Team Report – NET205

Network effects and platform affordances are essential tools used to monetise user interaction as seen in the case of Instagram.

Written by Kelsey Singleton, Tegan Gillard, James Smith & Steven Tymoszek

As a society our economy has undergone a constant evolution, changing to accommodate industrial, political, and technological trends. Where previously value was created through scarcity it is now measured in abundance, as is the case with the digital economy and its abundance of information. This information can be translated into many different forms such as digital content, audience interactions, user networks and other forms of digital data. The businesses that are thriving within the digital economy are those who are harnessing this information and encouraging the further production of it for profit. Phenomena such as the ‘Network effect’ and the implementation of certain platform affordances are essential in monetising attention and user interaction. For this report we will be analysing these practices as well as the effect they have had on the digital economies evolution with a specific focus on the success of the online platform ‘Instagram’. Created in 2010, Instagram was built as a Social Networking Site (SNS) focused on amateur photography and content sharing through dense networks. It is a prime example of how businesses are interacting with consumers and creating profit using free access and user-generated content. In the following report we first define the ‘Network Effect’ and how businesses utilise it to define their online success and become self-sustainable through the creation of dense user networks. Further analysing the way the platform has evolved and implemented platform affordances to allow constant growth and audience engagement. These affordances contribute to the rise of ‘influencers’ and promote their popularity (Veirman et al., 2017). These users then capture and transform attention into monetary gain through Instagram’s use of sponsored posts, empowering them as both producers and consumers of their own labour (Kenney & Zysman, 2016). Finally, we analyse how users benefit in an attention economy via the rapid development of social media influencers, and how these users, through brand partnerships use platforms such as Instagram to reach a targeted audience and sell their product.

A way businesses are now measuring successful growth within the digital economy is through a phenomenon known as the ‘network effect’. This is the concept of growing your network of users or audience members rapidly and keeping them active to increase the value of your product (Fu, Wang & Zhao, 2017). Whether this product be a website, phone app, youtube channel or Instagram page the value derives from the reach and density of your network (Fekete, 2006). A pivotal moment in the case of a network effect is the ‘tipping point’, a moment where after an initial period of rapid growth the platform reaches a ‘critical mass’ of users and becomes self sustainable (Kenton, 2019). This self sustainability is an important milestone for network based business models as they would be useless if only used by a single individual but once they are utilised by a larger network their value is increased and the experience is enriched for all users (Kelly, 1997; Aggarwal & Yu, 2012).

Instagram’s photo sharing app is a prime example of the importance of this network effect and how businesses within the digital economy are utilising these networks to increase their value and measure their success. According to their ‘Our Story’ blog, when Instagram first launched in 2010 it reached critical mass within days of it’s initial launch (https://instagram-press.com/our-story/). With over 25,000 active users on the first day and 100,000 by the week’s end the app had become completely self sustainable. It’s users were consistently filling the platform with original content and building networks with other users, inadvertently increasing the value of their own investment and experience whilst also increasing the value of the platform itself (Kelly, 1997). Instagram still needed these numbers to grow however to ensure the platform would continue to thrive so it relied quite heavily on those first few users to draw in new ones. According to Aggarwal and Yu (2012), an individual is more likely to use an application if they already have friends who use it so as long as Instagram continued to sustain a viable platform it’s users would continue to inadvertently grow the network. As a result of this user promotion Instagram has grown to over 1 Billion monthly active users since it’s initial launch in 2010 (https://instagram-press.com/our-story/).

This growth, however, has not always been consistent. As with most online platforms there are periods of plateau in network growth figures or even a loss of entire demographics. Instagram, and most Social Networking Sites (SNS), rely on the consistency of these networks to function. If users stop using their services the platform will reach a ‘minimum critical mass’ which means the site it is no longer viable due to lack of users and loss of content (Aggarwal and Yu, 2012). To overcome this platforms must evolve and reinvent to both retain users and continue expanding. Kevin Kelly (1997) describes this constant reinvention as the “Law of Churn”, the practice of deconstructing old models to evolve new ones and creating new features to keep up with changing trends and demographics. 

 Instagram has utilised this law consistently over the years but most controversially was the case of it’s new “Stories” feature in 2016 which was eerily similar to it’s competitor “Snapchat’s” own stories feature (Dolinschek, 2017). At the time both platforms were dominating the social media landscape in their own right but their demographics were quite different. Instagram had an older, more curated and brand focused user base whilst Snapchat had captivated the youth with it’s silly filters, impermanence of posts and lack of “parental control” (Dolinschek, 2017). So, to combat this and to obtain the monopoly on the SNS landscape, Instagram implemented a new feature reminiscent of an application users were already using. They reinvented their platform by including a less curated avenue of content sharing and thus enticed a new demographic and ensured their network would continue to expand. 

