Why The Social Media Meltdown Was Inevitable

Unbeknownst to many Silicon Valley mandarins, apparently, a subtle truth has to be acknowledged: there are only so many people in the world. And within that total, there are only so many who want to use any product. 

In other words, if growth can only be counted in terms of net new subscribers, the logical end point of the strategy has to be failure – because you run out of people. 

Netflix appears to have worked this out, with its introduction of higher prices, its development of ad-supported options, and its announced crackdowns on password sharing. For Netflix, which is a subscription-based business, there is a way out of the slowdown in net subscriber growth: extract more dollars from each subscriber. While it’s a little galling for many to see prices rise for the same offering, and the flexibility with which people are able to share a single account, history suggests that Netflix will likely start to offer additional services or items of value that customers may be delighted to pay for. 


At the opposite end of the spectrum, however, sit the traditional social networks, which do not collect revenue from their end users. Instead, their customers (insofar as one defines a customer as the entity whose revenues drive a business’ growth and sustainability) are the advertisers who promote their goods to the ‘free’ users in the platform’s audience. The challenge they are now facing is that, with a slowdown in net new subscribers, extracting more value from the advertisers is rather trickier. And at a tricky moment in the global economy, advertising spend is unlikely to grow sufficiently rapidly to meet the growth needs of the underlying companies, nor, and perhaps especially, the growth expectations of the investment world. 

If you use literally any social media network, you already know how social media networks attempted to increase their revenues in the face of subscriber growth slowdown: they tried to get more ads into your eyeballs. The first stop was simply injecting ads in between every three or four organic posts. Then came the promotion of short form video, which introduced not only the opportunity for pre-roll, mid-roll, and post-roll ads, but also to drop ad video into the playlist as thought it, too, was real content.  

The experience, however, trailed off as ads started to dominate users’ feeds. This led not only to a migration of interest to other things (hallo, BeReal, with your as-yet-undisclosed business model), but a slowdown in the growth of ad inventory, arriving at the crushing moment when the size of advertising budgets started to waver. 


The reality is that, as long as the business model relied upon more eyeballs to sell to advertisers, there was no good place to end up. The people who see themselves as the users aren’t open to paying money for a free thing, and the advertisers are tapped out. This was inevitable – which is easy to say now, where a billion subscribers or so ago the idea of getting all of them seemed outlandish. 

The next generation of social media will treat users like the fully-invested participants they are. Consumers know that a free newspaper is unlikely to be as satisfying as one with a cover price; instinctively, we know that HBO will have bigger productions than public access channels; and if we want to see a movie we love in its best form, we know it’s better at the movie theater than on a 3pm cable replay that cuts out every 14 minutes to bring another message from their sponsors. 

If the meltdown of this generation of social media was predictable, the potential of the next is functionally infinite. Once users become the customers, not the product itself, they can choose to vote with their wallet 

So, what’s your superpower?

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