Is it Too Late for Traditional Social Media?

April 13, 2020

In just over a decade, social media has become a staple of our digital lives. While the Internet began as a place to store and access information, through social media it has grown into a vibrant, dynamic, and addictive world. Whether good or bad, people have a platform to share their legitimate concerns or misinformed opinions from. 

Social media has become an inextricable part of the marketing of any company, as its audience is almost surely online. The market penetration of Facebook, the world’s largest social media platform, is simply astounding. In the fourth quarter of 2018, it had 2.32 billion monthly active users. That’s 30% of the world’s total population and around 55% of the world’s Internet users, accessing Facebook at least once a month.

A growth chart of Facebook's monthly active users
Facebook's explosive growth (source)

Those numbers might have you believe that social media is now a relatively mature industry. You could quite reasonably argue that any platform with billions of users and a market cap of many billions of dollars would have a stable business model that focuses on steady growth and keeping shareholders happy with quarterly dividends.

Unfortunately, that’s not the case at all. Social media is unlike any other industry. Given that it’s inherently linked to the Internet, it’s weird, and it’s about to get even weirder. The last few years, nearly all social media companies have been rocked by serious scandals, openly displaying the flaws in their business model. Blockchain technology provides a solution to many of these problems. But it might be too late. Social media might morph into something else entirely. Read on to find out more.

Social Media Scandals

There’s a saying that goes: “if you’re not paying for it, you’re the product.” Creepy, I know. But that’s the business model of traditional social media companies. You can use their platforms for free, and in exchange they gather as much information about you as they can, which they sell to the highest bidder. That’s how they make so much money.

That already feels a little bit wrong, but for most people it’s okay. They can use Facebook for free in exchange for ads that are tailored to who they are, because Facebook knows that they’re married, 37 years old, and have an income between $50,000 - $100,000 a year. No big deal, right? I don’t mind seeing ads personalized to my tastes. In fact, I prefer them over ads that are totally irrelevant to me.

But it’s not as simple as that, as the world found out during Brexit and the 2016 US elections. As it turned out, through the use of apps on Facebook, companies with less than good intentions – to put it mildly – gained access to the personal information of millions of people. This information was then used to manipulate them into taking actions that those companies favored. Arguably, this led to the UK voting out of the European Union and Trump getting elected.

Additionally, politically motivated entities were able to create an enormous amount of fake profiles on social media platforms like Twitter and Facebook, that fed the audience misinformation they were inclined to believe and that artificially lifted the number of followers, likes, and shares of people that those entities wanted to promote. An analysis from President Trump’s Twitter account found that 61% of his almost 55 million followers were bots, spam, inactive, or propaganda accounts.

A parody account of the Queen
Decidedly not the real profile of the Queen

To give you an idea of how widespread the problem of fake accounts has become: from April through to September 2018, Facebook removed 1.5 billion fake accounts. If that’s not a dumpster fire, then I don’t know what is. At the beginning of the article, I shared that Facebook had 2.32 billion monthly active users. But how many of those are fake? How can the general public trust social media platforms with the numbers that they come out with? And why should we trust them, if our data is so easily sold or even hacked?

To summarize, social media platforms suffer from three serious problems. Firstly, users have no control over their data. Everything they share on a social media platform either becomes the property of the social media platform or can be used and sold freely by the platform. Secondly, social media platforms are susceptible to hacks that steal the personal information of millions of users. And thirdly, social media platforms have become inundated with fake profiles that spread fake news.

Blockchain Technology as a Solution

Blockchain can solve the above three problems. First of all, it takes away the centralized nature of the social media platform. No longer is there a single point of failure. Depending on the consensus algorithm, hacking a blockchain requires taking control of 51% of the network, a feat almost impossible to accomplish. 

Secondly, the content that users share on the platform remains under their control. There’s no entity that can lay claim to that content or sell it to the highest bidder. Users retain full control over both their data and the content that they share.

Thirdly, blockchain technology can help users unequivocally verify their identity. This will make it much harder for certain entities to create fake profiles, as they’ll need to prove their identity as registered on a public blockchain. 

But I don’t want to spend too many words talking about how existing social media platforms can use blockchain technology to solve their problems, because it’s unlikely they’ll change their business model in such a fundamental way. Instead, I want to focus on how the social media landscape might be changing in ways few people are anticipating.

A New Form of Social Media

On the 3rd of February 2019, masked DJ Marshmello performed a live concert for millions of people. That wouldn’t have been unusual. But the concert took place in the popular third-person shooter Fortnite. It was entirely virtual.

A Fortnite concert with people flying in the sky
Gamers were catapulted in the sky during the song "Fly"

Virtual concerts in games aren’t new. The Royal Liverpool Philharmonic Orchestra held a live performance in the virtual world Second Life in 2007, as did U2 in 2008. But the Marshmello concert reflects a broader trend: games are becoming increasingly social. Fortnite isn’t just a game, it’s also a place where you hang out with friends and chat, where you show off your newly acquired outfits, or your newly-learned dance moves.

Similar to social media platforms, Fortnite is free. But different from social media platforms, the bulk of its revenue doesn’t come through advertising. It comes from the microtransactions of purely cosmetic enhancements to a player’s profile. Data isn’t sold under the radar and players can exist and enjoy the game in relative anonymity.

Of course, the game still suffers from the same problems of any centralized entity. The cosmetic enhancements that players buy remains under control of Epic, Fortnite’s developer. The players pay for something they don’t entirely own. If Epic were ever to introduce a “build your own skin” feature, where players could create their own content, then that content would be owned by Epic too. 

Additionally, the time you invest playing and ranking higher on the leaderboards yields no monetary reward. Compare that to playing a real-life sport, where even in lower divisions, players receive a salary that’s often more than enough to live from. But 99.9% of gamers? Zilch.

Again, this is what blockchain technology can solve. Players would have full ownership over their in-game items and would be able to trade those with other players for real money, if they so please. Additionally, blockchain technology would make it much easier for third parties to set up gaming tournaments that hand out monetary rewards to the winners. Players wouldn’t need to trust those third parties, because everything would be recorded in smart contracts on a blockchain.

If we then think about games incorporating social media features into their design, players could be rewarded for content that’s enjoyed by its users, as measured by the number of likes, shares, or any other form of interaction. In fact, this already exists in the form of blockchain social media platform Steemit

In my eyes, the project that’s closest to merging a form of social media with a blockchain game is Decentraland. It’s a world made to be visualized through virtual reality, where players can buy plots of land and build whatever they want on it. Already, games are being built on the platform. Players will be able to walk around in a virtual world, talk with each other, play games together, share news, and so on…

Traditional social media companies would be wise to adopt blockchain technology to solve the many problems they’re facing. But it might be too late. Games built on blockchain technology might prove to be a much more attractive offer for people looking to connect with others in the digital world.