sees this as the passage from an ownership-based system
to a system which produces additional value by de-coupling the ownership
of the physical asset (in this case the car) from the value it produces. This
decoupling should sound familiar as it is the main architectural principle
of digital platforms and a requirement for the success of early platform-
based disruptions such the one brought about by Kindle to the publishing
industry (see Chapter 3 and 4). On Kindle, by decoupling the ownership of
the physical asset (a reading device – what was once a paper-based book)
from the value it creates (the content of the book) it is possible to produce
additional value and a subset of services that were simply not possible
before (Yoo et al. 2010). To many, these elements are the early instances of
a radical shift in which peer-to-peer exchanges and the crowd increasingly
substitute current organisational forms (Sundararajan 2016).
118
Meanwhile there is nothing particularly new in the gift economy or in

community-based exchange (see Chapter 8); however, the ways in which
these practices are now sustained and empowered by technologies are
substantially new. And all this is not just a matter of scale and scope.
Technology matters. As we have repeatedly been pointing out, the
deployment of technology redefines the objects, tools and operations it is
called upon to sustain (Chapter 6). To go back to the Uber example, an
excellent recent case study points out that the company produces new
forms of labour and user experience from its digitally and algorithmically
mediated system. Uber rests on a semi-automated system of driver
performance evaluations, rating, predictive algorithms and electronic
management which radically moves the core innovation of the company
from peer-to-peer economic exchanges to machine-to-peer empowered
exchanges (Rosenblat and Stark 2016).
Uber’s data operations are not dissimilar to our model of encoding,
aggregation and measure-making (Chapters 5 and 6). The Uber system
collects massive flows of real-time data on everything from driver
positions, to driver rating, to driver ‘dead miles’ (when drivers do not
carry a fare). The system disaggregates drivers’ work experiences in many
data entry points which then re-aggregates into comparable objects that
are made commensurable along apposite metrics and performance scores.
The results are personal suggestions to drivers: where, when, and how to
work. This is a technologically created on-demand economy that although
based on platform business models derives its value mostly from data and
computational tools.
The sharing economy has its roots in a commons-based model of exchange
(Benkler 2004) which it has, however, considerably transformed. As
we saw in Chapter 8, the commons-based model is an alternative
ideal (ownership regime of resources) that leverages on the inherently
cooperative nature of human work. Although some of these principles are
reflected in the way Uber operates and, to a certain degree, creates value,
the company’s business model is entirely based on profit-making. In an
interesting and disturbing development, Uber skilfully uses the affordances
of digital technologies and many features once tried by social media
(rating, predicting, evaluating) to get the most out of non-owned assets
(drivers and cars) in a by and large unregulated sector of the current
digital economy.
Uber is just one example (perhaps not the most sustainable) of the
innovation that some companies are bringing to extant industries, business
models and organisational forms. As Arun Sundararajan has written,
‘Without social media, the sharing economy probably wouldn’t exist in
its current form’ (Sundararajan 2016, p. 25). We know that social media
have not just been confined to the spreading of alternative business models
or organisational structures, nor have they only diffused just a particular
platform-based interaction or exchange. Social media platforms have laid
down the digital track along which many sharing platforms now run: the
development of distributed technological infrastructures and the paramount
importance of active user populations (crowds), the redefinition of the
boundaries of private and public life, the ubiquity of mobile and self-track
monitoring devices, the development of open and collaborative spaces.
These are just some of the fundamental building blocks of an emerging
sharing economy whose future importance is bound to increase.
119
11.5 Conclusions
This chapter has sketched the contours of ongoing developments that
take the many innovations introduced by social media into the future
development of the digital economy that features the practice of sharing
and platform mediation. This is a challenging task that the chapter
tackles by applying the models and approaches developed in this guide.
The chapter explores the links between the fundamental characteristics
of social media platforms and the prospects of innovation social media
platforms bring to our digital future. By drawing on ideas and frameworks
put forth in this guide, the chapter explores digital trends such as mixed
reality, sensor data and the Internet of Things and investigates the broader
area of innovation in the patterns of economic and business exchange.
The first part of the chapter introduces some of the fundamental social
media properties discussed in the preceding chapters by placing them
within the purview of future changes. It singles out the technological
and social innovations social media have brought about which are now
part and parcel of the digital economy. The second part of the chapter is
divided into two sections that illustrate these points with examples and
provide some directions for the future. The first section deals with social
media platform architecture and data combinability and the innovative
opportunities they support when connected to or combined with smart
devices and sensor data. One of the most interesting traits that emerges
out of these trends is the creation of mixed reality applications. More
innovative businesses are bound to develop along this direction as smart
devices, wearables and virtual reality headsets proliferate (we mention the
example of Magic Leap).
The last section of the chapter shifts the focus to a different type of
innovation. Social media are contributing to the development of new
patterns in the organisation and coordination of economic actors and spur
new practices of producing and delivering services. There is currently no
consensus with respect to the contours of what has been variously called
the sharing economy. What should be evident from the entire guide is
that social media have undoubtedly contributed to and, in many respects,
have actually defined current developments. The distinguishing traits of
social media platforms have been adopted by many new sharing economy
platforms. We used the case of Uber to raise some critical questions.

