Feb 4, 2021 - Economy

Rethinking social media — and its value

Illustration of a cellphone with a word bubble featuring five dollar signs in it

Illustration: Sarah Grillo/Axios

Clubhouse's recent eye-popping fundraising at a $1 billion valuation with just two million weekly active users is the latest mark of a shift in how investors value internet content—and those who make it.

Why it matters: A new breed of social apps are showing that it's still possible to break through and amass large and engaged pools of users.

  • Apps like Clubhouse (audio chat), TikTok (short videos), and OnlyFans (paywalled photos and videos) have proven it's possible. Companies like Patreon, Substack, and Cameo have made it easier than ever for users to get paid directly for custom or elaborate content.
  • And that's largely because they're structured in a different way—prioritizing content that's valuable and relevant to users based on their interests instead of content posted by their friends and family.
  • "Creators are the nexus of value—their content is why users are even spending time on the the platforms," according to Li Jin, a former partner at Andreessen Horowitz (and small personal investor in Clubhouse).

Flashback: An early precursor was Vine, a short video-looping app Twitter acquired in 2012, that quickly gave rise to a cohort of popular entertainers with millions of fans.

  • Unfortunately, by the time Twitter figured out their value most had decamped to other apps, and Vine shut down in early 2017.
  • YouTube was an even earlier platform for new amateur entertainers—but its practice of splitting ad revenues and offering additional support has helped it endure.

The big picture: Social media apps have evolved, explains Jin.

  • In the first phase, users on apps like Facebook, Twitter, and Instagram produced content to connect with each other.
  • Then, users began to amass an audience and generate revenue. Brands and advertisers realized popular lifestyle "influencers" could sell products to their audiences.
  • And today, these breakout app users—the "creators"—are realizing they can sell their own brands' products to their fans.

Between the lines: "Your friends do need to be on there but the definition of who your friend is changes," Lightspeed Venture Partners general partner Nicole Quinn tells Axios of the newer social apps.

  • Today, many users go to the apps to interact with the stars that make their favorite content, other fans they've befriended online, or users with similar interests.
  • This is also driving the rise of what GGV Capital managing partner Hans Tung calls "contextual social networks," which are focused on a specific topic or group of people.
  • In parallel, services like Substack and Patreon are showing that deep relationships with content consumers willing to pay for it can be just as valuable as reaching a wide audience with ads.

The new normal: Serving content creators and keeping them happy is now table stakes for any new social media or content service hoping to be successful.

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