As seen through our discussion on networking, the affordances of a platform are importance to maintain user engagement and ultimately, economic gain. Platform affordances are essential in monetising attention. The concept of platform affordances for social media relates to the potential of an action taken (Majchrak et al., 2013). It involves social context and the capabilities of the technology available (Faraj & Azad, 2012). Platform affordances relate to what is shared, how sharing occurs, how data is captured and how users connect with one another and the platform provider. In relation to how users can interact with posts on social media, Bucher and Helmond (2017) state, “features are objects of intense feelings” (p. 224). This was discussed in relation to Twitter changing their star button to a heart button reaction. Users of the platform interpreted this as the reaction changing from ‘favourite’ to ‘like’, with the affordance becoming more loaded and less generic (Bucher & Helmond, 2017). This relates to the social impact and emotion behind affordances on social media platforms such as Instagram. These affordances result in economic consequences such as social and monetary value relating to both the users and the platform itself (Kenney & Zysman, 2016).

In relation to Instagram, affordances are strongly represented through monitoring, storing and sharing attention. Data and communication in the form of likes, comments, shares, follows and metadata such as hashtags and geotags. An Instagram user who has a high number of followers and follower engagement is seen to be more popular and likeable (Veirman et al., 2017). Likes on Instagram have even been referred to as Key Performance Indicators in relation to popularity and influence (Li et al., 2018). These platforms affordances on Instagram allow ‘influencers’ to be recognised as such and consequently, be recognised by brands to sell their products and/or services. This type of advertising is seen to be more effective than traditional methods as it promotes authenticity and believability, due to the popularity and likeability of the ‘influencers’ (Vierman et al., 2017). In 2019, Instagram removed the number of likes on each post for users in a number of different countries. This has yet to be researched in depth in order to find its effects on Instagram influencers, their popularity and likeability. However, taking away one main affordance of the platform may place more importance on others, such as followers and comments. 

For business profiles on the platform, affordances include tools around tracking the analytics of posts and demographics of the user interactions (Perez, 2016). Instagram shows business profiles how many times their profile has been viewed in the past seven days, as well as the ages, gender and locations of people viewing it. This sort of data and attention capturing and sharing on the online platform allows users to make marketing and business decisions to create economic gain (Veirnman et al., 2017). Business profiles can see which posts are performing well and which demographics, in order to more specifically target their advertising and engagement. 

The affordances of social media platforms are essential to capture and track attention, and transform that attention into economic gain (Kenney & Zysman, 2016). As discussed with the case study of Instagram, this comes in the form of likes, comments, shares and follows, which subsequently create the Instagram ‘influencer’. These influencers are recognised by their large numbers of followers and follower engagement, deeming them popular and likeable (Veirnman et al., 2017). From this, businesses then choose these popular and likeable figures to sell their products and/or services to their large followings because of their reach and perceived popularity and likeability (Veirnman et al., 2017). 

As discussed, platforms give users a place to trade attention for personal gain. In attention economies users also trade attention for money and vice versa. Attention is based on endless new ideas the same way capitalism is based on endless growth; however there is no metric for measuring attention like for money (Goldhaber, 1997). This gives attention an unofficial monetary value assigned by whoever trades it. Some users get around this cost by freely adopting professional marketing techniques (Marwick, 2015). However, corporations and consumers often work together to price attention behind the scenes (Guo, 2015). Businesses benefit from this as users provide them with cheap attention (Abidin, 2014). This expands businesses’ potential market at minimal cost (Kohler, 2018). Not all corporations are the same, and attention purchasing takes many forms. 

Instagram is a platform where money and attention can be traded. Consumers actively engage with business profiles on Instagram more than on other social media platforms (Elliot, 2015). Twenty percent of users knowingly follow brand profiles and sixty percent actively use Instagram to find new brands (Gollin, 2018). This relationship between users and businesses is driven through sponsored posts which are supported by the presence of popular Instagram users known as influencers (Marwick, 2015). Sponsored posts provide visibility to both users and brands in exchange for money. 

There are two types of sponsored posts on Instagram. For the first type users pay Instagram a fee to display a chosen post as an advertisement which is shown to a wider audience than just their followers; for the second type businesses pay users directly to create a post supporting their brand (Forsey, 2019). The first type appears similar to normal posts in a user’s feed but is marked as sponsored; the second is a regular post but must be marked with the hashtag: #spon (Gotter, 2018; Forsey, 2019). 

