Photo Credit: Shutterstock
It’s hard to pinpoint a specific date in the past decade, but at some point, social media “platforms” forever morphed into social media “businesses.” Suddenly, it was no longer about meeting new people, exchanging new ideas, and maintaining old relationships. All of a sudden, it was about building an audience, monetizing content, and gaming the algorithm.
And that’s why I think the traditional social media business model is now dead. We’ve had enough examples and enough product launches to realize that a social media business model based primarily on advertising is doomed to fail.
Social media’s business model
At its very core, the traditional social media business model is very simple: have your users create content, then get advertisers to show ads around that content. The more content your users create, the more ads you can show, and the more money you can make. Thus, every social media company has a clear incentive to attract as many users as possible, and then get them to create as much content as possible, all so they can sell as many ads as possible.
In the early days of social media, that might have worked. But not anymore. Consumers are finally waking up to the idea that, if the product is free, then they must be the product. In other words, if they’re not paying to use Facebook, X, or Instagram, then the “cost” of using these platforms is measured in terms of all the personal data that they are sharing with advertisers and marketers. There’s a vast data industry that includes companies bundling and selling off data, just so that the right ad can be shown to the right person at the right time.
Needless to say, this doesn’t lead to a very good user experience. In essence, any social media platform has the choice of pleasing either their users or their advertisers. And, since the biggest social media platforms are now publicly traded companies, any guess as to which constituency usually comes out on top?
Unfortunately, every new innovation that comes out of these social media platforms is just another ploy for engagement. Because – surprise, surprise – the more engagement you can get, the more ads you can sell. So is it really any wonder that everyone is now turning to the short video product as the latest solution to save social media? Everybody now agrees that video gets the best engagement.
But from my perspective, this is really just social media’s attempt to recycle the TV industry’s business model from decades ago. Create video content around certain “safe” niches, then get advertisers to show ads around that content. The better the content, the higher the price that you can charge.
Where do we go from here?
The problem is that even well-meaning startups are somehow doomed to fail. A recent piece from The Verge illustrates this point with Snap. The goal at the outset was to become a new kind of social media platform. Content was specifically made to be ephemeral and shared with only a small audience. Snap did everything possible to highlight content from your “inner circle,” and not from sponsors or total strangers. But, over time, Snap eventually gave in to the pressure from shareholders. Now, it’s all about growth hacking new ways to boost usage, engagement, and views.
That’s why I think the current social media business model is truly dead. We’ve tried every possible iteration. We’ve tried every possible version of the social media algorithm. And we’ve tried every possible way to divide and carve up our social relationships in order to monetize them. But it keeps coming back to the concept of audience, engagement, and advertising.
So to fix things, we’re probably going to need to rip the whole system up and create something new. New social media platforms are experimenting with blockchain and Web3 technology to create entirely new incentives for users. Tech entrepreneur Jack Dorsey, for example, has been a big proponent of using blockchain to create decentralized social media platforms that are owned by individuals, not by bland, faceless corporations. Maybe that’s the answer?
This might sound cynical, but it’s not. It’s simply a realization that we can’t go on with the same business model forever. Social media has had a fantastic first 20 years. Now it’s time to look to the future and evolve once again.
