9/5/23, 8:55 PM What is social media?

| McKinsey

What is social media?

June 8, 2023 | Article

Social media comprises the applications and

websites that allow people to interact with other
users, businesses, communities, and content.

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Y
ou probably already know what social media is. Whether you
cringe at the memory of your Myspace page from the early
2000s, keep in touch with your aunt on Facebook, or are regularly

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unsettled by too-relevant ads on Instagram, few of us are strangers

to a feed. In fact, nearly 60 percent of the world’s population uses
social media. And as of July 2022, global adoption of social media is
showing no sign of slowing: new users are joining social-media
platforms at an average global rate of seven users per second .

So if you’re reading this, we’d guess you know social media when you
see it. But what would you say if your great-grandmother asked you
to define social media? Our definition—the applications and websites
that allow people to interact with other users, businesses,
communities, and content—is accurate, but it also seems to include a
large portion of the internet. What are the actual parameters? What
do people use it for? And how can businesses use social media to
reach new customers in new ways? Let’s break it down.

Learn more about McKinsey’s Growth, Marketing, & Sales Practice .

When did social media start?

If social media is just a means of mass communication, you could

argue that the telegraph, invented in 1844, was the first of its kind .
But that’s a bit pedantic: social media as we know it probably began
in 1997 with SixDegrees—a short-lived social-networking website for
making friends. Personal blogs became popular with the launch of
LiveJournal in 1999. And the early 2000s saw the launches of the
now-ubiquitous social-media platforms LinkedIn and Facebook.

What are the different types of

social media?

Social media has revolutionized how people socialize, do business,

shop, date, come up with ideas, and get news. It’s limitless. There are

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now so many platforms that it can be difficult to keep track (sure,

you’ve heard of TikTok and Snapchat, but what about BeReal and Yik
Yak?). And it’s changed the way that businesses connect and
transact with their customers. Organizations that understand the
different types of social media and how to use them are at an
advantage. In particular, there are four social-media categories that
organizations should be aware of:

Social networks. Social networks, such as Facebook and Twitter,

allow people to foster relationships with family, friends, brands, and
perfect strangers. Users can follow other users online, sharing
photos, life updates, random thoughts, and more. Businesses can
capitalize on social networks through branding and customer
service.

Media-sharing networks. You may have guessed from the name,

but people typically use these platforms—such as Instagram,
Snapchat, TikTok, and YouTube—to share photographs, videos, and
other types of media. Media-sharing platforms are the domain of
social-media influencers : popular users who use their social
platforms to influence their audience’s lifestyles, consumer
behavior, and more. Through partnerships with these influencers,
businesses can target specific audiences and promote their
products or services.

Learn more about influencer marketing in our McKinsey Explainers

entry on the topic.

Discussion forums. On discussion forums, people can share

general advice, ask silly (or serious) questions, make restaurant
recommendations—anything you can think of, and a few things you
probably can’t. Because platforms such as Reddit have lots of
visitors (1.7 billion visits to the site were recorded in May 2022)
discussing a large number of topics, businesses can use discussion
forums to gain research insights into new potential markets.

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Companies can create advertisements, answer consumer

questions, and provide customer service by responding to
compliments and complaints. They can also crowdsource ideas for
products and launches.

Consumer reviews. You have likely used apps such as TripAdvisor

and Yelp before, maybe when you were vacationing in a new city,
exploring a new type of cuisine, or sounding off on a good—or bad
—consumer experience. Many people rely on these platforms and
their reviews when making decisions about new products, brands,
and services. Online consumer reviews can be vitally important for
a business.

Learn more about McKinsey’s Technology, Media &

Telecommunications Practice .

Who uses the most popular types

of social media?

We know that billions of people all over the world are using social
media. But who are they? According to a 2021 survey of more than
1,500 American adults conducted by the Pew Research Center ,
approximately 84 percent of respondents between the ages of 18
and 29 reported that they habitually use at least one form of social
media. A majority of these users attended college or earned at least
$75,000 annually. Businesses can use these and other survey
statistics to their advantage by catering their marketing on social
media to a generally young, well-educated audience.

In addition to this core demographic, a wide variety of people of all

ages are on social media, and certain generations gravitate toward
different platforms. Most of Facebook, LinkedIn, and Twitter’s users
are between the ages of 25 and 34 . However, Twitter’s second-

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largest bloc of users is made up of those aged between 35 and 49,

which skews the overall demographic older. Just more than 70
percent of Instagram’s users are under the age of 34. TikTok is known
as Gen Z’s stomping grounds —in the United States, 25 percent of its
users are under the age of 19 .

What are the four primary social-

media functions for businesses?