Image One. Sponsored post type 1 appears as a normal Post, however Sponsored appears below the profile name.

Image 2. Sponsored post type two. A regular post, but the user has included the hashtag #spon at the end of their description to identify it as a sponsored post. 

As seen above, both sponsored post types appear as regular posts. For the second type, a user could decide to not use the hashtag #spon to make their post appear more authentic. This act would not only break the user’s agreement with Instagram and risk them losing their account, but getting caught has been shown to be more damaging to a user’s reputation than not making the declaration (Forsey, 2019). Studies also show using the #spon hashtag has no impact on a user’s credibility, and can in fact make the poster appear more authentic (Ewers, 2017). Users are drawn to authenticity in online spaces and are more likely to give attention to such personas (Vickery, 2013). 

Anyone can make a sponsored post, be they solo users representing only themselves, or a large corporation; the barrier to entry is non-existent (Goldhaber, 1997). Both types of sponsored posts have been shown to be effective, but which is better depends on the needs of the poster (Ewers, 2017). Small parties, solo users and small businesses, are better using type one so they can get the attention of a larger audience; large corporations are better using type two as they benefit from their chosen poster’s authenticity (Gotter, 2018). Type one users can add precision to their sponsored post by selecting the age, location, and interests of their desired target audience, increasing the likelihood it is seen by those likely to take action on the post (Gotter, 2018). The goal of all sponsored posts on Instagram is to get an audience to take action, to follow the post to another location, such as a third party website, where they can pay for a good or service (Abidin, 2014). In this way the cost of a sponsored post becomes part of the transaction cost. 

Sponsored posts give users power as it allows them to stand alongside businesses in negotiating the value of transactions. Corporations may set the price of attention, but ultimately they are purchasing attention from the users. Organisations’ attention shrink as user’s attention grows (Goldhaber, 1997). Users are the ones who decide where they spend their attention, and thus whether or not an attention economy actually works; they control both supply and demand. 

The value of influencers extends beyond the attention of their followers. Through the approach of attention economy users on Instagram have been used to make profit from their smartphone addictions (Styler, 2019). The average person and the high use of their phones provide businesses the perfect place to advertise products and promote material in the digital world (Styler, 2019). Instagram influencers have been known to take money from advertisers and businesses to upload promoted posts as a means to captivate audiences into buying the products being promoted. Money travels where people generally go, where there is an audience, advertisers are eager to follow (Cooper, 2018). The attention economy allows us to track the direction in which the target audience is heading. In this case, Instagram with the large amount of daily users associated with the platform screams opportunity for business growth and development (Newberry, 2019).

Though with the increase in the race for our attention, users of Instagram can benefit from influencers and the development of the associated attention economy. Influencers have built relationships, trust, and credibility with their fans. People respect their content and recommendations (Huff, 2017). Consumers are tired and generally frustrated with advertisements being displayed to them time and time again through the use of traditional strategies (Barker, 2019). Through relevant influencers on Instagram, content or promoted posts are displayed to users  who have a relevant interest, effectively reaching the target audience (Huff, 2017). Brands or businesses need to reach new audiences to expand and grow, however, the idea is to try and market towards an audience that is more likely to be interested rather than not. This benefits users who may be interested in certain products or services and shows how through the technique of niche marketing with social influencers can be extremely beneficial (Barker, 2019).

As seen above, brands and businesses can use social media such as Instagram as a tool to sell their product or service to their targeted audience. Brands can use precious information from their followers or the influencers followers if they have hired their service (Newberry, 2014). For example, if certain posts get more likes and comments than the previous then the company may reconsider changing to attract the most attention. Users are treated as if they are labourers, engagement is key and with so many users actively involved in certain posts a greater opportunity to reach and connect with them may generate more sales (Edgecomb, 2017). There are plenty of tactics that can be used to achieve more sales for bands, but the key statistics of user engagement through social media influencers or other means still prove to be most useful when promoting products or services.

The influx of social media influencers has shown the rapid development of social media as a whole. The shift from selling an object to selling ourselves in social media by building a following as a thought leader, can bring business opportunities which stand out from the crowd (Durkin & Lindhe, 2018). By providing us with global reach for our voices, social media platforms enable businesses across the world to amplify their message in ways which are completely new (Landry, 2014). Through giving businesses the social media touch, you not only generate more business but also connect with your targeted customers a lot better and serve them also on a superior level (Smith, 2019). The shift towards more modern and unique techniques through social media to sell objects is more evident than ever. In the past, mass media ruled and theoretically held the monopoly which companies had to cough up thousands or even millions of dollars to be at least heard, or made known (Landry, 2014). Only those businesses with deep pockets could have a wider reach. Now, a small company can achieve global reach through social media within days of launching their business when and if the cards fall right (Landry, 2014). According to 2019 social media statistics, there are now 3.2 billion users around the globe, which is about 42% of our total present population (Smith, 2019). With such amazing growth, every business needs to recognise social media has affected how modern business is conducted.

