Is the Internet Good or Bad for Democracy?
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Hi everyone 👋 ,
Happy (early) Fourth of July! 🎆
This week’s topic is a question: have the Internet and social media been a net positive or a net negative for democracy? I don’t know the answer—but given recent events and the Independence Day holiday, it felt like a question worth asking.
This week, I’m trying something different for the Tech, Media, and Commerce sections. Each section focuses on a mini deep-dive into a single company within that space: Snap, Twitch, and Pinduoduo.
As always, let me know your feedback on newsletter format, length, and what content you’d like covered.
Let’s get to it!
The Internet, Social Media, & Democracy
Have the Internet and social media been a net positive or a net negative for democracy?
I began thinking about this question last week after reading two interviews. The first interview was with Jon Stewart in The New York Times. I’d put Stewart in the “net negative” camp: he is clearly both exhausted and disillusioned by how the Internet and social media have changed media:
[The Internet is] designed for engagement. It’s like YouTube and Facebook: an information-laundering perpetual-radicalization machine. It’s like porn. I don’t mean that to be flip…The algorithm is not designed for thoughtful engagement and clarity. It’s designed to make you look at it longer…There are very few events that would justify being covered 24 hours a day, seven days a week. So in the absence of urgency, [the media has] to create it. You create urgency through conflict.
The second interview was with Ta-Nehisi Coates, interviewed by Vox’s Ezra Klein. I’d put Coates in the “net positive” camp: he’s excited by how the Internet is enabling the Black Lives Matter movement:
I can’t believe I’m gonna say this, but I see hope. I see progress right now. I don’t want to overstate this, but there are significant swaths of people and communities that are not black, that to some extent have some perception of what that pain and that suffering is. I think that’s different…George Floyd is not new. The ability to broadcast it the way it was broadcasted is new.
Seeing the merits to both sides, I decided to take a poll on Instagram. The poll received 3,563 responses:
I was surprised by the slight negative tilt—particularly given the obvious bias of asking this question to the active users of a social media platform.
This is also too complex a topic for one simplistic question; there are plenty of caveats here (which I’ll get into below), but I thought it was an interesting starting point. Before looking at each side of the argument, a quick word on why this matters:
The Internet and social media have fundamentally changed how we consume and share information. And the exchange of information is the lifeblood of a democracy. How we get our news and how we communicate affects how we see the world, which then affects how we act.
The Argument for Net Positive
According to the Digital News Report, three-quarters of Americans get their news online; about half get their news from social media specifically.
More than anything, the internet has dramatically broadened access to information. Ben Thompson captures this in his piece Never-Ending Niches:
So it was with the Internet and the trade-off between reach and time: suddenly every single media entity on earth, no matter how large or small, and no matter its medium of choice, could reach anyone instantly. To put it another way, reach went to infinity, and time went to zero.
Thompson includes this illustration of how The New York Times’ reach changed because of the Internet:
I was curious about just how broad this reach now is. Like any good former investment banker, I turned to The New York Times Co.’s 2019 10-K filing and found this sentence:
As of December 29, 2019, we had approximately 5,251,000 paid subscriptions across 225 countries and territories to our digital and print products.
That’s incredible. But this reach is no longer limited only to big publishers like the Times: social media has even further democratized information. Anyone can be a publisher through Facebook, Instagram, Twitter, TikTok. This creates a powerful mechanism to spread awareness and build community.
Social media makes us aware of causes and communities and movements that we otherwise might not be exposed to. Just opening Instagram Stories right now and looking at the “stickers” captures this: there are stickers for Pride month and LGBTQ+ rights, stickers for Black Lives Matter, stickers to help small businesses, stickers raising awareness of the national health crisis.
Social media shares new perspectives and fortifies communities. Lightspeed’s Alex Taussig writes:
Social media is a lot of things — some positive, some negative — but, among those, it is the most incredible machine for human empathy ever created. Black communities have been telling the rest of the country about police violence for years. It’s quite another thing to see it live in your social feed, not just once, but over and over again, from coast to coast, in every kind of community.
Seeing is believing. The nation can finally “see” the pain and suffering of the Black community because of social media and the intrepid activists wielding it. That’s a reason to be hopeful and believe that urgent change is on the horizon.
Tragically, there have been thousands of George Floyds over the years. But today, social media (enabled by camera phones) spreads awareness. And that greater awareness mobilizes action.
Taussig cites a study that shows that historically, if more than 3.5% of a country’s population participates in protests, the effort is guaranteed to succeed. In the U.S., that’s about 11 million people. According to one survey, about 6% of the country, or 20 million people, have participated in the BLM protests.
