One thought for the week 💭
Is decentralised social media an imminent reality?
[700 words - 2.5 minute read]
Last week, a cryptography Professor raised $100k at a $10m post-money valuation. In one day. With one tweet. The most notable investor was former Coinbase CTO Balaji Srinivasan.
The tweet outlined a novel architecture for a decentralised social media service. He calls it Capsule. In this system, each user hosts their own microservice. These microservices then connect to one another in a mesh, allowing users to follow each other and share posts. This architecture leads to true decentralisation, since users discover the whole Capsule mesh by choosing to follow the people they’re interested in following, and not via a centralised platform.
In the same week, Jack Dorsey updated the world about his plans to create an “open decentralised standard for social media” via a a nascent Twitter-sponsored initiative called “bluesky,”.
Just as Bitcoin does not require a central bank, the bluesky protocol will not require central governance. The open protocol will enable different social networks to be connected via a shared standard. Each of the social networks can see, search and interact with each other. However, they are theoretically siloed. In this system, Twitter would be a client of bluesky. This means it would only be responsible for controlling the content produced on its own app. However, its users would still be able to see (and interact with) content that is produced on other networks built on top of the bluesky protocol.
These are by no means the first decentralised, P2P or federated solutions to social media. A number of platforms and technologies exist today such as ActivityPub, Diaspora, Mastodon, P2p Matrix, Scuttlebutt, Solid and Urbit.
Arguably, Capsule represents a more elegant technological solution due to its simplicity (it can be set up on a tiny VM with a single command) and the fact it requires no centralisation of servers whatsoever. Meanwhile, Twitter’s existing user-base means any protocol that it introduces would benefit from immediate scale and therefore network effects.
Whether either succeeds is far from certain. What is more certain is that the current market pull for a decentralised solution is so intense, that some solution(s) is bound to win. Imminently.
Never before have social media’s problems been as critical as they are right now.
The platforms are in a content moderation battle in which everyone is the enemy. They are being attacked from every direction. They are either moderating too much (and therefore suppressing freedom of expression) or too little (thereby enabling political interference and insurgency). It is an impossible battle to win. Facebook has 2bn users posting 100bn times a day. The global SMS system has 20-25bn messages a day. How can we realistically expect a single party to moderate a system like this in a way that appeases everyone?
Meanwhile, the use of black-box ML algorithms that keep users ‘hooked’ on feeds for as long as possible has come at the expense of mental-health, political polarisation, and misinformation. Should one company really be allowed to have this much influence on the national and international zeitgeist?
It is becoming increasingly evident that a new solution is needed. Something that is:
Open-source: Why? So that everyone has the ability to inspect, understand and modify the algorithms that determine so much of their mental state.
Decentralised: Why? So that no single company or government is allowed to make 100% of the decisions.
Interoperable: Why? So that multiple networks can work in tandem - enabling governance and moderation to be split between multiple parties.
More financially equitable: Why? So that the financial rewards are shared with the the actual creators of the content - not just the technology providers.
While I’m optimistic about the future of social media platforms, I’m also aware of four fundamental challenges….
Social networks are difficult to bootstrap due to network effects—we join them because our friends are there, not for ideological reasons like decentralisation.
Decentralised platforms pose new security threats. They allow anyone to join and don’t link accounts to real-world identities like phone numbers. This makes it difficult to prevent extremist or illegal activity, and will likely be met with considerable regulatory resistance.
Decentralisation often isn’t profitable. Many projects run on volunteer work and donations. This isn’t ideal for a new entrant hoping to take share from much deeper commercial wallets.
Creating an acceptable UX will be hard. These systems often use public key cryptography to ensure account security. But managing public keys is hard for most users, and building software that is both cryptographically secure and easy to use is difficult.
Whoever cracks these challenges will change the world forever.
For a (very) in-depth review of current decentralisation systems, check out this report that the bluesky team put together.