As discussed throughout this report, Instagram’s success proves the need for businesses to engage user relationships and combine their platform affordances to transform engagement into profit in a digital economy. Businesses within the network economy, specifically those that rely on the network effect, are not viable without consistent and abundant user interaction; especially in the first vital stages of release. To ensure they achieve this growth, successful businesses eliminate the barrier to entry and focus on network growth and consistent user-generated content to measure their success. Platform affordances such as likes, comments, shares and follows are used to capture and monetise attention, through creating and supporting the rise of ‘influencers’. The presence of sponsored posts on platforms such as Instagram has also allowed attention to be traded for money, giving users the transactional power to stand alongside, and sometimes above the businesses they provide labour for. Through Instagram influencers, average users are subjected to indirect advertisements. Instagram proves to be a platform in which brands and businesses can expand and reach a targeted audience to sell their product. As the digital economy continues to change and businesses such as Instagram continue to profit on their network and attention based models we may continue to see traditional capital shrink as the value of the attention and user interaction grows. The power it seems in the digital economy is held by the platform users who hold positions of both consumer and producer.

References

Abidin, C. (2014). #In$tagLam: Instagram as a Repository of Taste, a Burgeoning

Marketplace, a War of Eyeballs. In Mobile Media Making in an Age of

Smartphones (ed., pp 110-128). Retrieved from: https://wishcrys.files.

wordpress.com/2019/03/abidin-2014-intaglam-instagram-as-a-repository-of-

Taste-a-burgeoning-marketplace-a-war-of-eyeballs.pdf

Aggarwal, C. C. & Yu, P. S. (2012). On the network effect in Web 2.0 applications.

Electronic Commerce Research and Applications, 11(2), 142-151. 

https://doi.org/10.1016/j.elerap.2011.11.001

Barker, S. (2019, October 17). 9 of the Most Attractive Benefits of Social Influencer

Marketing [Blog Post]. Retrieved from: https://shanebarker.com/blog/biggest-benefits-social-influencer-marketing/

Bucher, T., & Helmond, A. (2017). The affordances of social media platforms. TheSAGE handbook of social media, 223-253.

Cooper, P. (2018, June 5). Social Media Advertising Stats that Matter to Marketers in

2018 [Blog Post]. Retrieved from: https://blog.hootsuite.com/social-media-advertising-stats/

De Veirman, M., Cauberghe, V., & Hudders, L. (2017). Marketing through Instagram 

influencers: the impact of number of followers and product divergence on

 brand attitude. International Journal of Advertising, 36(5), 798-828.

Dolinschek, A. (2017, January 13). Snapchat vs Instagram stories. Bizcommunity. Retrieved from http://search.proquest.com/docview/

1858202445/citation/F05A55EB8FC84E6EPQ/1

Durkin, P & Lindhe, J. (2018, May 3). The secret to selling yourself on social media if

you’re seeking business. Retrieved from: https://www.lyfemarketing.com/blog/importance-social-media-business/

Edgecomb, C. (2017, February 21). Instagram Marketing in 2019: The Do’s and

Don’ts of Posting & Liking. Retrieved from: https://impactbnd.com/dos-and-donts-of-instagram

Elliot, N. (2015, September 15). How Does Your Brand Stack Up On Facebook,

Twitter, And Instagram? [Blog Post]. Retrieved from: https://go.forrester.com

/blogs/15-09-15-how_does_your_brand_stack_up_on_facebook_twitter_

and_instagram/

Ewers, N.L. (2017). #sponsored – Influencer Marketing on Instagram An Analysis of 

the Effects of Sponsorship Disclosure, Product Placement, Type of Influencer

and their Interplay on Consumer Responses. (Master Thesis). University of

Twente. Enschede, Netherlands.

Faraj, S., & Azad, B. (2012). The materiality of technology: An affordance 

perspective. Materiality and organizing: Social interaction in a technological 

world, 237, 258.

