Business Models for Universal Social Media
Imagine that all social media would interconnect just as telecommunication providers do. What would this mean for the business models of social media? Would they still be able to generate the outsize revenues they now have? Would they be able to generate revenue at all? Would they improve their service? And what would universal social media mean for the public?
To cut a long story short, universal social media service would still allow social media to generate revenue, but increased competition and public service regulation would force them to improve their services and be accountable to the public. Let’s see how this would work.
Social media business models
Any company has a choice between three kinds of business models: product models, service models, and outcome models. There are no other kinds of business models.[i] Currently, social media use service models.
In turn, service models have a number of variations: charge for access to the service, and/or charge for usage of the service. Netflix charges for access but not for usage. Once you pay your subscription fee, you can watch as many videos as you want. Uber charges for usage, but not for access. You download the app and register for free, and then pay for each trip. Telco providers charge for access and for usage.
Let’s look closer at the business model of telcos and other communication service providers.
- Telecommunication providers charge for access and usage. The caller decides who to call, the callee decides whether to pick up. Both pay an access fee and the caller pays a usage fee, usually measured in the number of seconds called.
- Newspapers and Cable TV multicast their content to subscribers. Subscribers pay for access and decide what to read/view. Advertisers pay for access to subscribers’ attention.
- TV and radio networks broadcast content to the public. Viewers and listeners decide what to view/listen to. Advertisers pay for access to attention.
- Social media provide a matching function in which producers of content are matched to consumers of content. The social media provider decides what content consumers get to see. Access is free for producers and consumers. This attracts advertisers, who are charged by usage (number of views, clicks, conversions). In addition, business users sometimes may pay for access to premium services and to user data (LinkedIn, Twitter).
All these services are platforms on top of which two or more customer segments can connect to each other. They are all communication providers funded by charging for access and/or usage fees from subscribers or advertisers
What distinguishes social media providers from the others is that social provide a dynamic matching function that matches producers and consumers of content based on their behavior and their social network. To see what makes this special, consider a shopping mall, which is a platform connecting buyers and shops. Access to the mall is free for buyers. To enter a shop, a buyer enters the shopping mall and passes other shops where they may see desirable things to buy.
If a shopping mall would behave as a social media provider, it would arrange the shops that you pass according to your past shopping behavior and your social network. You would see a different arrangement of shops than other buyers. And every time you enter the mall, you would see different shops. This dynamic matching is absent from shopping malls, and from the other communication platforms listed above.
Universal service
What would happen if social media started to offer universal service?[ii] In the late 19 thcentury, subscribers to telephone services needed a different telephone for different providers. This was clumsy, and in the early 20 thcentury, universal service was mandated by law for telecommunication providers. All telecommunications providers were obliged to interconnect, so that a subscriber of one provider could call subscribers of other providers.
For social media, universal service would mean three things.
- Anyone on any social network could exchange content with anyone on any social network.
- Users could define groups that cross social networks, and then post content to a group.
- Any social network could match posts published on any social network, based on post content and other information available to the social network.
This requires a universal identification system, just like email addresses and telephone numbers. And it requires standards for searching and exchanging content consisting of text, images, videos, and sound. This is technically possible. The matching function of a social media would be like an autonomous search function that presents you with content published on any social network. What would be the unique selling points of different social media providers?
Unique selling points
The ability to exchange posts with someone, a unique selling point of social media today, would not distinguish social media anymore. Today, if you want to exchange content with someone on Facebook, you must join Facebook. With universal service, to exchange posts with someone who is on Facebook, join any social network.
The ability to create groups and broadcast to the group would not distinguish social media either. You could join any social network to do that.
The unique selling point of a social media provider would be its matching algorithm. Social media providers would have to attract users based on the quality of their matching. “Want to keep up to date about your favorite music genre? Choose us!” “Want to avoid hateful posts? Choose us!” “Want to avoid deep fakes? Choose us!”
Competing on matching services
With universal matching, social media would morph into a sort of dynamic newspaper without editorial responsibility but with distribution responsibility. It could refuse to spread a post if it does not match its distribution policy. The responsibility for the contents of a post is still with the author of the post, but the responsibility for distributing it is with the social media provider.
