Recent news has been filled with reports of Tesla boss Elon Musk attempting to launch a hostile takeover of Twitter. The platform has been the darling of many politicians, including former US President Donald Trump, and has about 77 million users in the United States and about 24 million users in India, according to Statista. A 140-character SMS service that also provides links to other media, it is one of the many social media platforms that have become hugely popular over the past few years.
Musk’s bid represents a 20% acquisition premium over Twitter’s current market price. In fact, the offer was 54% more than what its stock was trading at before Musk earlier this year began crowdfunding a significant portion of its stock. He now owns more than 9% of her stock, and his offer is to buy 100% of it and make it private. He himself is an ardent user and has more than 80 million followers on the platform. He claims to be a “authoritarian of free speech”. One reasonable reason to turn it into a private company away from the glare of the public market is to allow all comers the unrestricted soap program on the platform. There is speculation that he may allow Trump to return to what used to be the former US president’s favorite programme. Trump has been banned for life for some time now.
Meanwhile, Twitter’s board of directors last week unanimously adopted a “toxic pill” strategy through its “shareholder equity plan” that would reduce the likelihood of any entity or person taking control of the company through open market buildup. I’m sure this poisonous pill and the ongoing saga of Musk’s attempt to grab it is going to use up a lot of newsprint this week, so I’m going to stop contributing to it now.
This column is instead a reflection on the future of social media platforms. Twitter is a relative fish – others like Facebook are much bigger, with over 3 billion users worldwide. Instagram, a subsidiary of Facebook, has nearly a billion users worldwide. Facebook has already seen a different future for itself. It removes some of the difficulties recently with Apple’s new operating systems that don’t allow cross-site tracking and other ways to collect user information on Apple devices. The lack of this accurate information makes Facebook a less attractive medium for advertisers to identify prospects for specific commercial messages.
The new operating system controls by Apple aren’t Facebook’s only concern. The European Union has led the way in monitoring the private data of eurozone residents, and now countries around the world – including India – are imposing stricter limits on what user data can be collected. Additionally, Web 3.0 puts social media platforms squarely in the crosshairs. With Web 3.0 taking root, one can expect more de-intermediary for these platforms, which are in essence central repositories of customer data.
To be clear, it might be worth taking a little excursion to get to know what Web 3.0 is. The Web, as most of us know it, began as Web 1.0, with pages mostly providing static information. Users are not given much opportunity to interact with what has been offered, but they can ‘browse’ the web for information, the availability of which has grown as more and more people create websites on myriad topics.
Then this evolved into Web 2.0, the current version, where websites are more interactive than ever. This is to the extent that users can upload their content to a range of sites, such as YouTube, Instagram, Patreon, and Substack, which have provided users with an opportunity to earn money. The more ‘followers’ you have, the more ‘influencer’ you become, the theory being that you have a captive audience to whom goods and services can be marketed by third parties. Hence the large number of advertising content on sites such as YouTube. The advertiser pays the platform and platform the influencer for the opportunity to reach viewers of the influencer’s content. There are even a large number of tech companies supporting dynamic bidding for ad segments as channel viewers ebb and flow.
Web 3.0 changes the current paradigm by transferring websites directly into the hands of a creator or influencer using blockchain technology. This allows content creators to own the full relationship with their fans.
Just as people invest in assets, they can buy a share of their favorite creator’s content through contract terms that are written down on a “smart” (read decentralized and discoverable) basis. The decentralized nature of the blockchain (bit.ly/3xAkkiM) allows for such peer-to-peer contracts. Non-Foldable Tokens (NFTs) based on Web 3.0 concepts are already beginning to make headway in the art world.
The fact that Facebook is repositioning itself as the leader of virtual reality by rebranding itself as “Meta Platforms Inc” is no coincidence. Privacy regulation pincers and peer-to-peer contracts are bound to reduce the impact of social media platforms within a few years.
Facebook is building virtual reality goggles called Nazare (note the Indianization of the name), but the project has gone through arduous efforts to develop custom chips, and The Verge reports that the bill of materials for a pair of these glasses runs into the thousands of US dollars. This reminds me of the difficulties Xerox Corp, a former employer, had with commercial deployment of highly successful technologies that were way ahead of their times.
Only time will tell if the Meta will truly be able to reinvent itself for Web 3.0 before the tongs close.
Siddharth Pai is the founder of Siana Capital, a fund management company focused on deep science and technology in India