Social Media Is Dying
$28 million a year. That’s roughly what Twitter Blue, Twitter’s $11-a-month (or $8 a month on web) subscription product, makes for Twitter and Elon Musk, as reported by Mashable.
According to its last SEC K-10 filing, Twitter previously made over $5 billion a year, the majority of which (>90%) was made up of advertising. Half of Twitter’s top advertisers have now stopped advertising on the platform, and Elon Musk, the master of business, has now revealed his most cunning trick yet: users will now have to subscribe to Twitter Blue to use text-based two-factor authentication (also known as MFA, or multi-factor authentication).
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This colossally stupid idea - one that betrays a total lack of understanding of why websites offer security features - is one that screams of desperation. Of an attempt to both lower prices (because text messages cost Twitter money) and to con users into paying for a service that both used to be and should always be free.
Worse, it betrays a shallow understanding of the company in which Elon wasted nearly $44bn purchasing last year. By the end of the 2000s, Twitter was emerging as the Internet’s most vital, chaotic conduit for knowledge, with world leaders and major broadcasters embracing the platform en masse.
This period of growth coincided with a number of unfortunate security incidents which threatened to dent public perception of the site – including one where then-CNN anchor Rick Sanchez declared he was “high on crack”, Fox News cast aspersions about the sexuality of Bill O’Reilly, and President Obama tweeted a phishing scam to his hundreds-of-thousands of followers. A few years later, the company had to reset the session tokens of over 250,000 users after (yet another) catastrophic security breach.
Twitter was a relatively early adopter of MFA. It needed to be. It’s a necessary component for keeping the platform safe and protecting the integrity of its users, both high-profile and otherwise. Paywalling text-based MFA (which remains the most popular method, despite itself having security issues) is as irresponsible as privatizing the fire service and only allowing subscribers to make call-outs. It’s just breathtakingly moronic.
Now Meta, owners of Instagram and Facebook, will be selling an $11.99-a-month “verification” service of their own, which offers a blue checkmark, along with “extra protection from impersonation accounts” and, even more disgracefully, “direct access to customer support.” And while some may call this a masterstroke - a way to extract more revenue from those desperate for clout and legitimacy - I feel as if it’s a sign that Meta is deeply afraid about the future of their advertising-driven cash cow.
Musk, while impressively wrong about every decision he’s made at Twitter so far, is keenly aware that social media companies are painfully, brutally addicted to advertising. Advertising makes up 90% of Snap’s revenue, 97.5% of Meta’s revenue, and YouTube, which makes up almost all of its revenue from advertising, makes up 10% of all Google’s revenue.
Pinterest? All their revenue comes from advertising. TikTok? Ads. Amazon’s streaming platform Twitch is slightly more diversified, meaning that not only are there ads, but a revenue-sharing agreement between Twitch and creators when their fans subscribe, where Twitch gets a 50% cut to cover the cost of running the service (on hardware run and owned by Amazon) - but, again, the majority of its revenue comes from advertising.
The eternal growth engine of startups has always been “get a bunch of free users and then monetize them through advertising.” This feels like a good deal for the user, who pays for the service with their time and attention. Except the problem with the advertising-based revenue model is the annoying “free will” part of users. They have the ability to (as they often do) entirely ignore an advertisement, or when one is thrust upon them hit “X” to close it, or to “watch” but not really pay attention to a 30-second ad to watch, say, a 4-minute-long video about how to fix their toilet.
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You see, it’s hard to scale a customized, thoughtful advertising campaign, because you have to find a way to “target” hundreds of millions of people. This problem led to the growth of behavioral targeting, by which I mean using personal information (records of your online activity, often gathered on sites unrelated to the one you’re immediately visiting) to target ads specifically to you. While there were a few articles in 2019 that suggested that behavioral advertising didn’t work, the current evidence suggests that these companies are absolutely terrified of losing their ability to do it.
And they should be. In 2021, Apple introduced App Tracking Transparency, which presented users on a per-app basis with a prompt to opt-in (or out) of sharing their activity across other companies’ apps and websites. The reason that this was such a significant moment was that users up until this point didn’t know they’d already been doing this - and when presented with the question of “do you want to give a company your information,” most people will say no.
