It’s been a rough couple of weeks for the social media business. Meta just reported that its revenue declined for a second consecutive quarter, and its metaverse ambition hasn’t made investors excited enough to forgive its revenue slump. Elon Musk finally acquired Twitter, fired the top management, and proposed charging users for blue ticks. TikTok is winning market share, but its political situation is getting very shaky. Are we finally seeing a major shake-up of the social media status quo? Probably.
We can start by looking at advertising revenue, which is mostly how many social media platforms make money. Advertising revenue has been declining not only for Facebook, but also Google’s parent company Alphabet. This is linked to the decreasing purchasing power of consumers. At the same time, some new actors are also coming to claim a share of the advertising pie. Apple’s new privacy rules have also impacted Facebook’s advertising business. For Meta, this is probably more complex than for any other internet giant, since advertising is very much its main revenue source.
Meanwhile, Mark Zuckerberg thinks the future of social media lies in the metaverse. Thanks to his metaverse investments, Meta now expects total expenses for this year to be between $85 billion and $87 billion. Next year it will grow to between $96 billion to $101 billion. The metaverse hasn’t really seen any traction yet. Many parties are increasingly skeptical about when (if ever) we will realistically see higher usage numbers and revenue in metaverses.
More than metaverse worries
But Meta’s problems aren’t limited to Zuckerberg’s metaverse obsession. It’s also about the changes and concerns relating to Facebook’s core business. TikTok has won more users, and many parties see its algorithms and user experience outperforming Facebook and Instagram. Meta has also tried to copy ideas from TikTok, such as Reels.
But the result is a mishmash of content that many users find confusing, and never really asked for. The average Facebook feed is now a combination of paid content, Reels, media content, and – sometimes – some posts from your friends (who are presumably why you got a Facebook account in the first place).
Not surprisingly, many investors are concerned about the Meta situation. “Meta has drifted into the land of excess — too many people, too many ideas, too little urgency,” wrote Brad Gerstner, the CEO of Meta shareholder Altimeter Capital in a letter to Meta CEO Mark Zuckerberg. “This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes.”
Meanwhile, after months of drama, Elon Musk was finally able to close the Twitter deal. But the drama was a sideshow distracting from the fact that Twitter has problems, and its future was uncertain even before Musk decided to buy it.
For example, it’s a well-known fact that many parties see Twitter as a badly managed company. Its performance, execution efficiency and capability to build a business aren’t what you’d call excellent. On the other hand, it has become an important channel for announcing and publishing things. And of course, it has become a very political media platform.
Which is why one of the biggest debates has been if Musk will allow Donald Trump to return to Twitter. More generally, Musk has made some unclear comments about the right to free speech. The question is whether this means content moderation will cease to exist, or at least be relaxed enough to allow someone like Trump back on. This has made advertisers worried. Few want their ads placed in an environment of polarized fights, hate speech and conspiracy theories.
Social media needs content moderation
Advertisers aren’t the only ones worried. The Anti-Defamation League (ADL) – a Jewish advocacy group that tracks antisemitism in the US – said it identified more than 1,200 coordinated tweets and retweets spreading antisemitic memes in the 24 hours after Musk took charge of Twitter.
The Network Contagion Research Institute, which studies online social threats, published data showing that the use of the N-word on Twitter jumped 500% after Musk’s acquisition. Some advertisers have already indicated that they plan to pause Twitter advertising until they have a better idea of Musk’s new plans for the company.
Musk has now indicated that Twitter will establish a content moderation council, and that “no major content decisions or account reinstatements will happen before that council convenes.” We must wait and see what will happen.
As for Musk’s actual business plan, he has set targets of $26.4 billion in revenue by 2028, compared to $5 billion in the last year. He estimates advertising would be only 45% of revenue by that time. He also expects to open a new product called X. Details are scarce but ‘X’ could be anything from a subscription product to a Chinese-style super app.
TikTok trust issues
Then there is TikTok, which is still doing very well. It is estimated to have 750 million active users, totaling over a billion user accounts, and it has become the third-largest social media service in the world.
It is clear that TikTok’s concept is very appealing (otherwise Facebook wouldn’t be trying to copy it). But its problems are more linked to global politics, as it is owned by Chinese company ByteDance. The US and other western governments have been worried about data collection at TikTok for years. However, as the situation of global affairs becomes shakier, TikTok’s position is becoming more unstable.
Many parties would like to forbid TikTok in their countries. India and Russia have already done so, and US FCC commissioner Brendan Carr has just recommended the US do likewise. There are less extreme options for dealing with this, but it all boils down to being able to independently and easily verify how TikTok works in different situations, where the data is collected, how it is stored, who has access to it and how it can be transferred somewhere.
The future of social media
All of these social media disruptions are creating all kinds of uncertainty regarding the fallout. These days we talk a lot about how nebulous the future of Web3 is, and what it might look like. Now it looks like even the future of Web2 is also unclear.
It is also clear that leading social media companies have come quite far from the early days of user-generated content services. Their main driver is now to protect their advertising revenue – which is quite a challenging task in the current reality.
So that’s why the time has finally come where we will see big changes in social media businesses. Will it actually become a mix of Web2 and Web3? Could traditional media companies take a leading role in the internet business? Or will we see some newcomers that can make social media a better experience for users?
In the end, the question is where people want to spend their time. It is after all people’s attention that drives this business.