This post first appeared on the Dolfin website.
The social media giants run on attention, relying on ‘eyeballs’ to survive. But data scandals and ad fatigue are throwing their futures into doubt. Can they find alternative business models?
Three years ago an observation made by Tom Goodwin, head of innovation for Zenith Media, in TechCrunch went viral. He said the world’s largest taxi operator (Uber) owns no taxis, the world’s largest hospitality firm (AirBnB) owns no buildings, and the world’s largest content company (Facebook) creates no content. The soundbite revealed how, in a world of instant ubiquitous communication, connections have become more lucrative than inventory. The power has shifted towards platform providers.
“If Facebook is making money from my content, why don’t I get a cut?”
Three years on, however, many people are taking something else out of the observation – at least when it comes to Facebook. They’re saying: if Facebook is making money from my content, why don’t I get a cut?
This is troubling for the social media giant – but it’s not the only concern it faces. GDPR and Cambridge Analytica have made users worry about data privacy. They are also growing wary of interruptive advertising, fake news and psychological profiling.
For the moment, Facebook remains a hugely profitable company. But experts believe it – and all the other social media giants – may have to find a new model if they are to stay on top.
Pay as you play
The most obvious option is subscriptions. The monthly fee has worked well for Netflix, gaining it 125 million subscribers, and for Spotify, with 75 million, while LinkedIn and YouTube are pushing their premium services hard too. However, subscriptions may not work so well for Facebook. How would advertisers feel if the most affluent users paid not to see ads? And would free users to perceive their service as inferior?
“2018 was the year regulation disrupted digital.” – Andrew Grill – The Actionable Futurist®
According to Andrew Grill, The Actionable Futurist® and former global managing partner at IBM, any new social media model must return data ‘sovereignty’ to the user. He says: “2018 was the year regulation disrupted digital. With GDPR and open banking, it was a watershed. I think we’re now five to seven years away from people truly owning and trading their data.”
The question is: how? One option is through virtual currency. Thanks to blockchain and crypto, it’s now possible for any network or platform to quickly launch their own native ‘coin’. Users can buy, spend and earn this currency – and the host can get a cut.
It’s already happening. Canada’s messaging app Kik raised $50m to launch Kin tokens, while Russia’s Telegram launched a similar fund raise to support a native currency and a ‘TON’ wallet. Its launch paper said: “A whole new economy saturated with goods and services sold for cryptocurrency will be born.”
There are plenty of sceptics. After all, Facebook tried and failed with virtual currency before. However, a blockchain-based coin would in theory be easier to manage and offer more extras than the flawed Facebook Credits.
Grill says such a coin could offer a medium for sharing value back to users. He says: “If I’m worth £1,000 to Facebook, I want some of that. I can see a future in which Facebook could gift me coins to spend inside the platform in line with my perceived worth.”
“You’ll pay to have a digital assistant in the cloud that does deals on your behalf.” – Andrew Grill The Actionable Futurist®
Yet this could be the start of a much more fundamental shift towards a ‘personal data economy’. This is the idea that people can trade personal information on their terms to get cheaper or more personalised goods and services.
Grill is convinced it’s coming. But here’s the radical bit. It won’t be you but your virtual digital assistant that does the transactions. “I think you’ll pay to have a digital assistant in the cloud that knows all about you,” he says. “It will do deals on your behalf with your approved suppliers all the time.”
Bots calling the shots
If true, the implications are huge. For a start, if my bot is trading with your bot all day, what’s the point of consumer advertising? “The ad industry is terrified of this,” says Grill. “In effect they will have to write ad copy for robots. They will need to find a way to persuade bots to consider new offerings outside their existing suppliers.”
This might sound like science fiction, but a number of firms are already working on it. They are called Personal Information Management Services. PIMS give consumers a chance to gather their data in one place and share it on their own terms with trusted brands. It’s great for the latter, who get information that is accurate, rich and up-to-date. And they don’t have to store it themselves, with all the costs, compliance and security risks that go with it.
The UK start-up Digi.me is one of the pioneers. It has raised £4.2m ($6.1m) in Series A funding, and its lead investor is global re-insurer Swiss Re.
Julian Ranger, CEO of Digi.me, believes every business in the world could ultimately benefit from the concept. He says: “A two-person business could ask for your data, and it would be richer and more accurate than Google’s. The data advantage will go away and the competitive advantage will be what you do with it.”