How do you spend the majority of your day? You likely have several options for interacting with friends and family, including social media. In a 2021 Pew survey, 72% of American adults said they use some social media site.1 Many of these sites are free to use. Why?
The bottom line is that someone is paying for the service-it just might not be you. After all, a social media site is a business like any other that tries to make money. But to find out who pays and why they pay, we‘ll need to learn about network goods, two-sided markets, and platforms first. Then we‘ll be able to see why these interesting features of social media sites make them behave differently than some traditional business models. Though we‘ll use a social media site as our example, there are many other types of firms that fit this mold. Use your favorite social media site as a stand-in for the generic example below.