Era of smart internet to replace social media
Facebook shares plunged 19 percent on July 26, erasing nearly $120 billion in market value. It was the biggest one-day drop in value for any publicly traded company. The next day Twitter shares also dived nearly 20 percent. Likewise, Chinese social media companies also experienced dips not long ago. Social media in China and the US are facing huge pressure in 2018, and the plunge may indicate a new era approaching.
The social media giant may expect a surge in costs to protect users’ privacy because of the slowly increasing speed of subscribers, and it’s widely believed that this is the reason for Facebook’s slump. However, the BBC said that the main reason was Facebook was investigated by the US and European governments for its data scandals.
The business models of social media worldwide are mainly based on advertisements and value-added services, and the core of these two models is the user data. Before the EU’s General Data Protection Regulation was enforceable, a safeguard mechanism for personal privacy was lacking and users lacked control over their data. Websites wouldn’t tell users what data they had collected or what institutions used the data. Data abuse has become the most powerful growth engine, and Facebook’s market value grew hundreds of billions of dollars a year in the last three years until the Cambridge Analytica data scandal broke.
The more important reason for the dip is that social media giants need to understand that products have their own life cycle.
Facebook, Twitter, Weibo and WeChat were released in 2004, 2006, 2009 and 2011 respectively. They all face the problem of user fatigue after a long time using the same old applications and their products may not attract new users. A new series of social media is rising in China, such as Jinri Toutiao, which generates tailored feed lists for users, video sharing applications like Douyin and Kuaishou, live-streaming applications such as Huya and Yingke and Pinduoduo, an application meshing online shopping with social media. These emergent social media have growing numbers of subscribers and their market value has grown from billions to tens of billions of dollars.
These facts may be more annoying for the giants than data protection. The total number of global internet users has exceeded 4 billion, and we should not neglect the potential of the next 4 billion.
China can learn from Facebook’s decline. Social media needs to make up for their principal liability and governance capacity as soon as possible. Facebook said it will increase its safety and security staff to 20,000 by the end of 2018, nearly equal the total employees of the company. It shows that it’s expensive to abide by the rules.
Besides, innovation around new applications and new internet users are still essential to competitiveness. Applications like Douyin and Pinduoduo aim at attracting internet users from lower-tier towns and rural areas, seizing new opportunities as most of the next 4 billion internet users will come from developing countries.
Facebook’s plunge may indicate the internet industry’s change from a social media era which satisfies people’s interconnection to a smart era which aims at creating value. Artificial Intelligence has become the top priority for investment and China-US competition in high technology. Amazon and Microsoft are becoming popular in the capital market because of cloud computing. Medical treatment, security and finance are also busy applying smart technologies. All these facts indicate a new era of smart internet is coming.
The biggest change in the internet over the past decades is that Google and Facebook replaced Netscape and Yahoo, giants during the first wave of the digital revolution in the 1990s. In China, Baidu, Alibaba and Tencent changed the internet once dominated by the three web portals, namely Sina, Sohu and NetEase. A new change is still around the corner, and that is why the internet wave is fascinating.