Consumer Social is Going Back to the Future

As legacy platforms move further away from the initial premise of friend-centric social interactivity, what formats might take their place?

Faraz Fatemi
Lightspeed Venture Partners
5 min readJan 24, 2023

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Once upon a time, Facebook’s ability to connect everyone in the world to drive social interactions and content distribution was unique. The social graph, or the mapping of personal relationships and experiences that influence the way we interact online, was a legitimate and defensible moat that drove the greatest volume of engagement (read: clicks) on content. The scale of this engagement was and continues to be critical for supporting the programmatic advertising business model, which remains the predominant way legacy social media platforms have monetized.

However, as my colleague Michael Mignano pointed out in The End of Social Media and the Rise of Recommendation Media, legacy social platforms in recent years have moved away from the traditional “social media” premise, where friends & family come together to socialize, and toward the TikTok-inspired, algorithm-driven “recommendation media” focused more on entertainment at scale.

The reason for this shift is relatively straightforward and also tied directly to monetization — algorithm-driven recommendation content has now proven to scale further in terms of volume of interactions than social graph-based content. In short, algorithmic distribution is more efficient at driving engagement and therefore driving more revenue.

Additionally, algorithmic distribution has proven to be more defensible for the incumbents (due to high infrastructure costs, scale of network required, and size of training data required) than social graphs. Any consumer platform can now manufacture a social graph simply by connecting to its users’ address books, making this previously highly differentiated asset something any company, big or small, can build with a few lines of code and an effective go-to-market strategy. However, having a highly effective recommendation engine is an engineering feat that only the scaled platforms can pull off.

But if Facebook and Instagram transform into places where we go to be entertained, not where we connect with friends and family, it seems reasonable to predict that something else will take their place.

Humans are, at our core, inherently social creatures. We live in families, work in teams, and spend our free time with friend groups. At Lightspeed, we believe this instinctive human behavior is the key to a reinvigorated opportunity in consumer social, centered around filling the vacuum left around the initial premise of social incumbents — bringing together family, friends, and acquaintances for more intimate social interaction by leveraging new product wedges supported by new monetization models.

Putting the “social” back in social media

In this next era of social, platforms will win by finding ways to create richer human connections and engagement driven by mutual interests or experiences. Facebook was built around the news feed, Snap around ephemeral photo sharing, and Reddit around forums. Here are just a few possibilities for product wedges the next great social media platform might be built around:

2022 was defined by a post-pandemic return to in-person gatherings, and social platforms that augment the IRL experience (from event planning through post-event commemoration) will continue to benefit in 2023 and beyond. New calendar and event startups can capture both the excitement about a return to in-person and the reality of a continued hybrid approach to event planning and strategy.

Successful social startups optimize for engagement and time spent, and blending gameplay into the core social experience is a clear opportunity for emerging platforms to gain mindshare. Lightspeed is excited to double down on the intersection of Social x Gaming platforms as part of our broader recently bolstered gaming practice.

During the pandemic, digital media consumption skyrocketed. Coming out of the pandemic, platforms that make this consumption experience inherently more social have continued to thrive, particularly since friends & family are more distributed than ever.

The “unbundling of Facebook” trend continues, with standalone platforms comprised of many closed communities emerging as a (much improved, much greater utility) alternative to Facebook groups & Reddit forums. As in many maturing markets, serving previously “niche” communities and functions that incubated on larger platforms eventually becomes a serious opportunity in its own right.

Generative AI has fundamentally democratized content creation across formats including text, image, audio, and video. Platforms that combine this content creation with a participatory consumption experience will be able to drive significant network effects faster than ever before.

Finding business model fit in the next era of social

What’s clear is that there is an opportunity for both recommendation networks and more intimate social networks to co-exist, as long as the right monetization models are in place.

During my time at Clubhouse I was fortunate to work with an incredibly talented team of engineers and product managers on our monetization strategy. We explored everything from ticketing to tipping, tokens, brand sponsor marketplace (similar to TikTok), and even building a programmatic ad exchange. The key was taking a step back and identifying the core use case for the platform. Were we intending to be more entertainment-focused (with large-scale rooms featuring the likes of Elon Musk and Oprah Winfrey) or were we intending to be a pure social medium, where small groups of friends can come together and participate in discourse? As Clubhouse’s current team has identified a push towards the latter with the Houses model, the potential monetization approach has also become more clear.

Each of these platform approaches above starts with building new habits. Once habituation is in place, they can layer on new behaviors that naturally monetize on top of those habits. It’s likely that monetization in the next generation of social players will look less like legacy programmatic ad-based social monetization and more closely resemble elements of gaming platforms (e.g., in-app-purchases, subscriptions, embedded commerce) and/or web3 platforms (e.g., participate-to-earn, token-gated communities, in-app currencies).

What do you think? What opportunities do you see in consumer social in 2023 and beyond? Which product wedges will scale and which will struggle? What will monetization look like for the next generation of category-defining social platforms? (More perspectives on monetization to come soon!)

If you’re working in this space or have additional perspectives to share, please shoot me an email (faraz@lsvp.com) or reach out on Twitter or LinkedIn.

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