Photo Credit: pexels.com
For nearly two decades, the most popular social media platforms have been free to use. In exchange, though, users agreed to give up their privacy so that ads could be shown to them and so that their data could be monetized. That worked at first, but not any more. The traditional business model of social media is now broken.
And so we are tasked with coming up with an entirely new business model for social media. And, in order to do that, we need to understand the economics of social media. We need to understand the sources of value creation, as well as the sources of value destruction. And we need to understand the incentives involved, so that we can change the outcomes. With that in mind, here’s a closer look at 3 key stages of the social media lifecycle.
Production
No, we’re not talking about the production of factory widgets here. We’re talking about the production of social media content. Just because a platform is free to use doesn’t mean that users are going to be falling all over themselves to create new content. They need incentives. They need clear rules of the game for what types of content will be rewarded. And they need key technical features to help them produce this content as quickly and easily as possible.
In terms of creating a new social media business model, perhaps the most important element here is “incentives.” How can a social media platform incentivize people to create content? One useful method, of course, is to find ways to help users monetize their content. The big social media platforms are bringing in billions in dollars of revenue from advertisers, and in turn, they are now diverting part of this revenue for their own unique “creator” programs. YouTube particularly stands out here, because a growing number of YouTube creators have gone on to become mini-pop culture icons. Just think of Mr. Beast, PewDiePie, or Jake and Logan Paul.
Thus, any future social media model will need to find some way to keep rewarding these creators for their content. And any upstart social media platform will need to up the ante if they plan to “woo” these creators away from Facebook, X, Instagram, TikTok, or YouTube.
Distribution
Back in the day, the way you distributed content was by hiring kids on bicycles to throw newspapers onto streets or neighborhood porches. In the digital era, the way you distribute content is via the algorithm. The algorithm determines who gets what, and when. By making a few quick tweaks to the algorithm, you can fundamentally change the pattern of content distribution.
So if you’re looking to create a new social media business model, I’d start with the algorithm. First of all, do we really need a computer algorithm? Or should the task of content distribution be given back to us humans? And secondly, what are the tweaks needed to today’s core algorithms? Right now, the system seems to reward low-quality content that has the potential to go viral quickly, or to result in more engagement. Unfortunately, that has led to a very polarized content ecosystem, where everyone strives to be louder and more aggressive than the next person.
Consumption
The final piece is consumption. Here, we’re not talking about the consumption of food, but the consumption of content. But there’s a very useful analogy to consider here. Just as the consumption of a low-quality diet full of artificial nutrients is going to wreck your body, so will the consumption of a low-quality social media diet.
That’s something the Big Tech giants want you to ignore, of course. They don’t want to hear about the mental, psychological, emotional, and physical effects of social media. They don’t want to hear appalling stories of teen suicide and depression, and they don’t to hear about young adults trapped in an endless scroll of habit-forming content.
What happens next?
There has been an explosion of social media research since 2015. While most of this research has focused on Twitter (now X) and Facebook, there’s now growing research on Instagram, YouTube, and TikTok. So there’s plenty of data and evidence out there. The good news is that, the more you dig into this data, the more you realize that a new social media business model might just be possible.
