Social Media as an Innovation - The Case of Twitter

Abstract

Social media services such as Twitter and YouTube are offering unprecedented opportunities for ordinary people to access a huge amount of content and to publish their own content for a global audience. The key innovation of these services, however, is not technological, rather, it's about recognizing and connecting people's need for information and attention. To better understand this, we model a social media environment as an economy where consumption of content means supply of attention and consumption of attention is through supply of content. Both the supply of content and the supply of attention involve investment of time, hence time is money in this economy.

We show that as the population in this economy grows large, there exists an attention wage for content production and the segmentation of the population is neatly characterized. Surprisingly, if users' utility functions satisfy a certain linearity condition and the population size is large enough, then with probability 1, users will self-select into either the group of content producers or the group of content consumers, resulting in a perfect division of labor. Moreover, the macro-level content consumption and production of such partition equilibrium is stable, suggesting the sustainability of the social media.

Based on our model and a massive collection of data from Twitter, we propose and test four hypotheses, and the statistical results give strong support to our theory.

This paper gives important insights into the unique innovation of recent social media services like Twitter and YouTube. It also provides a new perspective on the free-riding phenomenon in many large social media sites.

Keywords: Twitter, innovation, social media, user-generated content

JEL Classification: D5, D51, D12