Justin Cox, a Web2 writer, has observed that the platform era is coming to an end. On Substack, he wrote an article titled “The Platform Era is Ending” in which he points out that …
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Social media ad revenue is falling;
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User engagement is down;
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Twitter and Meta are experimenting with “pay to play” models; and that
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Mastodon makes leaving legacy social media platforms easy and fun.
These are brilliant insights. Here’s my response.
Social Media Ad Revenue is Falling
Twitter’s advertising revenue dropped by 71 percent in December. But let’s be honest. Much of that lost advertising revenue is due to the hostile takeover waged by Elon Musk last year. A new czar means a new culture. Prior to Musk’s takeover, Twitter leaned left, and its advertising base reflected that. Musk, while not a Trumpian ultra-conservative, leans a little to the right—especially on fiscal matters. There was bound to be a backlash.
Considering that backlash, advertising revenue might fall for a period. If Musk targeted the right advertisers for the current culture, he could restore that revenue.
Maybe it isn’t so much that social media advertising is in decline. It’s more that advertising is shifting to video, which will benefit YouTube and TikTok. Beyond that, the advertising model, which is a holdover from the 20th century, is a terrible model for the 21st.
When you think about who the players in social media advertising are, the winners are the platforms and the advertisers. The losers are creators. The reason creators lose is because they must rely on the platform to decide whether to share advertising revenue with them. On Facebook and Twitter, they do not. On YouTube, yes. And the model forces creators to figure out other ways to monetize their audiences on those platforms.
Of course, the audiences on those platforms belong to the platforms.
With the ad-based social media business model, the advertiser is the platform’s customer while the creator and their fans are the product. I drive that point home in my book Web3 Social: How Creators Are Changing the World Wide Web (And You Can Too!).
Is User Engagement Really Down?
Cox posts to a Fast Company article as evidence of declining user engagement, which points out that engagement is falling for brands on Instagram. Yet, TikTok engagement for brands is going through the roof. Maybe TikTok is rising to the degree that other legacy social media platforms are falling?
Another point to be made is that buying products and services through social platforms is on the rise. If that’s the case, does it matter if engagement is down?
When it comes to the most effective content for brand marketers, funny wins.
So what does that mean?
It means that branded content on social media is about to become more shallow than it already is. In that case, if you’re looking for substantive content, social media is not likely to be the place you’ll find it. Where will real people looking for real content that challenges them, engages them intellectually and emotionally (beyond the banal laugh), and inspires them go?
My prediction: Web3 social media.
On the rise are social media platforms that allow creators and fans to engage with each other directly without an intermediary. This is part and parcel of Web3. If you just want to laugh, head to Instagram or TikTok. But if you want substantive content from thought leaders and visionaries, head to Web3.
If Everything is Pay to Play, Why Does It Matter Where You Play?
If the legacy social media platforms slide into the pay-to-play arena, why not ditch them and connect with those content creators who own their own platforms? The only way that can happen is if those content creators use protocols that empower their content creation. Guess what? Those protocols exist right now.
In Web3.
It is not likely that Twitter, Facebook, and TikTok will nix advertising in lieu of pay-to-access models. It will likely be in addition to. If you don’t want to pay to play, then you’ll view ads. If you don’t want ads, then you’ll pay to play. But not everything you pay will end up in the pockets of your favorite creators. The platforms will take a cut. In many cases, it will be a huge cut. Probably 30 percent, or more (Amazon currently takes 40 percent of print book revenues and 30 percent of Kindle revenues from independent authors).
With most Web3 properties, the lion’s share of what you pay (if you pay anything) goes to the creator. The platform gets a very small amount, usually in the range of 1% to 3%. At most.
The reason is because the business model is different. The platform isn’t looking to get rich by exploiting its members. It’s trying to facilitate relationships between creators and their fans, and the only expenses are those of administering and managing the technology. Decentralization means that the platform or protocol doesn’t need a marketing budget nor does it need hundreds or thousands of employees to feed a centralized overlord whose primary goal is to serve as a content gatekeeper.
On Hive, for instance, you can sign up for an account for free, or you can pay $3 through some frontends. After that, the cost of running the blockchain is done through rewards, almost 100 percent of which go to content creators and curators.
Not all Web3 social media platforms and protocols are pay to play, but those that are offer much better financial incentives than Facebook and Twitter ever will. For more information about the benefits of Web3 social media, check out my latest book.
Is Mastodon Worth Your Effort?
Full disclosure: I have not used Mastodon. However, Cox is making it look attractive to me in setting up my own instance. I just may do that soon.
Even if I do, I won’t be leaving behind Hive or any of the other Web3 social media platforms on which I play. At the end of the day, I think they’re much better than what Mastodon has to offer.
Mastodon is decentralized. For that, I’ll give it credit. However, you can still be censored because of the federated way that it works. The only place you cannot be censored or deplatformed is on any instances you own and control. One can argue that’s a tremendous benefit. However, Hive has a built-in censorship resistance that forbids anyone from deplatforming or demonetizing you. While downvote wars can put a chink in your earnings, you are free to say what you wish.
One of the criticisms of decentralization with censorship resistance is that it leads to hate groups and an ultra-conservative culture that is out of control. That’s more likely to happen on a centralized platform like Parler and Mewe. I haven’t seen it on Hive. And the decentralization feature allows anyone of any group or political persuasion to enjoy the same benefits. What’s good for the goose is good for the gander.
Web3 social media is on the verge of a breakout. Web2 power brokers like Jack Dorsey and Elon Musk are in favor of it. Their challenge is finding ways to turn Web2 social media into Web3 properties. But why should they? Web3 already has what they want.
It’s just a matter of time before the average social media user realizes that they can have better benefits through decentralized social media that utilizes immutable technology. When that happens, there will be an exodus from the legacy platforms to the emerging protocols that are leading the way into a decentralized internet based on blockchain technology and crypto-empowered communities.
Say you heard it hear first.
Cryptocracy is a decentralized newsletter published several times a week. I curate the latest news and crypto analysis from some of the brightest minds in crypto, and sometimes offer a little insightful and snarky commentary. Always fresh, always interesting, and always crypto. Original articles on Fridays.
First published at Cryptocracy. Not to be construed as financial advice. Do your own research.
Allen Taylor is the author of Web3 Social: How Creators Are Changing the World Wide Web (And You Can Too!).
Image credit: HubSpot
