Social Media Enables New Business Models

I've written before on the ways social media can impact the economy. Social media seems to be creating or in this case enabling are new business models. TOMS shoes is one such example. TOMS is the brain child of web entrepreneur Blake Mycoskie. Essentially for every pair of TOMS that are purchased a pair of TOMS is given away to a child in need.

The question is how do they give away so many pairs (now over 1 million) and still make a profit? TOMS founder gave away the secret in this Q and A video from the Clinton Initiative. If you take the time to watch the full video you'll see the secret rests with leveraging social media. TOMS does not spend much money on traditional advertising markets. Instead they rely on social media to spread the word for them. And it seems their customers are willing to help. We are social creatures at heart. We love to share and the new Web 2.0 tools of youtube, facebook, twitter, and the like have made it easier than ever before to spread a message quickly.

It works for TOMS. The expanded profit margin allows them to give away a pair of shoes while still making a profit. On the other hand companies that fail to leverage these tools run the increased risk of negative publicity. For those with the "United Broke My Guitar" song still stuck in your head you know what I'm talking about.