Fekete, L. (2006). The ethics of economic interactions in the network economy. Information, Communication & Society, 9(6), 737-760. https://doi.org/10.1080/13691180601064089

Foresy, C. (2019, May 28). How to Get Sponsored on Instagram (Even if You

 Currently Have 0 Followers). [Blog Post]. Retrieved from: 

https://blog.hubspot.com/marketing/how-to-get-sponsored-instagram

Fu, W., Wang, Q. & Zhao, X. (2017). The influence of platform service innovation on value co-creation activities and the network effect. Journal of Service Management; Bingley, 28(2), 348-388. http://dx.doi.org.dbgw.lis.curtin.edu.au/10.1108/JOSM-10-2015-0347 

Goldhaber, M.H. (1997). The Attention Economy and the Net. First Monday, 2(4-

7). Retrieved from: https://firstmonday.org/article/view/519/440

Gollin, M. (2018, August 29). 5 Tips to Run Unstoppable Instagram Advertising 

Campaigns. [Blog Post]. Retrieved from: https://www.falcon.io/insights

-hub/topics/social-media-strategy/5-tips-instagram-advertising-campaigns/

Gotter, A. (2018, October 2). Instagram Sponsored Posts: Everything You Need to 

Know. [Blog Post]. Retrieved from: https://adespresso.com/blog/instagram-

sponsored-posts/

Guo, S. (2015). Ruled by attention: A case study of professional digital attention

agents at Sina.com and the Chinese blogosphere. International Journal of

Cultural Studies, 1–17. doi: 10.1177/1367877915572184

Huff, T. (2017, May 9). 6 Benefits of Using Influencer Marketing in Your Social

Strategy [Blog Post]. Retrieved from: https://www.socialmediatoday.com/social-networks/6-big-benefits-using-influencer-marketing-your-social-strategy

Kelly, K. (1997). New Rules for the New Economy: Twelve Dependable Principles for Thriving in a Turbulent World. Wired, 5(9). Retrieved from: http://www.wired.com/wired/archive/5.09/newrules_pr.html.

Kenney, M., & Zysman, J. (2016). The Rise of the Platform Economy. Issues in 

Science and Technology, 32(3), 61–69.

Kenton, W. (2019) Understanding Critical Mass. Investopedia. Retrieved from: https://www.investopedia.com/terms/c/critical-mass.asp

Kohler, T. (2018). How to Scale Crowdsourcing Platforms. California Management

Review, 60(2), 98–121. doi: 10.1177/0008125617738261

Landry, T. (2014, September 5). How Social Media Has Changed Us: The Good and

The Bad [Blog Post]. Retrieved from: https://shanebarker.com/blog/biggest-benefits-social-influencer-marketing/

Li, P., Chang, L., Chua, T. H. H., & Loh, R. S. M. (2018). “Likes” as KPI: An 

examination of teenage girls’ perspective on peer feedback on Instagram and its influence on coping response. Telematics and Informatics, 35(7), 1994-2005.

Majchrzak, A., Faraj, S., Kane, G. C., & Azad, B. (2013). The contradictory influence 

of social media affordances on online communal knowledge sharing. Journal 

of Computer-Mediated Communication, 19(1), 38-55. doi: 10.1111/jcc4.12030

Marwick, A. E. (2015). Instafame: Luxury Selfies in the Attention Economy. Public

Culture, 27(1 75), 137–160. doi: 10.1215/08992363-2798379

Newberry, C. (2019, October 22). 37 Instagram Stats That Matter to Marketers in

2020 [Blog Post]. Retrieved from: https://blog.hootsuite.com/instagram-statistics/ 

Perez, S. (2016). Instagram’s analytics will offer audience demographics, post 

impressions, reach & more. Retrieved from: http://social.techcrunch.com/

2016/05/16/instagrams-analytics-will-offer-audience-demographics-post-

impressions-reach-more/

Smith, K. (2019, August 1). The Importance of Social Media in Business [Blog Post].

Retrieved from: https://www.lyfemarketing.com/blog/importance-social-media-business/

Styler, E. (2019, June 8). Social Media, The Attention Economy, And You [Blog

Post]. Retrieved from: https://www.oxfordstudent.com/2019/06/08/social-media-the-attention-economy-and-you/

Vickery, J. R. (2014). The curious case of Confession Bear: the reappropriation of 

online macro-image memes. Information, Communication & Society, 17(3), 

301–325.

Appendix

Image One. Chacon, B. (2017). image-ad. Instagram Ads: A Step-by-Step Guide to 

Running Your Own Ad Campaign. Retrieved from:

Instagram Ads: A Step-by-Step Guide to Running Your Own Ad Campaign

Image Two. Leaper, C. (2016). Kourtney-Kardashian-spon-1. So this is how much

our favourite influencers get paid for those #sponsored posts… Retrieved 

From: https://www.marieclaire.co.uk/news/celebrity-news/

how-much-do-people-really-get-paid-for-instagram-sponsored-posts-1176