Rethinking social networking

Al Sargent
4 min readAug 19, 2022

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Hacker News recently had a long discussion thread on the post Is this the end of social networking? which in turn commented on Sunset of the social network. Here are my thoughts, reposted from the HN thread:

There are some trends that could drive a fundamental shift in social media:

  1. Lack of trust. Trust is the scarcest element in social media today. Any social media company that is built on advertising will never have the trust of a subscription-based social media company. Companies that address scarcity tend to be successful.
  2. Commoditized technology. What’s no longer scarce: the underpinning technologies of social media: capturing and displaying photos and videos on multiple types of devices, recommending new social connections and posts. What was cutting-edge in 2004 is now well-known.
  3. Habitualized subscriptions. Meanwhile, users are getting increasingly used to paying for subscriptions: app stores, streaming services, SaaS applications, cloud services, etc. It’s not 2005 anymore; not everything needs to be ad-supported.
  4. Social imperative. Connecting socially with others is a basic human need. This only increases as some kinds of jobs can be done from anywhere, and friends relocate far away.
  5. The Social Network, isn’t. As Facebook/Meta and others pursue the novelty-driven user experience of TikTok — “show me what’s interesting from people I don’t know” — it creates room for companies that want to get back to meeting the need for keeping in touch with friends and family, even when remote.
  6. Legacy-driven investors. Large tech fortunes have created a donor class focused on legacy, not profit. Example: MacKenzie Scott, the ex-wife of Jeff Bezos. Or Craig Newmark, of Craigslist.

Put all these together, and it seems like new social media companies could be created along the following lines:

  1. Mission-committed. Focus on social connection first, not whatever drives the most revenue. In other words, don’t get pulled into the latest fads, as Facebook is doing with TikTok.
  2. Trust-building business model. A subscription business model eliminates the conflicts of interest that drives Facebook’s trust-eroding privacy practices. Again — trust is the scarcest element.
  3. Subscriber-owned to lock-in trust. Each subscriber owns a portion of the company, and thus the company has a fiduciary, legal obligation to protect their interests. This is similar to what Vanguard does — investors each own a portion of the company — which forces Vanguard to act in their interests. It’s the opposite of Facebook/Meta’s ownership structure, where Mark Zuckerberg controls 90% of class B shares, giving him control over the company. [1]
  4. Subscription holiday to jumpstart growth. To fix the cold-start problem [2] inherent in building a business with network effects, make the service free until it gets to a critical mass of subscribers. We can debate if critical mass is 10 million users, 100M, 1B, or some other measure. But be transparent about the threshold, and the subscription price once its hit. Speaking of price…
  5. Priced for adoption. Keep entry level prices low to be point of being negligible for the vast majority of users. Maybe one dollar a month. Maybe cheaper in countries with lower levels of disposable income. Whatever it is, keep it lower than most other subscription services in order to encourage adoption, but not to shift back to the problematic ad-driven model.
  6. Internally-funded innovation. A very low subscription price, at scale, can fund innovation. 100M users at $1/month is $1.2 billion per year. That’s enough to pay cloud infrastructure and the engineers to build and run apps. Back-of-the-envelope path: suppose for argument’s sake that half of that, $600M, goes towards cloud service providers. That’s approaching the $1B/year that Netflix spends. The other $600M could fund 2000 engineers at $300k/year/engineer. That’s enough to build a great deal of capabilities and bring them to emerging platforms (like AR glasses, cars, IoT/smart home…).
  7. Legacy-driven funding. A business like this probably might not attract traditional venture capital funding. Even if every one of Facebook’s 3 billion users all switched to this business and paid 1 USD/month, that would be $36B per year. That’s well short of Facebook’s $120B/year [5]. Who might fund it? A set of mission-driven investors who wants their legacy to include a trusted, self-sustaining organization that socially connects the world. Craig Newmark could be one such investor (at least advisor), having built one such Internet institution (Craigslist) that facilitates community and commerce in an economically-sustaining manner. But there could be many other investors as well.

Again, technological acumen and capital aren’t what’s scarce in social media; trust is.

[1] https://www.morningstar.com/articles/1061237/how-facebook-silences-its-investors

[2] https://www.amazon.com/Cold-Start-Problem-Andrew-Chen/dp/0062969749

[3] https://www.linkedin.com/pulse/netflix-pays-1-billionyear-amazon-faraz-ali

[4] https://datareportal.com/essential-facebook-stats

[5] https://www.statista.com/statistics/268604/annual-revenue-of-facebook/

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Al Sargent

Occasional thoughts on tech, sailing, and San Francisco