In the age of Facebook and Instagram, the concept of "social currency" is being discussed much more.

Marketing executive Erich Joachimsthaler defined social currency in 2009. In his words, it is the amount of success that an individual or business has in convincing customers to identify with certain brands. A brand is a company's public image. For example, Nike's brand involves its name, its commercials, what it posts to Twitter, and how people perceive the company.

As people interact with each other every day, they often discuss their favorite, or least favorite, brands. Social currency measures how relevant a brand is to its current or new customers. It is therefore a useful measure of the company's potential growth.

In the 1980s, the French cultural philosopher Pierre Bourdieu proposed an idea that he called social capital. He saw social capital as a kind of status. It was based on the resources an individual could access through their family, friends, and other kinds of networks. These resources could be used to explain success in certain social situations where money was not the only factor.

A New Kind of Capital

Like cash, social capital can be earned, spent, and passed on. According to Bourdieu, social capital is limited by the individual's ability to use those resources for their benefit.

Another of Bourdieu's ideas was what he called cultural capital. Bourdieu described cultural capital as a kind of status currency. It's created and exchanged when individuals seek out certain products to show off their social status to people in general. Cultural capital can help explain why, for example, people wait in line to buy new smartphone models or sneakers labeled with the names of basketball players.

Joachimsthaler's definition of social currency in 2009 updated Bourdieu's concepts based on the invention of the internet. He also articulated these ideas in ways that were helpful for business and marketing professionals. The dawn of smartphones and social media in the 21st century has given branded companies a new ability. They can now target specific people they hope to reach.

Social Media Is Important in Consumers' Lives

In the past, traditional advertising in print and on television was largely limited. Advertisers had to identify what kinds of people read certain magazines and watched particular shows. They needed to know how often they were able to reach these potential consumers. Now, sites like Facebook, Twitter, and Instagram have become increasingly important in the social lives of consumers. Brands are able to interact with and advertise to social-media users online. Companies can also reach consumers repeatedly and on a daily basis. This is a new way of reaching potential customers who might also share information about the product with friends and family. This new method requires a new model to understand these social interactions. Social currency provides that model.

Social currency is now an economic concept. Economics is the study of how money and wealth are produced and used. As with cash and property, the economics of social currency are defined by a gap between the number of people who want access to a resource and the ability of the resource to fulfill that want. This means that social currency is defined by what economists call scarcity. Generally, the more a resource is scarce, the more it is valuable.

Producers who want to accumulate social currency need to compete for consumers' attention on websites that have hundreds of other companies. One way to measure how well brands are accumulating social currency is to look at the number of followers they have on social media sites. There are many ways that brands try to use their online presence to grow their follower counts. One way is by playing up the exclusivity of their products. This is a particularly important strategy for luxury brands. They use the expense and low supply of their products to make people want them more.

Because of their exclusivity, purchasing a luxury product, like a diamond watch, increases a consumer's cultural capital. However, it only happens if they use that product in view of others. Such consumers are therefore likely to share information about those products to expand their cultural capital. They can do this by talking about their products with the community of others who have them. They can also discuss them with people who do not have them. In this way, the brands are easily able to build social currency and, therefore, become more desirable.

The Goal of Going Viral

Exclusivity is not the only way of building social currency. Smart brands sometimes try to make their advertisements "go viral." That means the ads are shared not only by their brand followers but also by people outside those communities.

What makes people share viral content is not an exact science, but it seems related to social currency. Just as people like to talk about being part of exclusive communities, they also like to share other things that make them look good. Say businesses are able to create advertisements that their users want to share not only with each other but also with their other networks in order to look smart or cool. If so, brands can expand their communities. This can increase the number of people willing to purchase their products.