Final answer:
The two common ways social media companies generate revenue are through Advertising and Subscription Services. By selling ad space and offering paid subscriptions, these companies leverage two sides of the product market to generate income.
Step-by-step explanation:
The question revolves around the revenue generation strategies used by social media (SM) companies. The correct answer is A) Advertising and Subscription Services. Let's break down why:
- Advertising is a major source of revenue for social media companies. By displaying ads to their users, these companies can earn significant amounts of money, often based on the number of impressions or clicks each ad receives. This is similar to how radio found a way to collect revenue by selling advertising space.
- Subscription Services are another common revenue stream, where users pay a regular fee for premium features or to remove ads from the platform, offering an ad-free experience. Satellite radio companies such as SiriusXM are an example of this model, providing streaming music without commercials for a subscription fee.
Together, these methods represent two sides of the product market where firms generate revenue by selling goods and services to households, similar to the way households pay for various goods and services, becoming revenues to firms as Arrow "B" indicates.