able to:
• discuss the role of social media in the development of the digital
economy
• assess the implications that social media infrastructural features (their
functional logic and business models) have on some of the current
trends in the digital economy
• define mixed reality and discuss some of its digital determinants
• define the sharing economy and crowd-based capitalism
• assess critically the difference between a commons-based business
model and a data-based business model.
120

1. Define the different layers of social media platforms.
2. Define the technological determinant of mixed reality. Can you argue
that what social media structure as platform participation is already a
mixed reality?
3. Discuss how data combinability is likely to impact on the model of
service provision in a sector of your choice (finance, insurance, public
transport etc.).
4. Define platform and the sharing economy.
5. How does Uber disrupt the traditional model of transportation?
6. Apply encoding, aggregation and measure-making to an innovative
platform business of your choice.
121
Notes
122
12.1 Introduction
In this final chapter, we provide a review of the entire subject guide. Our
main purpose is briefly to summarise the major arguments we have put
forward in ways that make evident the links between the various chapters
and the logic that holds the subject guide together. In so doing, we also
hope to remind you of the basic implications of the ideas we have put
forward and the learning outcomes of the entire course which this subject
guide serves.

The key aims of this chapter are to:
• review the chapters of the guide
• indicate the links that tie the chapters together and the arguments
within each chapter
• explain briefly the driving forces of the developments we have
described throughout the guide
• describe the implications of the developments we have described for
social media management and the digital economy
• restate the learning outcomes of the subject guide and the course.

By the end of this chapter, you should be able to:
• explain the arguments that tie together the major arguments of this
subject guide
• place each of the chapters of the subject guide in its proper perspective
• explain the vital role social media play in the current digital economy
• assess the learning journey you have undertaken and the concepts,
approaches and skills you have learned.

Norton, 2016).
2008) Chapters 1, 2, 4, pp.7–35, 63–100.

possibilities. (Cambridge: Cambridge University Press, 2014).

Barrett, M., E. Davidson, J. Prabhu and S.L. Vargo ‘Service innovation in the
digital age: key contributions and future directions’, MIS Quarterly 39(1)
2015, pp.135–54.
123
12.2 Summary of the subject guide