As we’ve described, social media has myriad uses, and everyone

seems to be on a platform for a different reason. It can be difficult for
businesses to keep up with platforms’ functionalities and
demographics.

McKinsey has pinpointed the four primary functions of social media

for businesses —to monitor, respond, amplify, and lead consumer
behavior. These four functions are linked to the journey consumers
undertake when making purchasing decisions:

Monitor. Businesses can keep a close eye on how customers are

responding to their brand and adjust their marketing and strategies
accordingly. Customers have extremely high expectations: survey
results show that half of consumers who have a negative
experience will publicly complain online. And social media is having
a big impact on consumption habits, especially among younger
people: one in ten omnichannel shoppers in a McKinsey survey say
they had made purchases directly via social media .

Respond. When a complaint is made, speed counts. A study

finds that 79 percent of consumers expect a response within 24
hours of a complaint, and 40 percent expect brands to respond
within an hour. What’s more, 81 percent say if they don’t receive a
response when they complain online, they won’t recommend that

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company to their friends. These are high standards; only about 50

percent of businesses meet these expectations. But companies
that respond quickly and genuinely can positively affect consumer
perception and behavior.

It’s also critical to communicate such feedback quickly within the

business. Whoever is responsible for brand monitoring must make
sure that the information reaches relevant teams, such as
communications, design, marketing, public relations, and risk.

Amplify. Amplification is marketing activity that spurs broader

engagement and sharing. This includes referrals and
recommendations, community stimulation, and brand advocacy.
For example, Starbucks launched a campaign in 2009 that
awarded Twitter users $20 gift cards for being the first to tweet a
picture of new advertising posters in major US cities. The company
shared that the campaign, which turned core customers into brand
ambassadors, was “the difference between launching with many
millions of dollars versus millions of fans.”[ 1 ]

Lead consumer behavior. Businesses can use social-media

platforms to encourage long-term behavioral changes among
consumers—usually achieved through activities related to brand
content awareness, product launches, targeted deals and offers,
and customer input.

With an awareness of all social-media functions, companies can

make informed decisions on how to lead consumer behavior. One
example is the Old Spice Man campaign, launched in a 2010 Super
Bowl commercial. The campaign started on television, but Old
Spice quickly moved to social media as a way to interact with
millennials, a new audience for the heritage brand. After just one
month on YouTube, Old Spice became the platform’s all-time top-
viewed brand. Ultimately, the ad got more than 19 million hits

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across social-media platforms, and Old Spice sales grew 27

percent in six months.

“McKinsey has pinpointed the four primary

functions of social media for businesses—to

monitor, respond, amplify, and lead consumer

behavior.”

Overall, social media offers significant advantages for businesses

that adequately monitor, respond, amplify, and lead consumer
behavior. The most powerful social-media strategies focus on a
limited number of marketing responses closely related to every stage
along the consumer decision journey.

In the future, personalization —on social media and elsewhere—will

unlock a wealth of new opportunities for companies. We’ve already
seen the benefits of personalization in action: it can reduce customer
acquisition costs by as much as 50 percent, lift revenues by up to 15
percent, and increase marketing ROI by up to 30 percent.
Personalization has also been shown to improve performance and
customer outcomes . And the COVID-19 pandemic has only made
personalization more urgent for brands: three-quarters of
customers have switched to a new store, product, or buying method
during the pandemic, proving that store and product loyalty are
increasingly things of the past. In the future, successful business
leaders will employ generative AI tools, such as ChatGPT, to craft
personalized messages on social media, as well as other sales
content, to drive conversions .

Learn more about McKinsey’s Growth, Marketing, & Sales Practice .

What is social commerce?

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Social commerce is when customers browse and shop directly on

social-media platforms. It’s already a core feature of e-commerce in
China, but this new way of buying is growing rapidly in the United
States as well. In 2021, $37 billion in goods and services were
purchased through social-commerce channels in the United States,
and that figure is expected to increase to nearly $80 billion by 2025.
Globally, the social-commerce market is expected to grow to more
than $2 trillion by 2025.

For consumer brands, social commerce creates the opportunity for

an interactive, entertaining, and experiential journey—one that also
feels less promotional than the traditional journey. For example,
rather than starring in an ad for a new skin care product, celebrities
can invite fans behind the scenes to view their skin care routines,
demonstrating how they use the branded product and why they love
it. Then fans can buy the product within the platform.

“For consumer brands, social commerce

creates the opportunity for an interactive,

entertaining, and experiential journey—one

that also feels less promotional than the

traditional journey.”

Innovation has driven creativity within Chinese social commerce.