That means that there’s real hope that this month’s Black Lives Matter protests will result in real change. Social media drove awareness, awareness drove action, and action will drive change.
The Argument for Net Negative
Because media is so democratized and so accessible, the line between news and entertainment is blurring. Jon Stewart talks about this in the Times interview:
The media in the last four years has devolved into a succession of moral manias. We are told the Most Important Thing Ever is happening for days or weeks at a time, until subjects are abruptly dropped and forgotten, but the tone of warlike emergency remains: from James Comey’s firing, to the deification of Robert Mueller, to the Brett Kavanaugh nomination, to the democracy-imperiling threat to intelligence “whistleblowers,” all those interminable months of Ukrainegate hearings (while Covid-19 advanced), to fury at the death wish of lockdown violators, to the sudden reversal on that same issue, etc.
Anyone whose phone is constantly lighting up with CNN and Apple News notifications understands this. This was originally driven by ad-based business models, which created the phenomenon of “clickbait” and led to an endless quest for clicks. But it’s proving true under subscription models too.
News thrives on conflict; and online, conflict has become news’ economic engine. This leads to more partisan reporting by major news outlets. And on social media, algorithms exploit biases to create echo chambers. As one respondent to the Instagram poll put it:
According to one analysis, the average person will spend nearly 7 years of their life on social media 🤯 That’s a long time to spend in an echo chamber—particularly when these echo chambers are made more dangerous by misinformation. Two-thirds of Americans are concerned that the news they’re reading online is wrong.
Twitter and Facebook are both beginning to flag posts that violate their rules. But many continue to view social media platforms as cesspools of dangerous misinformation. Algorithms create compartmentalized slices of reality that can bring people together but also, when left uncontrolled, drive people further and further apart.
So…Net Positive or Net Negative?
There’s no clear-cut answer; there are compelling arguments on each side. As Ben Thompson puts it:
I would summarize the arguments as the following:
✔️ Net positive: The Internet and social media 1) broaden access to information, 2) enable new communities to form and interact, and 3) combine #1 and #2 to mobilize people to act.
❌ Net negative: The Internet and social media 1) make news falsely urgent and conflict-ridden, 2) use algorithms to exploit and exacerbate that conflict, and 3) spread dangerous, wrong information.
Realizing there’s no “right” answer here, I view net positive as having the slight edge. This conclusion is particularly true with some qualifications—my takeaways are:
➡️ The Internet, apart from social media, is a net positive for democracy. Information is more accessible. More people are part of the conversations that matter—to quote Hamilton, more people are in the proverbial “room where it happens”.
➡️ Social media, on its own, is a net negative for democracy in the U.S. Many people who responded to the poll suggested that “the Internet” and “social media” be separated; the latter, though a subset of the former, is more broadly seen as a clear negative. Social media has gone unchecked and been allowed to erode carefully-crafted structures and institutions.
➡️ Those answers are U.S.-centric. For countries under non-democratic governments, the Internet and social media are both net positives. Movements like the Arab Spring relied on social media to access information, create communities, and mobilize action.
The Internet and social media are double-edged swords. Every pro has a corresponding con; every plus is balanced by a minus. The Internet makes it easy to find information on Covid-19, saving lives; but it also makes it easy to spread dangerous misinformation. Without the Internet and social media platforms—especially Twitter—would Donald Trump have become president? But one could just as easily ask: without them, would Barack Obama have become president?
The Internet and social media are neither moral nor immoral—they are amoral, and their negatives stem from our mismanagement of what can be powerful tools for good and enduring vehicles for change.
It’s our responsibility to safeguard these tools and platforms, ensuring that they’re used in ways to fortify and expand our democracy rather than to undermine it.
Sources & Additional Reading — here are the pieces that inspired and informed this content; check them out for further reading on this subject:
Jon Stewart Is Back to Weigh In | David Marchese | The NYTimes
Why Ta-Nehisi Coates Is Hopeful | Ezra Klein | Vox
The News Media Is Destroying Itself | Matt Taibbi
Drinking from the Firehose | Alex Taussig | Lightspeed
Never-Ending Niches | Ben Thompson | Stratechery
Digital News Report | Reuters & Oxford
The '3.5% Rule': How a Small Minority Can Change the World | David Robson | BBC
Chart of the Week
Global consumer spend on video games vs. on music over time (Source: Matthew Ball)
📱 Tech
A few Snap-related follow-ups to last week’s piece on the future of VR and AR. I hadn’t fully appreciated Snap’s vision for AR. Snapchat lenses are more than just a fun feature; they’re laying the foundation for the future of the company.
