In social media platforms and their economies, content and engagement serve as 'currency’. Akin to some traditional currencies, they are experiencing inflation.
In the vibrant social media ecosystem, content and engagement—likes, comments, shares, and follows—operate as the primary ‘currency’, buying visibility and influence and driving the success of influencers, brands, and content creators. This digital economy, underpinned by the scarce resource of user attention, resembles traditional economies in many ways. And just like some traditional economies, legacy social media platforms have been experiencing a unique form of inflation characterized by an oversupply of content and engagement that paradoxically diminished their value, akin to traditional economic inflation, where an excess of currency reduces purchasing power.
More Currency, Less Value
As social media platforms have matured, the volume of content and the corresponding engagement metrics have surged. Twitter’s users generated about 5,000 daily tweets in 2007, while they produce over 500 million today. In 2024, Instagram users upload over 100 million photos and videos daily, and over 1 billion stories are shared daily across Facebook apps. As noted by Facebook itself, already in 2014 an average Facebook user sees up to 1,500 stories in their News Feed per login, which can skyrocket to 15,000 for those with extensive networks. Yet, despite the increase in this 'currency' (or because of that), the engagement rate and reach for most content creators, especially those in the middle and long tail of the distribution, have experienced a decline. Studies, such as one by Edgerank Checker, had shown that the average Facebook Page's organic reach dramatically decreased from approximately 100% of followers in 2007 when they launched to 16% in 2012 to 6% in 2016. In 2024, the average engagement rate per page on Facebook is just around 0.07% (Facebook photo posts have the highest engagement at 0.12%, while Facebook link posts have the lowest at 0.03%).
This phenomenon reflects a saturated market where the value of each engagement unit decreases, making it harder for content to stand out and achieve significant reach without substantial investment in paid promotion. Much like how an increased money supply with an unchanged goods supply reduces the value of money and lowers the purchasing power. Despite having more units of currency, citizens are impoverished. Notably, nowadays, it takes many more posts, likes, comments, etc., to obtain reach and gain visibility and the consequent benefits on social media. For someone just starting on a legacy platform, accumulating enough social currency to ‘buy’ visibility and influence is a daunting mission, not dissimilar to young adults struggling to purchase homes in the real-world economy. Only established and early influencers, akin to financially secure households, can stand a chance to preserve their purchasing power and navigate this inflating economy.
The decline in organic reach has been more severe for mid and lower-tier users. As a result, a small fraction of top content creators capture a disproportionate share of attention and engagement, while the vast majority find it increasingly challenging to achieve visibility. This increasingly skewed distribution of engagement highlights a widening gap akin to income inequality in the real economy, where wealth concentration leads to reduced economic mobility and opportunities.
As the organic reach has tended to zero, many brands and marketers have turned to paid advertisements to ensure visibility on users' feeds. This shift towards a "pay-to-play" model has been a crucial part of legacy social media platforms’ evolution into more ad-centric businesses. Eventually, however, even the competition for ad space has escalated and led to increased costs, making it more challenging for new entrants or smaller brands to compete.
Emerging Platforms: A Return to Equilibrium?
Emerging social media platforms offer an alternative by potentially resetting the inflationary spiral. These platforms, with their smaller, more engaged communities, can provide a more equitable distribution of engagement and reach. Platforms like Warpcast and Lenster stand out by offering a more balanced experience, where users can engage deeply without the stress of competing for likes and followers and the overwhelming challenge of catching up with massive accounts. These new digital squares provide a space where genuine connections are more achievable, allowing for a focused discussion on a few topics of interest. This depth, coupled with the flexibility and convenience of crypto rails (e.g. payments via Frames), can lead to more fruitful collaboration and economic opportunities. For those looking to build an audience, investing in such emerging platforms can be more rewarding, as efforts yield greater visibility and impact.
Navigating the Economy of Social Media
The landscape of social media mirrors the complexities of real-world economies, marked by the inflation of its unique currency—engagement and content. As legacy platforms battle with the dilution of value amidst an abundance of posts and interactions, emerging platforms present an opportunity to recalibrate the scales of the digital economy. As we move forward, the balance between quantity and quality, between widespread reach and impactful engagement, will define the currency of social media and its capacity to connect, influence, and enrich our digital lives.
Ode to open data
A final quick note about data. Collecting data for this article was challenging, which also prevented me from doing further analysis on the relationship between the amount of content, engagement, and attention for social media platforms. Web2 companies’ data are few (specific metrics are closely held and generally not publicly disclosed in detailed historical series), scattered around, fragmented, and inconsistent. This is painfully obvious after being used to the seamless accessibility and transparency of web3 data (go Dune!).
We may never appreciate this paradigm shift enough.