In this section, we summarise the chapters of this subject guide. We do
this from a different point of view from the summary we provided in the
Introduction. Our purpose here is not simply to summarise the content
of each chapter as we did in the Introduction. Rather, we review the key
arguments we have advanced in ways that help you see the subject guide
and the course in its entirety and understand the logic that ties the various
chapters and arguments together. We can achieve such an aim now, since,
after working with each one of the chapters, you are in a better position to
assess the content of the course and understand how the bits and pieces
of the subject guide are held together. The perception of the journey at its
end is always different from the way it is has been conjectured in its very
beginning.
By thus summarising the subject guide, our aim is furthermore to help you
assess some of the economic or business implications of the developments
we have described throughout the subject guide. Social media platforms,
we would like to restate, are major constituents of the path-breaking
changes signified by the diffusion of multisided platforms. They are key
actors in an economy that is increasingly shaped by the ways multisided
platforms create and distribute value. At the same time, they develop and
expand the ways multisided platforms work through the inclusion of large
user populations, the datafication of their platform engagement and the
contribution they make to shaping current patterns of innovation and the
digital economy in its entirety.
In Chapter 1 of this guide we outlined the basic social and technical
developments of which social media platforms are an integral part. Among
other things, we identified these with the diffusion of the internet and
a culture of collaboration and user involvement in which information
systems, devices and infrastructures play a vital role. We have given this
argument its historical outlines in Chapter 3 in which we coupled the
communication protocols and the end-to-end architecture of the internet/
web with the very ideal of participation and the decentralised nature of
interaction and communication the internet and the web promote (Zittrain
2008). Social media platforms, we claimed, ride on this participatory ideal
and the culture of public talk, collaboration and sharing which nonetheless
transform in various, non-trivial ways.
A key argument we made in Chapter 2 with regard to this transformation
is that social media should not be seen simply as social networks (a
widespread view) but rather as platforms that shape user involvement
in a variety of ways. On this view, platforms are not neutral mediators of
people’s networking relationships and interactions online. Rather, they are
complex and stratified socio-technical arrangements that heavily shape
the terms by which people participate and converse online. A fundamental
means through which such shaping is accomplished is through the design
of the core interaction and the specific orientation such an interaction
confers to each platform. Drawing on and extending this argument,
we distinguished three major types of social media platforms, namely
interaction-based (e.g. Facebook, Twitter), content-based (e.g. Spotify,
Netflix) and service-based (TripAdvisor, OpenTable) platforms. There are
many commonalities between these types of platforms but also important
differences, some of which we sought to capture in Chapter 4 through the
concept of network effects, and cross-side network effects in particular.
In Chapter 4, we also outlined the types of economic entities multisided
platforms are and described how social media platforms qualify and
124
extend the multisided nature of platforms. The critical role of users and
the digital footprint that their structured participation leaves online are
the distinguishing attributes, we claimed, of social media platforms. They
confer on social media platforms the specific identity they acquire as
subspecies of the more inclusive category of digital multisided platforms.
In this context, we advanced the critical argument that social data as
distinct from user generated content is the hallmark of social media
platforms as technical and socio-economic entities.
In Chapter 5 we spelled out in some more detail the terms on which user
platform participation is transformed to social data. For this to happen,
it is necessary for social media platforms to organise user participation
along stylised routes that produce standardised data and a countable
data footprint. In other words, user participation has to be encoded into
stylised activity types that are performed on platforms en masse, leaving
a measurable data footprint that can be variously measured, filtered,
aggregated and computed.
We further analysed the mechanics of aggregation in Chapter 6 and took
pains to disclose the fundamental assumptions on the basis of which each
user is made comparable (that is, commensurable) to other users and one
group or network of users comparable to other groups or networks. In
other words, encoding provides the unit of measurement through which
user activity is made the functional but also economic engine of social
media platforms. Placed in this context, the unstructured nature of user-
generated content and the still cumbersome technical processes (e.g. text
and sentiment analysis) of transforming it to computable data make them
less susceptible than social data to the computational mechanics that
characterise the operations of social media platforms. Encoding, aggregation
and the scores that can be produced on the basis of the social data they make
available is the central span of the data edifice of social media platforms.
Chapters 2–6 provide the foundations of the course; that is to say, key
concepts and frameworks that describe the fundamental operations on
the basis of which social media platforms are sustained as socio-technical
entities. Chapters 7–11, by contrast, address more straightforwardly the
economic context in which social media platforms operate as business
organisations, and the means and practices by which they create value for
platform owners, advertisers, other third parties and users.
In Chapter 7, we reviewed and critically reappraised the concept of value
as this has been discussed in the literature. We have taken stock of the
claim that posits value as having, in the course of capitalism, become
loosened from its bonds to the materiality of products and services and
increasingly tied to the forms through which buyers and consumers
experience a product or service (see e.g. Barrett et al. 2015; Lusch and
Vargo 2014). But we also sought to expand and adjust this path-breaking
idea to the reality of social media platforms which create value by means
of the direct and indirect links and transactional dependencies they create
between platform participants. In addition to being contexts of experience,
social media platforms, we claimed, are stages on which different actors
communicate and interact with one another. In other words, they are
communicative contexts as well.
Having laid the foundations for platform value creation, in Chapter 8
we have considered the business models through which social media
platforms monetise the value they help create for platform participants. No
essential understanding of business models can be gained apart from the
basic concept of cross-subsidisation and its attendant business practices.
Firms and organisations bundle various products and services together
125
and price the components of the bundle differently (some with low or
no margins and others with high margins) with a view to establishing
conditions that are favourable to attracting a larger consumer base for
the bundled market offer. Social media platforms ride on the practice of
cross-subsidisation, as standard mass media organisations have done for
decades. In Chapter 8 we presented a few types of cross-subsidisation
and described several of the ways by which social media adopt but also
extend and in some cases transform and tweak that model. An important
condition that makes cross-subsidisation an interesting revenue base for
social media platforms is closely associated with the fact that most of the
services they produce are, at their very core, data-based services.
These ideas were taken further in Chapter 9 in which we showed how
data produced though encoding (Chapter 5) and aggregation (Chapter
6) form the basis for compiling audiences that are sold to marketers and
advertisers. Advertising is a major source of revenue for social media
platforms that, in this regard, continue the tradition of mass media,
trading user attention for money. But social media audiences differ from
those of mass media in a number of respects that we have pinpointed and
analysed. Social media audiences, we claimed, are data-derived audiences
that are pliable, scalable and adjustable to the varying requests of
advertisers. Furthermore, in Chapter 9, we dealt with the critical role that
data brokers and data intermediaries play in the internet data ecosystem.
Data brokers and data intermediaries are important allies of social media
platforms with which they build different types of partnerships and create
a variety of data-based services that are very characteristic of how the
internet and the digital economy operate. Also in Chapter 9 we dealt with
how social media platforms create value for traditional, non-digital native
firms and organisations and briefly considered the impact social data may
have on business strategy.
We further described and analysed in Chapter 10 how social media
platforms create value for users. The detailed data that social media
derive from users give them the opportunity to process these data in
ways that allow them to relate individual users with one another. By
this means, social media can tailor their responses to individual users, a
practice that has increasingly been referred to as service personalisation.
Basically, personalisation is a complex data-based practice that requires
the comparison of users and their preferences as these are encoded and
processed by social media platforms. Such a task is accomplished by
the technique of recommender systems, whereby user preferences are
clustered together, enabling the construction of affinities between users
expressed in the form of quantitative descriptions such as a similarity,
popularity and trending scores.
In Chapter 11, we reconnected to some of the ideas advanced in Chapter
9. Placing social media platforms within the broader context of the digital
economy, we considered how social media platforms are standing at the
frontiers of innovation, setting new trends in the development of what is
now called the sharing economy.
These then are the core ideas of this course and the subject guide.
Social media platforms are really no more than complex arrangements
that organise and standardise the platform engagement of large user
populations. The data produced by such standardised participation forms
the basis for the development of various services that are traded and
monetised in the broader internet data ecosystem that characterises the
current digital economy.
126
There are a number of interesting and vital issues that we have opted
not to deal with in the current subject guide. Important among them are
the issues of privacy and surveillance raised by the insights social media
platforms obtain on the lives of individuals and their pursuits. These issues
are further accentuated by the collaboration of social media platforms
with data brokers and data intermediaries that we briefly touched on this
subject guide. These are, we thought, deeply serious issues that require
their own lengthy and specialised treatment.