TikTok (and its sibling app Douyin, which was its foundation) has
emerged as a leader in social commerce, with gamified product
purchasing and a strong social element. Live-stream hosts build a
rapport with their high-volume customers, and that rapport builds a
sense of community and helps bring important customers back on a
near-daily basis.

The US social-commerce market is likely to evolve differently from

China’s, but there are some parallels. For instance, social-commerce
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adoption in the United States is currently being driven by social-

media and content creation platforms, such as Pinterest and TikTok,
adding new shopping capabilities, just as their Chinese counterparts
did half a decade ago. And interest is growing in these new shopping
features: a 2021 retail survey by Forrester found that 61 percent of
online US adults younger than 25 said they had completed a
purchase on a social or creator platform network without leaving the
website or app, up from 53 percent in 2020.

What are some of the risks of social

media for businesses?

Despite social media’s opportunities for business growth, using such

platforms for marketing introduces many challenges. Here are five
social-media risks to be aware of:

Customer expectations vary across platforms. The most popular

platforms—such as Facebook, Instagram, and TikTok—have many
users who are relatively young. But beyond that, demographics on
these platforms can look quite different. Companies should cater
their tone, customer service, and advertisements to each platform’s
users.

High expectations for service response. As we’ve described,

customers expect quick responses to their online questions and
complaints. Some consumers hope for a response within an hour;
others, 24 hours. Either way, only about 50 percent of businesses
can keep up with these demands.

Unpredictable service demand spikes. There’s always a risk that an

online review will go viral, especially when social-media influencers
get involved. The related dramatic spikes in company awareness
(positive or negative) can be hard to predict.

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Gaps between required and available skills. The hiring demand for
social-media experts changes year to year, and it can be a
challenge for companies to keep their social-media teams up to
date.

Complicated workflow and technology investment choices.

Because social media is so dynamic, it can be difficult for leaders
to make the right investment decisions when it comes to related
technology. Operating models should allow for a wide range of
actions and responses—including authenticating posts, gathering
customer information, and providing on- and offline resolution—
and automatically allocate them to the appropriate service teams.

There are many risks that come with company marketing in social
media, but frequently, the rewards outweigh the risks. It’s important
for businesses to understand the relationship between social media
and marketing—and how this relationship is evolving.

Learn more about McKinsey’s Operations Practice .

What effect does social media have

on customers’ purchasing

decisions?

Before the use of social media for marketing, businesses relied on

media such as newspapers, radio, and television. Companies had to
spend a lot of money if they wanted to reach a broad audience, and
even then, they couldn’t use the platforms to monitor, respond,
amplify, and lead consumer behavior. Today, social media has made it
possible for marketers to reach customers at any and every stage of
the consumer decision journey. In fact, social media is the only form
of marketing that can give businesses the opportunity to influence

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consumers from the moment that they begin thinking about a

purchase all the way to after they’ve received a product.

McKinsey studied the purchasing decisions of 20,000 European

consumers in 2013 and 2014. Respondents were asked if social
media influenced their purchasing decisions significantly. The results
showed that social media had significant effects on consumers, both
directly (when social-media recommendations played a critical role at
the point of purchase) and indirectly (when social media played a role
at earlier decision journey touchpoints, such as initial awareness of a
product). The study also revealed that between 2013 and 2014, there
was a 10 percent increase in consumer purchases related to product
recommendations received on social media. These study results
serve as a testament to how social media can affect consumers at
any stage of the decision journey.

The relationship between social media and consumer behavior

seems stronger than ever, but the landscape is constantly shifting. In
the future, new platforms might make it easier for users to share their
experiences with companies, products, and services. At the same
time, it might become more complicated for businesses to keep up
with these developments and adapt to the new challenges and
opportunities that social media will bring. Companies need to
prioritize staying ahead of this powerful technological movement.

Learn more about McKinsey’s Growth, Marketing, & Sales Practice ,

and check out the firm’s social-media job opportunities if you’re
interested in working at McKinsey.

Articles referenced:

“ Generative AI is here: How tools like ChatGPT could change your

business ,” December 20, 2022, Michael Chui , Roger Roberts , and
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https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-social-media?cid=other-eml-mtg-mip-mck&hlkid=77e202a22ca94fe8a… 11/12
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“ Social commerce: The future of how consumers interact with

brands ,” October 19, 2022, Camilo Becdach, Marc Brodherson ,
Alex Gersovitz, Daniel Glaser, Zachary Kubetz, Max Magni, and
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“ How US consumers are feeling, shopping, and spending—and

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“ Social media as a service differentiator: How to win ,” April 27,

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Edelman, and Hugo Sarrazin

1. Claire Cain Miller, “New Starbucks ads seek to recruit online fans,” New York Times, May
18, 2009.

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