Social media networking sites Facebook, LinkedIn, Google and Twitter are investing heavily in IT platforms to improve their customer experience.
Challenging the market dominance of networking vendors such as Cisco, Hewlett Packard Enterprise (HPE), IBM, etc. Facebook has developed its own hardware development team.
Where’s social media heading
Social media companies have diversified their investments to reap benefits from all aspects of the sectors of the society. For example, start-up is an area where most IT and social media companies are concentrating recently given its quality and cost effectiveness.
In August, Facebook said it will spend $50 million on start-ups in Asia Pacific through a program FbStart. Of the $50 million in benefits distributed to the region, more than $20 million went to startups in India as more than 75 percent of top-grossing apps in India are integrated with Facebook.
Facebook finds a huge opportunity for mobile developers in India and around the world given that millions of people are still not yet connected to the Internet.
Latest news from LinkedIn, devoted to business networking, is that the company is expanding its international headquarters in Dublin. This site is being developed on 17,507sq m and seven hundred construction jobs are involved over the course of the project, which is expected to be completed at the beginning of 2017.
The company has major investment plan for Ireland as it intends to add 1,000 more professionals to its workforce.
Why IT investment
Some of the social media companies are spending around 20 percent of their revenue towards Capex (capital expenditure). For comparison, telecom network operators make 15 percent of their revenue on Capex.
Instagram, a part of Facebook, says more than 80 percent Indian customers are using their phone to take pictures to post on social media.
Instagram said its monthly actives in India have more than doubled over the past year as of September 2015. Instagram has grown to more than 400 million users this year. Among the last 100 million to join Instagram, more than half live in Asia and Europe.
Facebook has made an investment of $780 million towards Capex in the third quarter of 2015. The website has an average 1.01 billion daily active users for September 2015, an increase of 17 percent annually.
Daily active users through mobile were 894 million on average for September 2015, an increase of 27 percent year-over-year. Increases were also observed in monthly active users in both the above said categories.
According to Twitter, capital expenditures for the third quarter of 2015 were $120 million. It expects Capex will not be more than $110 million in the fourth quarter 2015. The company had Q3 revenue of $569 million, up 58 percent.
Twitter’s total average Monthly Active Users (MAUs) were 320 million for the third quarter, up 11 percent year-over-year. In the second quarter, MAUs were 316 million.
Excluding SMS fast followers, MAUs were 307 million for the third quarter, up 8 percent year-over-year, and compared to 304 million in the previous quarter. Mobile MAUs represented approximately 80 percent of total MAUs.
LinkedIn revenue for the quarter rose 37.2 percent to $779.60 million. This was up from $568.27 million last year.
The company will be investing 20 percent of its annual revenue towards Capex this year. It expects revenue between approximately $2.975 and $2.980 billion in 2015, representing growth of 34 percent.
Cumulative number of LinkedIn members was 396 million in the third quarter, up 20 percent from the year earlier.
Unique visiting members grew 11 percent to an average of 100 million per month, and member page views grew 33 percent.
It’s notable that more than half of traffic to LinkedIn is occurring through mobile phones.
Social media IT spending
Technavios research analyst predicts the global social media IT spending market to grow at a CAGR of 22 percent during the period from 2015 to 2019. The rise in the growth of social media users and advertisement spending over social media platforms are the primary growth drivers for the spike in IT spending by social media companies.
A report in Research and Markets says social media platforms are investing in digital marketing and SEO techniques to improve customer experience. BI software that monitor the customers’ patterns of purchasing products and helps companies understand new market requirements are yet another focus area to boost revenue.
IT vendors in the social media market are prioritizing the product development investment that drives the user engagement. Social media companies such as Facebook, Google, and Twitter are significantly investing in improving their existing products including timeline algorithms, newsfeed, graph search, and standalone mobile applications such as messenger.
Technavios research analyst predicts that software companies such as Salesforce and HubSpot are shifting their focus towards marketers and chief marketing officers (CMOs) because many companies are set to spend the majority of the marketing spending over social media platforms such as Facebook, Instagram, Snapchat, and Twitter.
Last year, social media companies invested 54 percent of their IT budget on hardware. Most of the companies are investing in integrated infrastructure to enhance the service delivery platform, security, and compliance control while offering value-added services associated with cloud-based technology.
American dominates the global social media IT spending market with over 52 percent of the market share, which is triggered by the traction toward converged infrastructure among large and medium social media platforms, related to data hosting. 52 percent is not a surprise considering the fact that Twitter, Facebook and LinkedIn are head-quartered in the U.S.
IBM, HPE, Oracle, Dell, Cisco, Salesforce, SAP, Microsoft, VCE, EMC, Juniper Networks, NetApp, Adobe, VMware and Google Analytics are some of the main IT vendors in the global social media market.
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Arya MM
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