If you’re particularly interested or knowledgeable in this space, I’d love to chat. Please get in touch! 🙏
News from this week 🗞
NetEase, the second-largest gaming company in China (behind Tencent), is among a group of investors who just backed IMVU, an avatar-focused social network and aspiring metaverse operating out of California. IMVU has raised more than $77 million from five rounds since it was co-founded by “The Lean Startup” author Eric Ries back in 2004. IMVU members use 3D avatars to meet new people, chat, create, play games and trade virtual goods. Link
UK game studio Jagex has been acquired by The Carlyle Group for an undisclosed amount. Jagex is the creator of the $1bn franchise RuneScape, which after 20 years is one of the world’s longest–running and most successful games of all time. Link
Clubhouse has confirmed that it raised an undisclosed amount via a Series B round led by Andreessen Horowitz. It also confirmed that it will be introducing products to help creators on the platform get paid, including subscriptions, tipping and ticket sales. Link
Yac, the startup that’s digitising voice messages for remote offices, has raised $7.5 million in a new round of funding. The company’s bet on a future of asynchronous workplace communication has garnered enough attention to pick up a pretty sizeable new round from investors led by GGV Capital and a return investment from the Slack Fund. Link
Spotify expands into audiobooks. After Amazon acquired Wondery to move further into podcasts, Spotify takes steps to compete with Amazon’s Audible. The race for all things audio is on. Link
In response to the huge rise in live-streamed concerts, UK collection society, PRS has launched a ‘one-size-fits-all’ live-streaming tariff licensing solution. However, the industry reaction has been largely negative, with many describing it as 'ill-conceived’ and not matching the realities of streaming. Link
Ringover, a Paris-based company that sells cloud-based voice-video-chat-SMS-call centre communication software to businesses, has raised €10 million in Series A funding. Link
Gowalla, an 11-year-old company that was originally founded as a Foursquare competitor but eight months ago become an augmented reality social app, has $4 million in seed funding. Link
Rony Abovitz, founder of Magic Leap, unveiled his next project, a startup called Sun and Thunder, which aims to build “synthetic beings.” Abovitz says the company’s first project will feature a character named Jako Vega, also known as ‘Yellow Dove’, which will be the centre of a number of short film experiments set to release sometime in 2021. Link
Kuaishou Technology, an enormously popular Chinese short-video app maker is looking to raise as much as $5.4 billion in its IPO at a potential valuation of >$60bn. It would be the world's biggest internet IPO since Uber. Link
Vimeo, the now 16-year-old, New York-based video platform being spun out of IAC in the second quarter, has raised $300 million in funding at a post-money valuation of $5 billion. In November, Vimeo raised $150 million at a valuation of $2.75 billion. Link
YouTube has paid out more than $30 billion to creators, artists, and media organisations over the last three years, according to a new letter published by CEO Susan Wojcicki. In the letter, she discusses YouTube’s priorities for 2021. At the top of the list is creator monetisation and the fostering the creator economy. Link
Ed-tech company ClassDojo has raised $30 million funding led by ProductHunt CEO Josh Buckley, with participation from numerous other notable individual investors, including Superhuman CEO Rahul Vohra.ClassDojo helps parents and teachers communicate about students. It raised its last round of funding, a $435 million Series C round, in 2019. Link
Loupe Tech Inc., a new sports card breaking app, has closed $3 million in funding since its October launch, with a first round led by Upfront Ventures. Loupe is a live e-commerce streaming platform built for sports card collectors. It offers a unified platform for breakers to live stream and sell sealed packs and single cards to collectors who are able to interact with sellers in real time. All of the activity takes place inside a single app. Link
Twitter is getting into the newsletter business. The social media company announced that it has acquired Revue, a Dutch startup that allows users to publish and monetise email newsletters. While Revue hasn’t driven the same wave of “is this the future of media?” think pieces as Substack, it counts major publishers like Vox Media and The Markup as customers. Link
Soci, a startup focused on what it calls "localised marketing," announced that it has raised $80 million in Series D funding. National and global companies like Ace Hardware, Anytime Fitness, The Hertz Corporation and Nekter Juice Bar use Soci to coordinate individual content marketing efforts efforts as they promote themselves through search, social media, review platforms and ad campaigns. Link
LottieFiles, a platform for JSON-based Lottie animations, has raised a Series A of $9 million. Based in San Francisco and Kuala Lumpur, LottieFiles was founded in 2018. The platform includes Lottie creation, editing and testing tools, and a marketplace for animations. It now claims about one million users from 65,000 companies, including Airbnb, Google, TikTok, Disney and Netflix, and 300% year-over-year growth. The new funding brings its total raised to about $10 million. Link
Interesting data from this week 📈
Goldman Sachs index tracking the value of USlisted, non-profitable tech companies. Source: FT
Thank you for reading ✌️