Glass Giants: Meta, ByteDance, Twitter, Snap

Friends,

Few companies have had as profound an impact on the modern world as social media giants Meta, ByteDance, Snap, and Twitter. They bring us together, tear us apart, power businesses, and chronicle catastrophes. It is no exaggeration to say they have, in many ways, defined the last decade and a half of our lives.

They look vulnerable.

Over the past two years, significant headwinds have gathered force such that today, each is facing a unique crisis. Meta is in a strategic quagmire, ByteDance has become a political landmine, Snap is losing steam, and Twitter is run by perhaps the best entrepreneur of his generation, whose talents seem to have been sapped like Michael Jordan in Space Jam.

As vulnerabilities accumulate, it seems increasingly important to wonder what comes next in social media. Will these giants survive? What new forms will they take? What business models will emerge that we have yet to see? And who has a chance of unseating them in the coming years?

To answer these questions, we’re publishing a two-part series on the state of social media. In Part 1, we’ll focus on the companies that define the industry today and detail the strategic shifts that have left them susceptible to disruption. Next week, we’ll dig into the upstarts that are changing the industry and the avenues of attack they’re choosing.

To get started, jump in below.

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Glass Giants: Social Media's Sudden Weakness

Actionable insights

If you only have a few minutes to spare, here’s what investors, operators, and founders should know about social media giants and their vulnerabilities.

• TikTok changed social media’s rulebook. Facebook and Instagram rose to prominence by creating the world’s most robust social graph. Those network effects made them defensible against newcomers. TikTok has neutralized this advantage. Rather than trying to create a social graph, it leverages A.I. to serve users the most palatable content possible. The result is a “social” media platform that requires no friends to work.
• Apple’s privacy updates have crushed ad revenue. Tougher market conditions in 2022 contributed to a slowdown for platforms that monetize through advertising. Apple’s privacy changes were more damaging, making mobile tracking considerably harder. These shifts have cost Meta billions in lost revenue.
• Expensive mistakes are adding up. Mark Zuckerberg’s company may spend up to $100 billion on its metaverse plans. It currently invests between $10 billion to $15 billion per year. So far, the initiative hasn’t produced much enterprise value. Meta’s pursuit may be a distraction and a costly strategic mistake.
• U.S. governmental sentiment toward TikTok has reached a new low. The possibility of an American ban on the Chinese-led app looks increasingly plausible. In recent months, critical political and governmental figures have called for TikTok to be pushed out of the country. Many state and federal employees have also been prohibited from using the ByteDance-owned service.
• Giants chase different, distant dreams. Meta pines for the metaverse, Snap pins its hopes on an A.R. revolution, and Twitter fantasizes about becoming a “super app.” Though such foresight and ambition are to be commended, none of those visions seem likely to bear fruit anytime soon.

***

Social media is a beautiful idea. At the highest, most abstract level, its goal is to connect humanity. To give us better places to meet and share and learn and speak. There are few finer missions and grander canvases. It is easy to see how this potential has romanced many dreamy builders and investors. This is a chance to unite, to alloy, to put Babel back together. If humanity is to become enduring and intergalactic, global connectivity is a prerequisite.

History is full of beautiful ideas perverted by their implementation. Market forces do not care how pure a founder’s intentions are or how grandiloquent their vision is. Dr. John Pemberton may have wanted his cola-flavored drink to cure morphine addiction, but it became the world’s most famous sugary drink instead. As the military idiom goes, “No strategy survives first contact with the enemy.” The same applies to business: even the best-laid plans rarely survive contact with the market.

The past two decades have demonstrated the extraordinary power of social media as a concept and how easily it can be corrupted. In many respects, the movement has succeeded. It is easier than ever to stay in touch with friends and family, learn from the world’s foremost experts, and share an opinion. Businesses and relationships have been built off its back, producing perhaps trillions of tiny moments of connection, joy, and laughter.

It is also a monstrosity. This is barely metaphorical. Today’s social media giants steal our attention, cloud our minds, distort our relationships, sharpen our tongues, and obscure truth. They have made us cruel, jealous, and dishonest. They have fostered an anxious, depressed generation and eroded trust in democracy. To greater and lesser extents, we live in a state T.S. Eliot would characterize as “distracted from distraction by distraction.” In another age, we would refer to the source of such ills as demonic, pestilent, an agent of dark magic.

Despite social media’s many failings, its most prominent companies have looked economically invulnerable in recent years. Mark Zuckerberg’s Meta rose to a peak valuation of $1.08 trillion after creating an ad-machine second only to Alphabet’s. While remaining private, TikTok scaled to an estimated 1.8 billion users and a valuation that hit $450 billion in secondary sales. Even smaller entities like Twitter – acquired by Elon Musk for $44 billion – appeared unshiftable. Though the “town square” had not found as effective a business model as its titanic peers, no legitimate player challenged its position. The result was an industry both frequented and reviled. Despite 64% of U.S. adults believing social media has a “mostly negative” effect on society (just 10% consider it “mostly positive”), users continue to flock to these platforms. These products are more powerful than we are.

In a meme

​​​​For the pictorially inclined, here's the whole piece — all 5,600 words of it — in a single meme.

Puzzler

​​​All guesses are welcome and clues are given to anyone that would like one. Just respond to this email for a hint.

Sunil A was the fastest to correctly answer our last riddle, making him the first winner of 2023. He was followed by Gary J, Reed M, Saagar B, Yazan Al T, Sunil S, Joshua K, Sylma M, Jithamithra T, Ryan K, Riley van den B, Prashant W, Steven V, Adam F, Maitreyee J, and Alexia T. Nicely done to all, who deciphered to untangle this puzzle:

The answer? A shadow, of course.

I’m excited to see you all again for Part 2. Wishing you a lovely rest of the day wherever you are in the world.
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Until next time,

Mario