New Social Networks
Twitter and other social networks are exposed to disruption by web3 technology, which would have different ownership and user incentives.
*I want to thank you for being a subscriber to the Crypto Executive Guide newsletter. Please share this post with someone who is interested in learning about Crypto and web3.*
Last week, Elon Musk put out a poll of Twitter asking his 79 million followers, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” He then added, “The consequences of this poll will be important. Please vote carefully.” After over 2 million votes, Elon’s fans voted 70/30 against Twitter supporting free speech. In response, Elon said “Is a new platform needed?” What does this mean and can new web3 technology bring about a different type of social network, one owned and controlled by its users?
Rumors have swirled that Elon is teaming up with Jack Dorsey, the billionaire founder of both Twitter and Stripe, to purchase Twitter from its shareholders. The idea being floated is that they would take the company private and then relaunch it under a decentralized DAO structure. Elon is worth $270Bn and Jack is at $7Bn. Twitter has a market cap of about $30Bn, so this isn’t the craziest idea I’ve seen posted on the internet before. If you haven’t read about DAOs, check out my prior post here. A Decentralized Autonomous Organization is basically the Crypto equivalent of a corporation. DAOs can issue tokens that provide governance to the holders, much like equity shares in a traditional company.
If the duo of Musk and Dorsey pulled this off, they could issue tokens to users of the platform based on followers, number of Tweets, level of engagement, or whatever metrics they liked. At this time, these DAO tokens couldn’t function like stock in that they would not confer a future share of profits in Twitter. The US securities rules don’t allow that at this time, but I believe those rules will change in the future and this will be possible. You can learn more about regulation of the space in my prior post here.
How would this change Twitter? It’s hard to say for sure but my guess is that it would lead to meaningful changes in their content moderation, their algorithm, and their data policies. Right now, Twitter sets the policy and makes decisions on what can be said and when someone is removed from the platform. With the high-profile removal of Donald Trump and a significant number of COVID deniers and anti-vaxxers, the moderation policies of social networks have come under scrutiny. Governments around the world are asking Twitter and their competitors to better explain their decisions and process. I think a decentralized Twitter, or any new social platform, would have some plan to poll users on these questions. They would leave this up to the “wisdom of the crowd”. Do I think this is a good idea? I’m not really sure. It might lead to some terrible unintended consequences of suppressing minority groups or opinions. However, it is probably a step in the right direction.
The other big area that a decentralized social network would likely be different is the way they serve content to their users. As a for-profit company, Twitter and other social media companies are trying to get as much engagement as possible so that they can serve users as many ads as they can. This leads to a process whereby the items that get the most engagement are the ones that are the most helpful to the company, which has brought on an ethos of “if it enrages, it engages”. If a post is highly controversial, people on both sides of an issue are more apt to like, comment, or re-post it. Would a decentralized Twitter behave in this manner, promoting enraging content to its user-owners just to make extra ad dollars? I doubt it.
The last area I want to address that would be very different with a DAO controlled social network is data. Facebook is the company that has taken the most heat on this topic. Their terrible use of data from their users to target elections, products, and more has gotten plenty of well-deserved negative press. I am certain that a decentralized social network would respect its user’s privacy in a much different way than their traditional counterparts.
Could a decentralized social media company, Twitter or a new one, operate effectively as a non-profit? Would they still be able to generate enough revenue to keep the service free to users while paying their salaries and expenses? I think non-traditional leaders like Craigslist, Wikipedia, and Khan Academy shed some light on this. Those companies have different business models but operate as not-for-profit entities. They show some strategies that a DAO controlled social network could use to dominate their market.
It is important to report that there has already been one attempt at a decentralized social network that got to some level of scale. Bitclout launched last year with a goal to be “the first and only blockchain custom-built from the ground up to power and scale a new category of decentralized social applications to one billion users”. They raised $200MM in a token offering from some of the biggest VCs in the Crypto space, including A16Z, Polychain, Pantera, Coinbase Ventures, and more. They had a weird go-to-market strategy. They took major celebs and created accounts without their permission. They allowed people to buy coins from Elon Musk, Ariana Grande, Mr. Beast, and tons more. The celebs could then “claim” their accounts if they wanted and participate. Most of the big names haven’t supported Bitclout yet, but a few people that are big in web3 have like Jake Paul, Cameron Winkelvoss, and Chamath Palihapitiya. It’s a bit of a wacky strategy, and Bitclout hasn’t really caught on yet, but it does show some promise of what could be.
Are Musk and Dorsey teaming up to do something different with Twitter? I have no idea, but it sure would be cool to see what this could become.