We’re now witnessing a new wave of innovation in social media, involving cryptocurrency and blockchains.
The next generation of social network is emerging. Websites are springing up whereby all data and uploads exist on the blockchain instead of on centralized servers.
By decentralizing and encrypting all data and uploads, these sites aim to eliminate invasion of privacy and hacking. The most advanced of these next-gen social networks will contain their own native cryptocurrency to be used for purchases.
We’re witnessing the birth of a new form of e-commerce.
This proprietary digital money can be used to buy goods and services from other users, purchase ad spaces, donate to crowdfunding — you name it. For social media, these capabilities will represent another wave of disruptive technology that shakes the Silicon Valley status quo to its core.
Epitomizing these trends is Social (SCL), a new cryptocurrency designed for use within secure and private decentralized social networks. These networks feature an integrated marketplace and ad platform.
Four major trends are revolutionizing the tech sector: big data, the cloud, mobile technology, and social media. In this white paper, we tackle social media and how it has melded with new technologies such as cryptocurrency and blockchains.
Ironically, when the first social websites such as GeoCities were started, the technology was so clunky that very little new data was created at that time (the mid- to late 1990s). When people finished building their websites, they were so tired and relieved that they did not usually go back and update them.
GeoCities actually had icons next to the front door of each of the personal websites indicating that it was either recently updated or was shown as getting old and dusty. In those pre-blog days, it took a real personal investment to even have a personal website. The visual was unpleasant to look at and was a huge marketing gaffe on GeoCities’ part because websites were very difficult to update.
As blogs and the first social websites came into existence (Myspace was an early example), personal websites such as GeoCities failed and disappeared from the web. Today search engines like Google utilize data to see if a website is being updated; if so, it is shown higher in the search results. As a result, when you type in a non-famous person’s name their Facebook, Twitter and LinkedIn pages are the first pages listed. This has been true for many years.
What is new are all the mobile tools and easily configured templates that social websites now possess. Once the light bulb finally turned on and the social sites recognized that ease of access and updating was the issue they faced, they all began to replicate the Holiday Inn and McDonalds strategies from the prior tech wave (automobiles).
Consumer chain stores burst upon the scene in the 1950s in a huge way and it was location, location, location that determined their success. If you could locate your motel or fast food chain near off the ramp of a highway, business quickly followed. The car made the U.S. mobile, which provided growth rates for hotels and motels that had been previously reserved primarily for traveling executives and salesmen of large manufacturing companies.
Social websites have replicated ease of access and standard features – similar to the ones the big chains used to supplant the mom and pop shops from the 1930s. Once social websites rediscovered the prior tech wave’s secret formula for success, something else happened. That something is remaking traditional business computing.
On-Ramps of the Information Superhighway
Today every major tech company is either building tools or infrastructure on top of their core products. Social websites create a tremendous amount of user data which today is used for advertising revenue. The advertising model is not the recipe for long term success. That would be like asserting that McDonalds would have grown into the behemoth it became by selling their product at cost and simply reselling the menu choices from their customers in the 1950s.
A strategy like that may have enabled other companies to become fast food category killer companies but the end result for McDonalds would have been a Yellow Pages type of business. McDonalds would have generated 98% less sales then they actually did. This is why Facebook paid billions for WhatsApp. Facebook’s strategy is to become a large chain for the 21st century, standing at the nearest corner of the information superhighway.
However, it appears that Facebook is casting about in all directions to see if it can acquire the “category killer” chain utilizing a kind of shotgun approach. Some of the logic used to explain the $18 billion-dollar acquisition (the price Facebook paid for WhatsApp) in messaging applications is that Facebook is trying to keep its competition from getting to the on-ramps of the information superhighway. Facebook is applying a similar logic to its more recent acquisitions as well.
Can Facebook ever monetize a messaging application to the tune of $100 billion in revenue? That is very unlikely.
Facebook does have a tremendous amount of dry powder to get it right, however. We believe that chances are they will one day awaken from their slumber to see that they are missing the on-ramps. You may be asking yourself, is there any way for a social site to truly maximize its commercial potential? The answer is a definitely yes.
That’s where cryptocurrencies and blockchains come in.
Blockchains Meet Social Media
Imagine if Facebook had taken its massive market share in social media and, instead of focusing on ways to post photos of your Aunt’s latest soiree, had looked for more financially lucrative opportunities.
Which brings us to blockchains. Blockchains represent the technology that make cryptocurrency possible. But there’s more to blockchains than Bitcoin (BTC).
Unless you live in a cave, you know that cryptocurrencies are a digital means of monetary exchange that are secured by encryption, with no physical representation of the “money.” The exchanges are recorded in what are known as blockchains, which make up the underlying infrastructure supporting the currencies.
Every cryptocurrency is supposed to be linked to a blockchain, which is a distributed computer-generated database of all transactions that have ever taken place in the currency.
Every time a crypto token is used, a record of the transaction gets added to an existing database that is distributed to all major “miners,” or creators of the database. These miners generally have very large computers that use highly sophisticated algorithms to add transactions to the blockchain. The same miners use even more sophisticated algorithms to create new tokens.
The point is that blockchains have a multitude of uses and likely represent a dynamic growth area within tech. Blockchains have the potential to add to the growth of many established and inherently strong companies.
One key to spotting the beneficiaries is to recognize that blockchains require an incredibly large number of calculations, requiring extremely sophisticated software and either supercomputers or a large network of computers. Currently the Bitcoin network makes more than one billion billion calculations per second, much more than the world’s fastest supercomputer.
Another key is to focus on companies that have already committed to using or are considering using cryptocurrencies or other applications of blockchains, because these companies will be able to leverage the advantages of blockchains for a competitive edge.
We’re now seeing the emergence of social media ecosystems that use blockchains, whereby members of the social network can safely exchange cryptocurrency and engage in other commercial activities.
Social: In the Vanguard
The cryptocurrency Social is in the vanguard of these trends. Social tokens are intended for use in social media marketplaces to buy and sell goods and services form other users and donate to crowdfunding campaigns on the platform. Socials also can be used within integrated ad platforms to purchase ad spaces that will be displayed within user’s new feeds.
The emergence of Social tells us that Facebook’s “innogration” strategy is not focused where it should be. Generic likes can’t become the foundation for a category killer application. Everything you see with technology since the birth of mankind is the ever-customizing ability of technology to resolve issues more efficiently. A like is a like and is not the equivalent of a post or a skills endorsement.
Facebook will wake up and one day buy companies that address this issue. Everyone who is paying attention in the marketplace will know. Suddenly, Facebook will start acquiring businesses which not only generate real revenue now but also are relevant to the current market. Social reflects this relevancy.
When companies build strategies, they don’t use rocket science to determine where they want to go. Companies which have articulated strategies first identify where there is opportunity today and then reverse engineer their core products and services to address this market. Yes, they can buy companies but those who solely rely on the purchase of a company do so at great risk.
The fact that the leading social companies have not yet found the path to the long-term solution should not alarm any investor. There was a time when McDonalds and Marriott had so few outlets that no one knew they would grow up to become the category killers they became.
Facebook and Twitter dallying with being the “it” social companies of the moment will not catapult them into this type of stratosphere.
That’s why the future of social media belongs to cryptocurrencies such as Social. They represent a new paradigm in social networking.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.