SocialFi is the antidote to social media’s advertising problem | Opinion
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It’s been 20 years since MySpace was founded—the first of its kind social networking platform that brought us Top 8, MySpace Tom, and profile page music. As we look back on MySpace and the subsequent launch of Facebook, Twitter, Instagram, and TikTok, among many others, we’re reminded of the initial intent behind this technology.
Social media has given both content creators the ability to become viral sensations, and everyday users access those viral sensations with the push of a button. But at what cost? For most of us thus far, none. But do these platforms have the resources to sustain the continued dissemination of and access to this content? Is Elon Musk versus Bob Iger the beginning of a more prolonged battle between content providers and advertisers? If so, social media platforms need to forge a new path—one that serves the needs of its creators and users alike without interruption.
SocialFi—the convergence of social media and decentralized finance—is a burgeoning and promising alternative that combines accessibility, monetization, digital ownership, and scalability, all while inherently protecting influencers and creators under a more sustainable revenue model.
TikTok recently tapped into a concept well-known in sociology known as the “third place.” Coined by sociologist Ray Oldenburg, the term describes social environments distinct from our traditional spheres of home (“first place”) and work (“second place”). Against the backdrop of inflation and an increased cost of living, traditional third places are financially out of reach for many. Coupled with the enforced isolation of COVID-19 and how it reshaped how we interact socially, platforms like TikTok and Instagram have emerged as the new, accessible “third place” for the average person.
We’ve seen countless examples of how social media can generate substantial wealth and dramatically alter careers—for better or worse—with its volatility and unpredictability. A prime example is Vine—a short-form video hosting platform—which catapulted figures like King Bach and Jay Versace to fame, but its demise in 2017 also marked the end of prominence for some of its stars. The rise and fall of various platforms have been closely observed, mainly as the majority of influencers express concerns over unfair compensation relative to their contributions.
You could post content freely during social media’s infancy and reap its economic benefits and subsequent opportunities. Enter advertisers a few years later, who interrupted and ended the entire content creator model.
To offset the lack of revenue from free subscriptions, social networks began relying more heavily on revenue generated by advertisers and sponsored content. Coupled with recent developments, including TikTok dissolving its creator fund, Bob Iger pulling ads from X (previously Twitter), a perceptible drop in YouTube ad revenue noted by users, and Meta’s announcement to cease paying for Reel content, creators continue to see a decline in their revenue streams.
Still, content creators remain at the top of the list of career aspirations for younger generations, with most children between 7-11 hoping to become YouTubers, influencers, or gamers. If that’s the case, we must ensure we’re creating—and maintaining—a sustainable, accessible, and lucrative rewards system.
We already have all we need
Decentralized social media platforms are disrupting traditional compensation models by incorporating the inherent benefits of web3 into the industry. Payments are made directly to the creator using cryptocurrency or other digital assets (think NFTs) instead of fiat currency—thereby cutting out the middleman, like Facebook or TikTok. Decentralized platforms allow creators to set their terms for compensation. Smart contracts automatically distribute payments, ensuring creators receive their fair share without intermediaries taking a cut. Blockchain transparency also enables creators to track the revenue they generate, addressing issues of platforms misreporting earnings. By cutting out intermediaries, decentralized models empower creators with verifiable ownership over their financial success.
Some of the main pain points for advertisers and marketers utilizing traditional social platforms are data privacy issues, data overflow, and closed ecosystems. Because blockchain technology’s increased transparency and data availability, analytics can be shared across entire ecosystems, and marketers are no longer limited to the company’s data center. Smart contracts in SocialFi bring transparency and fairness to revenue distribution, addressing the issue of platforms potentially misreporting earnings.
For advertisers, SocialFi offers enhanced data analytics across the entire blockchain ecosystem, allowing for more targeted and efficient advertising strategies. Even though SocialFi has more opportunities to share more available data with advertisers, SocialFi’s technology provides smart contracts to users to manage how their personal information is shared. This transparency ensures that advertising budgets are more effectively utilized and directly benefit the creators.
The decentralized nature of SocialFi also fosters more robust community engagement and participatory governance, aligning platform development with user interests. Overall, SocialFi promises a more equitable digital ecosystem where creators have more control, advertisers have more precise insights, and users enjoy a richer, more engaged community experience.
What to expect from SocialFi
The promise of SocialFi is that any advertiser revenue will go more to the creators; the payment dispersion is inherently transparent. Advertising will always be subject to politics, but the benefit of SocialFi is that the advertisers can verify where the money is going. Advertising teams have more peace of mind.
The promise of decentralized social media is clear—more control for creators, better compensation models, and stronger digital communities. Yet, despite this immense potential, adoption remains slow. To fully tap into the power of decentralized platforms, we need intuitive user experiences that smoothly onboard new users. Education is also paramount; clear explanations of the technology and its benefits are critical for driving understanding and excitement.
As we enter the next crypto bull run, now is the time for investors and VCs to pay more attention to the social media space. The companies that solve ease of use while communicating the core value of decentralization will lead the pack. The opportunities are staggering if we take action today. By relentlessly focusing on simplicity and mainstream needs, decentralized platforms can transform not just social media but the entire creator economy.