In fact, only 25% of iOS users have opted in to App Tracking, meaning that the world’s billion-plus iOS users are no longer effective targets for social media’s only real revenue driver. Worse still, Facebook’s workaround - baking “I agree to personalized ads” into their terms of service - led to them being fined $410 million by the European Union, as GDPR requires companies be transparent when obtaining user consent, and will likely require European users to deliberately opt-in to share their data with a company best known for using and abusing the data in question.
Let’s be abundantly clear: Meta’s core advertising models depend heavily on things that likely become impossible to do legally (or even technically, given Apple’s App Tracking Transparency, Alphabet’s retirement of the third-party tracking cookie, and the Chromium Project’s planned blocking of non-cookie fingerprinting technologies) in the next decade. Their other products simply do not make that much money.
This is likely why Mark Zuckerberg is so desperate to create and then own large parts of the metaverse - because he may see that the end, while distant, is coming for advertising-driven social media companies. Our broken markets demand eternal growth from these companies, with Wall Street expecting - and receiving! - a $1.45 increase in Average Revenue Per User from Q3 to Q4.
This is an unrealistic, unsustainable, untenable situation. There are only so many living souls with devices and wallets, only so many advertisers, and only so many ways to connect these two parties in a way that doesn’t break the law. And I predict that between America and the European Union it will become significantly more difficult to juice more advertising revenue from customers.
The relationship between the platform and the customer - who is also the revenue driver - is inherently antagonistic. Your experience of using their platform is manipulated from the moment that they try to monetize you - paywalled features, advertising running before videos or appearing between posts, or “sponsored” content that you may or may not want to see. You tolerate this because the platform provides you access to something, but also protects you from bad actors - scammers, impersonators, spammers, abusers, and so on.
Their initial value proposition was based entirely on someone else doing something - find your friends, follow a celebrity, see videos of a serval - and the platform being gracious enough to allow you to connect to them. Except now your feeds on Facebook and Instagram are dominated with sponsored posts and ads for stuff that actively interfere with what you want to see. The very nature of monetizing these platforms is antagonistic. You don’t pay more to have a better experience, you pay nothing to have a worse one. And the continually lax approaches to trust and safety are a huge part of the problem.
The most damning proof of this is the lack of transparent customer service in any of these networks. Anytime anyone loses access to their Instagram, or Twitter, or Facebook accounts, they are met with a faceless email, no customer support number, and no real recourse or appeal process beyond hitting a few buttons and praying to the lord. Despite making over a hundred billion dollars in one year, despite being an interconnecting part of society that can manipulate elections and radicalize youths, there is no telephone number to talk to anybody at Facebook.
That’s why many of these networks are, at times, antithetical to their mission of connecting people. Trying to “succeed” on these networks is rarely based on the quality of one’s work, but on how one can manipulate the hidden algorithms to try and make oneself popular. Finding people with like-minded interests is difficult, because connecting people quickly is not the point - keeping them on the platform is.
A user that is “lost” trying to find something is a user on the platform that can be served promoted content or driven toward a particular part of the network that is more valuable to the owner. Discovery across the board on social networks is terrible, because they don’t really want you to find any specific information - they want you to stay on the app for as long as you’ll tolerate.
It’s not just that the user is the product - it’s that as long as people are still logging on, a user’s experience is subordinate to the company’s interests in monetizing them. While I doubt Mark Zuckerberg or Jack Dorsey sat down and said “we’re going to trap people in here, and that’s how we’ll make money,” the intentional revenue-driving product decisions made to “grow” (by which I mean grow revenue eternally) these products were made to drive as many dollars out of each customer. They have no real impetus to improve the product unless it’s in service of trapping the user or placating critics.
This is in part because investors in the private and public markets value companies based entirely on growth. They believe a company is “bad” when it stays steadily profitable, because a “good” company is one that grows by double-digit percentages every single quarter for the rest of time. The result is that social media companies are incentivized not to find ways to make users happy, but to find ways to continually extract money from them in a way that may not be sustainable, but immediately placates those who demand eternal growth. The key difference between this and sustainable capitalism is that the demands on the networks from day 1 were that they would eventually be used by everybody in the world, and that such a captured audience could be marketed and sold to.
Every single one of these companies is heavily dependent on advertisers, meaning that you are absolutely going to see every single social network try some form of “premium” product as they try to minimize the damage caused by the tectonic shifts hitting the adtech world. These will only become more acute in 2024, when Google finally discontinues support for third-party tracking cookies – a move that will cascade down to other browsers that rely on the Chromium engine, like Microsoft Edge and Opera.