• obtain a deeper understanding of the sort of technical and economic
entities that are social media platforms
• integrate the arguments each chapter makes into a larger and more
comprehensive argument about social media
• link social media platforms with the diffusion of multisided platforms
and the ways in which the current digital economy develops
• explain the type of value social media platforms create and describe
the ways through which such value is marketed and monetised.
127
Notes
128

IS3183 - Study Guide

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IS3183 - Study Guide

Uploaded by

Copyright:

Available Formats

Management and social media

University of London International Programmes

Published by: University of London

Chapter 1: Introduction .......................................................................................... 1

Chapter 11: Digital innovation and social media platforms:

1.1 Route map to the guide

1.2 Introduction to the subject area

1.2.1 Social media as platforms

1.2.2 Social media and the digital economy

data analytics, information architecture and design are therefore made up

solutions offered by Facebook to deepen their understanding of audience

in the Department of Management at The London School of Economics

1.4 Aims of the course

• analyse the types of services social media platforms develop for

1.5 Learning outcomes

1.6 Structure of the guide

Chapter 2: Social media

(Instagram) and service-based (TripAdvisor). Such a distinction and the

Chapter 3: The internet ecosystem and the development of social

Chapter 4: Social media as multisided platforms

Chapter 5: The structure of platform participation

Chapter 6: From social data to measures

Chapter 7: Platforms and value creation

Chapter 8: Business models and social media platforms

Chapter 9: Creating value for business

Chapter 10: Creating value for users

Chapter 11: Digital innovation and social media platforms:

Chapter 12: Conclusions

1.7 Overview of learning resources

1.7.2 Essential reading

1.7.3 Further reading

1.7.4 References cited in this introduction

1.8 Online study resources

1.8.1 The VLE

1.8.2 Making use of the Online Library

1.8.3 Other resources

1.9 Examination advice

Chapter 2: Social media

platform types we outline. You will be in a better position to comprehend

2.1.1 Aims of the chapter

2.1.2 Learning outcomes

2.1.3 Essential reading

2.1.4 Further reading

2.1.5 Additional resources

2.2 Social networking sites (SNS)

The attention in the SNS approach is usually directed to the visible

2.3 Social media platforms (SMP)

2.4 Types of social media

Chapter 3, adopted a very different policy on the use of real-life identity as

The articulation of self-appearance or self-presentation online is intimately

content-based social media platforms are specialised in one or another user

have progressively restricted the open participation of users in one or

2.6 Reminder of learning outcomes

2.7 Test your knowledge and understanding

Chapter 3: The internet ecosystem and

3.1.1 Aims of the chapter

3.1.2 Learning outcomes

• explain the design of end-to-end architecture and how it is linked to the

3.1.3 Essential reading

3.1.4 Further reading

3.1.5 References cited

3.2 Social media platforms and the internet

3.3 The internet communication protocol suite

Once these technical solutions were in place, they sparked an amazing