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Last Thursday, in an unexpected new twist to the Web3 social publishing landscape, two leading platforms announced a merger. Paragraph, seeking to be the Patreon of Web3, announced it had raised $5 million in capital from Union Square Ventures and Coinbase Ventures and was joining forces with Mirror. Mirror made its own announcement.
The question begging to be asked in this scenario is whether this partnership is a good thing for Web3 or whether it will leave creators scratching their heads. Let's unpack it.
Mirror, a pioneer in Web3 publishing, launched in 2020. It quickly established a name for itself as a leading Web3 publisher, offering creators the ability to monetize their content using non-fungible tokens (NFTs) on the Ethereum blockchain. Later, they migrated to Optimism.
Fans of Web3 publishers can collect text-based content while the feature of decentralization gives content creators more power and control over their content.
One of the refreshing things about Mirror is its attractive design. The platform quickly became a publishing destination for decentralized autonomous organizations (DAOs) and other Web3 entities seeking to turn the principles of Web2 content marketing into Web3 content publishing best practices. Because of its innovative approach to content publishing, Mirror became a leading platform in the Web3 space allowing content creators to build communities around their content.
On May 2, Mirror announced it was launching a new Farcaster app called Kiosk.
Since its launch in 2021, Paragraph has innovated and rolled out new features rapidly. It started as a Web3 newsletter publishing platform. It has grown into so much more.
Paragraph's writing and publishing features are a step forward for the Web3 space, but they're also a big step forward for online publishing in general. Creators can create content from scratch or use Paragraph's artificial intelligence writing assistance feature. Creators can also embed NFTs into their content and monetize their newsletter entries by presenting them as collectibles. Furthermore, they can monetize their audiences through subscriptions with flexible options that include payment in crypto or fiat as well as NFT collectibles as proof of membership.
Of course, this is just the tip of the iceberg. Paragraph can do much more, and I fully expect it to continue innovating well into the future.
It's difficult to ascertain precisely the benefits of this merger without knowing the full details of what the merger means for the two platforms. In some ways, they have too much in common for it to seem like a useful merger. For instance, both platforms are integrated with Farcaster. Both provide creators with opportunities for content monetization. Both facilitate embedded NFTs and digital collectibles. Creators can provide subscription opportunities for their fans. With this much in common, it's difficult to see how either can benefit from their merger arrangement.
It's also difficult to know all the implications of the merger without understanding the reasons behind it, which neither Paragraph nor Mirror provides in their announcements. However, one source drills a little deeper.
CoinDesk refers to the merger as an acquisition. Paragraph is acquiring Mirror. CoinDesk also clarifies the arrangement by stating that Paragraph's founder, Colin Armstrong, claims that Paragraph will transform into a "unified product suite".
According to CoinDesk, Mirror wants to focus more on its new app Kiosk while Paragraph wants to continue its mission of becoming the go-to platform for Web3 publishing. The obstacle for Paragraph was its small team. Mirror managed to obtain a bigger market presence and growth even though both platforms ended up looking identical. The acquisition seems to benefit both platforms by giving the Mirror team more freedom to pivot to its new product while allowing Paragraph to leverage Mirror's reputation and technology to improve its product. On top of that, Paragraph will gain access to Mirror's customer base.
But what about the creator?
In my experience and observation, customers rarely benefit from consolidation in mature markets. However, Web3 publishing is not a mature market. It's an infant market. That means there is a lot of room for growth and innovation. The loss of Mirror in the market allows another upstart to come along and compete with Paragraph. Currently, I see no other Web3 publishing platform attempting to do what Paragraph and Mirror were aiming at. That could change.
I'm all for growth and innovation. I also believe in the power of communities, and I hope that Paragraph can take Mirror's product and design and improve upon it for the benefit of creators. However, I think there is one drawback to the acquisition. Venture capital (VC).
I don't begrudge companies, even Web3 companies, the desire to seek funding for their operations. Companies must get funded if they are to grow, and that usually benefits consumers in the short term. On the other hand, venture capital has a way of squeezing the value out of products and services in the long term.
Let's face it, venture capitalists invest in companies for one reason only: to profit from their enterprise. That's how capitalism works. So long as they capitalize on features that consumers want, need, and benefit from, there's no conflict of interest. That usually happens with startup companies. The VC money helps them grow, innovate more quickly, and pass benefits on to customers. Everyone wins. However, there are diseconomies of scale at play as organizations grow larger.
Inevitably, what happens is a company grows and increases its profits as consumers seek the desired benefits of working with that company. The company profits, investors profit, and customers are happy. When peak market saturation occurs, companies then struggle to increase profits for investors, and investors pressure company management to cut costs or seek other measures of increasing profits for investors, and that often takes place at the expense of customer benefits. This can occur in several ways, but the bottom line is that investors profit whether the company does or not, and usually leads to some customers seeking competitive alternatives.
Of course, we are a long way from that moment. In the early stage of Paragraph's life, I see growth and innovation. I'm looking forward to seeing how Paragraph changes based on its acquisition of Mirror and how creators like myself benefit from it.
Disclosure: As a caveat, I'd like to add that, about a year ago, I was active on both Paragraph and Mirror. After much consideration, I dropped Mirror because I felt like publishing content on both platforms was duplicating efforts and one was cannibalizing the other. It looks like I made the right decision.
Allen Taylor is the author of Web3 Social: How Creators Are Changing the World Wide Web (And You Can Too!).
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