Members-Only Article
I know we’ve been a bit Elon-centric here of late, but the latest developments should prompt us to look to some of the core challenges behind what we now call social media. The Musk saga is comparatively simple: a middle-aged buffoon on one-half midlife crisis, one-half power trip running roughshod over everything. But outside such extreme cases there are more basic challenges. The essence of the social media business proposition is to be the venue for literally everyone talking about everything while managing the venue through automated processes which keep the staff capacity and costs low. Put a different way, success means scale: revenues growing exponentially while costs grow arithmetically.
This is the model with almost all VC-funded tech startups. The payment processing company Stripe is an example of this. Stripe focuses on integrated payment systems for businesses of all sizes and they have roughly 20% of the payments market. (TPM uses Stripe.) This is the classic example of the hockey stick VC-play. If you can become the dominant player in your niche, the profits can be astronomical. It costs more for Stripe to process 10,000 payments than one payment. But the additional cost is far, far less than 10,000 times greater. Once you have the basic engine and security set up, each new customer brings in new revenue but costs only rise a tiny amount.
Application of this model to journalism was the foundational flaw behind a lot of chaos in digital journalism over the last 15 years. Journalism doesn’t have one dominant player per niche. Lock-in doesn’t work in the same way.
Social media is different because it involves this annoying factor of people. As noted before, the model is everyone talking to everyone else about everything. You can then run ads against all the conversations and attention. But people are weird. At a basic level they act in unpleasant ways that create moods advertisers don’t want to be connected with. They do illegal things. They stalk, plan criminal activities, radicalize people for terror attacks, distribute illegal digital material like child pornography.
Just like in the real world, when you throw a party you take on some responsibility for what every random person does. That’s a lot scarier if you don’t even know everyone who is going to show up. This is the heart of the problem. If you hire people to manage every little disagreement and infraction, the model breaks down because your costs are rising exponentially along with your potential profits.
This is why “content moderation” is always going to be done on the cheap. It’s built into the nature of the business model. This doesn’t mean there aren’t a lot of people who have put a lot of time and thought into how to do this. It doesn’t mean there aren’t a lot of people who have put a lot of time into trying to manage these processes inside these companies. There are in both cases. But the basic tension is at the heart of the business model. Fossil fuel companies are fantastically profitable largely because they socialize the externalities of their business. They’re not responsible for climate change. You are. It’s certainly not a perfect analogy. But it’s an instructive one. The very scale of a successful social media platform makes close moderation of all the discussions totally impossible. They must rely on a lot of user reporting and programmatic analysis of content. It will always be highly imperfect, a lot of shambling responses and non-responses punctuated by a few often heavy-handed responses.
This is the heart of the matter about social networks. It became even more complex after 2016 when it became clear how many state and non-state actors were running various information and disinformation campaigns on the platforms. That’s no different from out in the wild, you might say. But it’s not the wild. It’s not a neutral environment. It’s designed to provoke and capture your attention. Facebook used that engine to harvest tens of billions of profits. But other players can harvest too. That was the 2016 watershed. That required hiring a lot more people. It meant a lot more governmental scrutiny. In many ways it created the dynamics that led the briefly richest man in the world to shell out 44 billion dollars (between him and his partners) to purchase Twitter.
Musk’s adventure at Twitter is less interesting — though it can be hard to look away from — since he first abandoned all moderation and now is building a new set of rules based on who he’s mad at at any given moment. Who knows how that ends? But these core issues will remain regardless.