Social Media Is Doing Better Than You Think

There's been no shortage of drama in the social media industry lately. Facebook launched Threads, a Twitter look-alike, which unexpectedly prompted Twitter owner Elon Musk to declare it a knockoff and challenge Facebook's Mark Zuckerberg to a literal cage match. The fight is now officially on, so these days, whenever they have a spare moment, both men are busy posting photos on their own platforms of themselves training with various martial arts masters, each vowing to flatten the other. In short, the simple pleasures of a tech billionaire's life.

Sideshow aside, while Facebook's Threads did sign up 100 million users in just five days, user engagement has since plunged fast — most people took one look and never came back. So for the time being, the sharply divided social media landscape hasn't really changed.

A Single Global Market: Why Social Media Is Hard to Replace

Because social media companies are always in the spotlight, every time clients see a headline, they invariably ask me the same old questions: "Is social media doing okay? Isn't nobody using this-or-that platform anymore? Isn't it just old people left on there? Don't they not have cookies to track users with anymore? Isn't it getting killed by fake accounts? Weren't there huge layoffs?" — that sort of thing. If I got paid ten bucks every time someone asked me this, I'd have made tens of thousands of dollars off this question alone by now.

So Are Social Media Companies Actually Okay?

I think people are overlooking quite a few things. Most importantly, every other form of media is declining far too fast, which makes social media the only medium that works effectively across "all ages" and "the entire planet." Until someone invents brainwave-transmission technology, nothing is going to replace social media.

The reason social media companies have become so powerful is that their technology turned what used to be a diverse, fragmented media market into a single global media market. Magazines, newspapers, and TV could never survey audiences down to the level of the individual, but because social media lives on our phones and computers, it can, in theory, target individual audiences directly.

Audience profiles have never been this precise. Remember all the regulatory pushes after the Cambridge Analytica scandal? Those rules came about precisely because social media did "too good" a job profiling audiences, leaving everyone's privacy stripped bare — not because social media wasn't effective.

The biggest impact social platforms had on the advertising industry was pushing forward audience-buying technology — you can now purchase a global audience from anywhere, which has turned the worldwide ad market into a single unified market. In the past, if you were in Taiwan trying to reach "someone living in New York who loves cycling," it would have been a nightmare — there was no way to know which local media outlets to use. Now the system can do it for you in a snap.

So this is the main reason global media has been declining these past few years: Google, Facebook, and Twitter pulled off the one thing traditional media never could — a unified global media market.

The global common media market is enormous, which sets off a virtuous cycle for the platforms (and, of course, a vicious one for the traditional media industry worldwide). Social media giants can keep rolling out more features to subsidize users and operate directly across borders — something ordinary media companies simply cannot compete with. And in the process, any regulatory change aimed at media platforms ends up favoring the platforms anyway. Take GDPR: the bigger the platform, the easier it is to comply. The more regulation there is, the more it weeds out the small players.

On top of that, big platforms can offer quasi-public services that raise the bar for everyone else. Website analytics, for instance, is basically ruled entirely by Google Analytics — no ordinary company could ever justify spending the money to build such a sophisticated tool and then give it away for free.

This creates a strange paradox: the more the world moves toward no-cookie tracking, the more it actually encourages social media to consolidate into an oligopoly, because whoever has the most in-platform behavioral data comes out ahead — and the major social networks generate tens of thousands of times more in-platform behavioral data than anyone else. We measure our social media use in hours. Think about it: do you spend hours every single day on any e-commerce site or news site? The choices we make on social media in a single day — even something as simple as whether we look at a post or not — generate an astronomical amount of data. No other type of website's usage data can compare. Spend that much time on social media, and naturally your digital footprint gets longer, and the resulting data gets more accurate.

Fake Accounts Are a Thorny Problem, But Won't Take the Platforms Down

So for social media companies, there are really only two problems that matter: regulation and fake accounts. As noted above, regulation has actually strengthened the leading platforms' grip. Fake accounts, meanwhile, are an inherent problem for social media companies — and a harder one to solve than expected. That's why Twitter has taken the aggressive approach of charging for verified accounts; Musk's theory is that this raises the cost of running fake-account bots. It has raised the cost of fraud somewhat, but the fraudsters are simply too resourceful, and I don't think the fake-account problem gets solved in the short-to-medium term. Still, given the sheer scale of social media usage, and the fact that operators will keep suppressing the problem on an ongoing basis, fake accounts alone won't be enough to cripple these platforms or make advertisers lose confidence entirely.

So for now, it looks like the good times still have a long runway ahead for the major social media companies. And essentially every mainstream social platform has caught up on AI over the past six months — Facebook and Google's large AI models have, in many use cases, already shaken off the sense of being outclassed by OpenAI. Their stock prices may see corrections, and bad headlines may pop up from layoffs after over-hiring, but their edge is hard to displace in the short-to-medium term. What's more, they're natural AI plays in their own right — anyone interested in the AI theme should keep watching the stocks and progress of these social media companies.