Since the introduction of Web2, we have operated within walled gardens owned by centralized monopolies. As a result, our digital identities have become monetized assets for large corporations like Meta, Google, and Amazon. Despite this, people continue to exchange social media engagement for data that shape their digital experiences through targeted advertising campaigns and content recommendations.
SocialFi brings promises of taking back control of user data along with the option to monetize engagement. But is this just another pipe dream, or do we see the beginning of a seismic shift toward a decentralized social media platform that rewards users for their content and engagement?
Before exploring the potential of SocialFi, let’s first look at social media’s current landscape in Web2.
Businesses today exploit people by offering them something for free. In return, people agree to give away their data, or personal information, for the convenience of not having to pay for the product.
How many users do these companies siphon data from using the freemium model?
The answer? An enormous amount.
According to Datareportal April 2022 global overview we see that social media engagement continues to grow at a rapid pace.
A few highlights:
4.65 billion users are on social media**.** That is over half of the world’s population**.**
326 million new users have onboarded within the last 12 months. Meaning ten new users are joining every second single second.
2 hours and 27 minutes are spent on social media daily.
It’s important to note that these numbers may not represent unique individuals. Regardless, these are staggering figures that underscore the popularity and importance of social media. So, with these numbers in mind, let’s identify which platforms are onboarding the most users.
It’s no surprise that Facebook’s lead far outpaces the rest of the industry when it comes to capturing the data of billions of users. Revisiting Datareportal April 2022 global digital overview, we can glean that Facebook controls 62% of the social media market, with the next highest platform being YouTube at 22%.
Here are additional highlights that further showcase Facebook’s reach and data advantages relative to its competitors:
Facebook leads with a staggering 2.912 billion monthly active users.
Youtube comes in second with 2.5 billion active users.
Whatsapp has at least 2 billion active users.
TikTok has 1 billion users.
The high activity concentration on Facebook relative to its competitors showcases a significant data advantage. This centralization of data of this magnitude is harmful to users and provides an uneven playing field to its competitors. However, it’s important to note one final metric before exploring how the benefits of SocialFi will positively impact the social media landscape.
Current advertising models rely on persuasive tactics that convince customers to make a purchase or change their behavior. In addition, these models target cognitive factors such as rational thinking and moral correctness. But, just how effective are these methods in generating revenue?
According to the IAB Internet Advertising Revenue Report:
“Social media advertising was up 39.3% to $57.7 billion, as consumers continue to engage with Meta platforms, Snapchat, TikTok, and Twitter.”
Simply put, users work for free while the platform owners reap all the benefits. If we want a sustainable online economy, that imbalance has to change. So let’s take a moment and imagine a platform that allows you to choose the data you want to monetize to these platforms. What do you think that revenue stream potentially looks like?
Hint: Thousands of dollars.
Take note that there is no way to correctly estimate the value per user as there are many factors to consider. The numbers we generated are based on the market cap divided by the number of users. Yes, it’s not entirely accurate, but it paints a picture of potential value. That said, reversing the roles and charging these social media networks for your data can net you a yearly revenue of:
Google: $416
Facebook: $203
Snapchat: $112
LinkedIn: $36
What monetization looks like outside social media networks:
Email Address: $89
Healthcare Records: $250
Payment Card Details: $5.40 (https://www.invisibly.com/learn-blog/how-much-is-data-worth)
Banking Records: $4.12
Total: $1,115.52
These numbers represent just a handful of services we interact with. Once you consider all our daily services and applications, the total amount increases considerably. SocialFi has the potential to enable us to take back control and allow us to move beyond our current broken and inefficient paradigm.
SocialFi (social finance) combines social media and finance on the blockchain providing privacy, security, and freedom. Furthermore, the digital wallet allows users to regain control of ownership and governance from centralized intermediaries like Facebook. Building off this foundation will enable users to monetize their social media engagement. Let's look at several ways SociaFi is setting itself up to challenge the status quo: Privacy:
Data sovereignty. User Control. Option to monetize data.
Censorship Resistant: Interoperability across various platforms mitigating the risk of being de-platformed or censored. Prevent the loss of access to followers. Retaining control and ownership of creative content. Freedom to integrate into any decentralized network unlocking additional benefits or features.
Token Economy: Reward users for their engagement. Symbiotic paradigm.
The list of SocialFi dApps is growing, with Lens Protocol, Torum, and Audius leading the way. What’s more interesting is how Web2 social networks are responding with Web3 integrations of their own. It seems like SocialFi is on track to fulfilling its promises and evolving the status quo. A quote from Benzinga’s, “How SocialFi Can Speed Up Web 3.0 Adoption” describes how this movement will come to pass:
It’s a natural evolution of the status quo — a status quo where centralized platforms benefit the most from creators’ work. It just makes sense for creators to evolve past that, and it’s only a matter of time before they do.