Social media, a landscape long dominated by advertising revenue, is on the brink of a transformative shift as regulatory challenges and heightened concerns over privacy and safety take centre stage. The European Union’s looming regulations, embodied in the European Digital Services Act, are creating inherent risks for significant players like Meta, forcing them to adapt or face potential consequences.
As European privacy and safety regulations are gradually implemented, experts warn that the changing landscape may affect Meta and its competitors, including Snap. “What’s going on with Meta in Europe… could potentially have ramifications for our Facebook, Instagram, and all of its various subsidiaries,” stated Matthew Crain, a professor at Miami University.
Meta, having experienced an 184% surge in its shares throughout 2023, appears well-positioned to navigate these changes. The company successfully weathered Apple’s privacy changes and is rolling out options tailored for the EU market, such as a no-ad subscription offering. On the other hand, Snap faced challenges recovering from Apple’s App Tracking Transparency, and despite a 90% rise in shares in 2023, it still trades at less than a quarter of its record high in September 2021.
Beyond regulatory concerns, the traditional advertising model is being questioned, leading social media companies to explore diversification. E-commerce is emerging as a potential avenue for growth, with TikTok launching “TikTok Shop” and Meta introducing shops for Instagram and Facebook. These platforms aim to integrate shopping features, allowing users to make purchases directly through the apps.
Elon Musk’s acquisition of Twitter, now known as X, has also added a layer of complexity to the social media landscape. Despite facing challenges with a 30% drop in downloads, X’s shift towards a subscription model generated $6.2 million in revenue in November. Musk envisions creating an “everything app,” although experts express scepticism about its success in the crowded U.S. market.
The tension inherent in social media businesses—balancing targeted advertising and user privacy—challenges maintaining trust. Companies like LinkedIn, focusing on user benefits, aim to build trust by providing valuable outcomes for users. Startups like Vero, with a no-ads and no-algorithmic-feeds approach, are also attempting to stand out by prioritising user satisfaction over corporate interests.
With over 3 billion monthly active users for Facebook alone, Meta’s growth strategy has propelled it to the forefront. However, concerns about child safety on its platforms have been scrutinised. In the future, social media companies must grapple with the evolving landscape, addressing subscription and e-commerce challenges while alleviating concerns about privacy and harmful practices. The potential for disruption looms large, with startups poised to offer innovative solutions to the industry’s persistent problems.