This does not violate free speech: if some network does not want to distribute your rant, then find another network who does.
At the same time, social media must compete on their matching algorithm. They must find distribution policies that attract sufficiently many users. Some distribution policies are harder to advertise than others. I find it hard to imagine that a social network would advertise “Want to receive Islamophobic content? Join us!”.
And if users join a network due to the advertised qualities of the algorithm, then the network must offer what they advertised. There is no way a universal social media provider could advertise the best cat videos and in reality distribute Nazi propaganda.
Revenue models
A universal social media mandate would force social media providers to move from service models to outcome models. Outcome-oriented revenue models promise a performance. They are implemented by a network of sensors that measures performance and charge the customer accordingly. For example, Rolls Royce does not sell jet engines, but thrust. Engine performance is measured by sensors, and customers pay for delivered performance.
Social media could offer a subscription model, in which users pay a base fee for access and a fee for performance, provided that the matching algorithm performs at the advertised level. If performance of a matching algorithm is better than that of the competition, and users value this service, they will be willing to pay for it. If the performance of a matching algorithm is poor, customers will be motivated to move to the competition.
Or social media could use an advertising model, in which usage is free but they attract paying advertisers with features of their distribution policy and characteristics of their user base.
Or they could combine these revenue models, as newspapers do.
There is no magic. But with an attractive matching proposition, social media should be able to generate positive net revenue.
What about conspiracy groups, misinformation and hate speech?
Would this supercharge conspiracy groups? Would it amplify hate speech even more than it does now?
Universal social media would facilitate the creation of world-wide groups about any topic. However, current social media, disconnected from each other, facilitate this too. Universal social media does not change this.
But it does change matching services radically. Whatever the revenue model, matching services must advertise their distribution policy. This will have a sanitizing effect on what matching algorithms do. “Want to hear the latest conspiracy around Covid-19? Join us!” “Want to keep up to date about flat earth theories? Join us!” With these matching policies, try to attract advertisers or paying customers.
What about sponsored networks?
Social media like Telegram and Signal are funded by rich sponsors or crowdsourcing and are free for users. There are no advertisements. If universal social media service would be mandated, then everyone would move to these groups. I doubt whether usage could still be free with 3 billion or more users.
Sponsored networks could move to a freemium model with free base services and paid premium services. Or they could limit the number of users. I do not see a reason why this would make universal social media service a bad proposition.
Accountability
Public services must be accountable to the public.[iii] Universal social media should be transparent about at least the data they collect about their users and about the content that they distribute. They should publish this information in the native language of their users, and the truthfulness of these descriptions should be checked by auditors. This will not only improve public accountability, it will also improve their service to the public. I provide more information about transparency requirements in an earlier blog.
The bottom line
Today, American companies provide services to foreign governments to conduct low-cost disinformation campaigns in the USA. These governments would hate to lose this service. At the same time, foreign governments will not allow their citizens to connect with people abroad by a universal social media service. So the prospects that social media will be a truly universal service are dim.
But even restricted to the USA, universal service would be a huge improvement. They would likely reduce profits of social media providers to the levels of normal businesses, so we can expect powerful lobbying against it. But universal service would introduce competition and motivate regulation, both of which would improve service and accountability of social media. This is a public interest for which government should take responsibility.
As a bonus, it would also open space for competitors from Europe, who would have a fair chance of developing matching services on a competitive marketplace without setting the impossible and irresponsible goal of becoming the next world-wide unmanageable monopolist.
[i] Roel Wieringa & Jaap Gordijn. Digital Business Ecosystem Design. A No-Nonsense Guide to the Design and Care of Networked Business Models. TVE Press, 2022.
[ii] https://en.wikipedia.org/wiki/Universal_service
[iii] R. Gorwa & T. Garton Ash. “Democratic transparency in the platform society.” In N. Persily & J.A. Tucker (eds.), Social Media and Democracy. The State of the Field and Prospects for Reform. Cambridge University Press, 2020. Pages 286–312.
Originally published at https://www.thevalueengineers.nl on July 4, 2022.