The problem is that customers have been trained that these services are free - after all, why would they pay to talk to their friends? - and convincing them that they should pay for, say, “having access to customer support” is going to make them throw up their hands and walk away. Musk is, on some level, kind of ahead of the game in the realization that a business cannot live on ads alone - the problem is that he has dramatically overestimated how much money he can make through subscriptions.
Had these companies started with premium products, perhaps this transition would have been easier. Users could have been conditioned to understand that there was the free version - ad-supported, some interruptions by advertisers involved - and a premium one that had better but not essential features. A user-centric approach where you actually worked out what they’d pay for and why they’d pay for it would potentially have worked at the beginning, but will now be an uphill battle as you convince people to start to pay for things they have got used to getting for free.
Musk (and I’d argue Zuckerberg) lacks the regular use one would need to actually understand what users would want (and indeed, would be willing to pay for). Gating things like two-factor authentication (Twitter) and “access to customer service” (Facebook) behind paywalls is attempting to monetize desperation and fear. It’s a tacit admission that these companies do not believe they are beholden to the user’s safety or experience, and that only those who are “valuable” deserve to be treated with the respect that any normal business would treat a customer.
Sadly, the rotten economics of these companies are such that making a good free product and a great premium product just doesn’t make sense. If Twitter and Facebook had 24/7 customer service departments and aggressively anti-spam and impersonation departments, creators would spend more time on them, increasing the value of the platform in tow. They could sell premium clients that had baked-in features for power users, or concierge-like Trust and Safety services - you know, products that people would pay for because they make the experience of using the product better.
Except these are not products that would show “growth” - they are investments in long-term user retention and revenue that promote sustainable economics. They are not as sexy as the billions of dollars that reduce users as vehicles to cost-per-mile or cost-per-action advertisers that can be sold to venture capitalists or hedge funds. This doesn’t even mean that these ideas wouldn’t work - it’s just that when you only really give a shit about the next quarter, it’s hard to even consider what the future might bring.
That future might be quite dark for these companies. If (or, rather, when) the swindle of behavioral targeting begins to crumble, they will find themselves desperate to find short-term solutions to long-term problems. And the users will be the ones to suffer.
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"This is in part because investors in the private and public markets value companies based entirely on growth. They believe a company is “bad” when it stays steadily profitable, because a “good” company is one that grows by double-digit percentages every single quarter for the rest of time." I love this sentence it really reminds me of my ex jobs where everything went to shit the moment we were stable
As someone who makes a living by using the actual products that Meta, Google, Tiktok & Twitter sell (AKA I'm a Digital Marketing Director who pays to put those annoying ads in your feed), I'm shocked by the amount of "Nero Fiddling while Rome Burns" I'm seeing from most of my peers. Tiktok's new method of trapping users in an endless cycle of scrolling provided the first breath of fresh air in the digital marketing space since Meta and Google's stranglehold commenced, and it's caused a lot of people to (mistakenly, in my opinion) believe that something new is or will be coming down the pipeline that is going to make these existential threats to the current way of doing business some how ... just not be that big a deal?
And with Google's new bonehead move of promoting the head of YouTube Shorts (yet another rip off of the vertical scrolling video boom) to the CEO of YouTube indicates that Google is just as pants-shittingly-terrified of TikTok as Meta is and making some pretty large bets that the addiction portion of these algorithms are going to be enough to overcome the gradual throttling of the actual adtech that's made these platforms so much fucking money.
I think TikTok is the only one that's really poised to survive these sea changes, because they don't really give a shit about what you do after you leave the app (which is how MOST of Meta + Google's products tag people with labels like "Would Pay for $30 Socks" or "Probably Would Click On An Ad About a Monthly Subscription Box of Tactical Gear") but instead focus on honing in, with incredible quickness, what sort of weird ass green-screen content is going to keep you on the app for as long as possible while limiting your conscious understanding of just how the fuck 3 hours have passed while you watched a bunch of recipes being made and dudes talking about why 15 minute cities are spelling the end of civilization.
But just because TikTok figured out how to make crack from Meta and Youtube's cocaine, that doesn't mean that things are just going to be rosy for marketers moving past 2024. Of course, that's almost 4 quarterly reports away, so it might as well be 100 years in the future.