Check out this clip from the Partner Summit that shares new AR products:
Pretty impressive. I also enjoyed Packy McCormick’s bull case on Snap, which included these surprising stats from the Partner Summit:
75% of 13-34 year olds in the U.S. use Snapchat—that’s 78M people, more than either Instagram (75M) or Facebook (73M). Snap’s strategy is pretty simple: don’t worry too much about attracting older users—just hold onto current users as they get older, and make sure to attract new younger cohorts.
Several readers also shared this fantastic WIRED piece written by Kevin Kelly last year, which McCormick also references. The piece introduces the concept of “Mirrorworld”. What is Mirrorworld, you might ask?
Mirrorworld is a 1:1 digital map of everything in the real world, overlaying our physical world. Imagine seeing a virtual name tag hovering above people you’ve met before. Or looking across the street at a restaurant and being able to see the menu and pictures of the food. Imagine relaxing in your living room on Friday night and watching a life-size, AR Beyoncé perform a live concert right in front of you. Kelly writes:
The first big technology platform was the web, which digitized information, subjecting knowledge to the power of algorithms; it came to be dominated by Google. The second great platform was social media, running primarily on mobile phones. It digitized people and subjected human behavior and relationships to the power of algorithms, and it is ruled by Facebook and WeChat. We are now at the dawn of the third platform, which will digitize the rest of the world.
Snap is playing the long game: Evan Spiegel’s grand vision is to create Mirrorworld, the next great computing platform, one Snapchat lens at a time.
A quick break to remind you to subscribe if you haven’t already!
🎥 Media
In 2014, Amazon bought Twitch for $970M. At the time, people were spending 270M hours on the livestreaming platform each month. Fast forward to 2019, and people were spending 11 billion hours on Twitch each month—a 40x increase in five years.
Twitch’s biggest draw was Tyler Blevins (pictured below), the world’s most famous gamer and better known as Ninja. But in August last year, Microsoft poached Ninja for its own Mixer platform. Ninja was reportedly paid $30M to switch from Twitch to Mixer.
Poaching Ninja worked in stopping Twitch (temporarily) as Twitch viewing fell 12% from Q3 to Q4 2019, but Mixer still struggled to grow. Last week, Microsoft announced that it’s shuttering Mixer and moving to Facebook Gaming. It released Ninja from his contract, nine months after shelling out $30M for him. Yikes.
Over the past few months, Twitch has surged and now seems positioned to win the livestreaming battle.
During the six-week stretch from early March through mid-April, Twitch viewers livestreamed 2 billion hours of video game play. The average user spends 95 minutes per day on Twitch. (For comparison, the average YouTube user spends 40 minutes per day on YouTube.)
But what’s more impressive is how Twitch is broadening its scope beyond gaming. Music, in particular, has surged, as artists turn to livestreamed performances during the pandemic:
Long an afterthought to YouTube, Instagram and TikTok, Twitch has emerged recently as an effective way for musicians to interact with fans during the coronavirus pandemic. What YouTube is for music videos, Instagram is for photos and TikTok is for memes, Twitch is becoming for live performance and conversations. In May, people spent almost 27 million hours watching live music and other performing arts on Twitch.
Next up: sports. Amazon just bought the rights to stream the Premier League—England’s top soccer league—on Twitch.
🛍️ Commerce
Last week, Pinduoduo’s founder, Colin Huang, became China’s 2nd-richest man. The 40-year-old Huang owns 45% of Pinduoduo and is now worth $45.4B, second only to Tencent’s Pony Ma ($52.6B) and ahead of Alibaba’s Jack Ma ($43.9B).
Pinduoduo invented social shopping. Social shopping basically means that buyers get discounts if they invite their friends to shop with them. For instance, if you buy toilet paper on your own, it might cost $2; if you invite two friends into your order, you can buy it for $1.50. The meaning of Pinduoduo’s name sums it up best (image source):
Pinduoduo got its start by targeting price-conscious buyers in third- and fourth-tier Chinese cities—often women in charge of household purchases—who brought their friends into group-buying deals. Elad Natanson wrote a great piece in Forbes last year that calls Pinduoduo “a social sharing-driven version of Costco or Dollar General.” He explains how Pinduoduo gamifies shopping:
You get free products for getting friends to install the app, and there are leaderboards showing people who have had the most friends sign up. You win coupons by spinning a wheel on an in-app game, then the coupon only lasts 2 hours, prompting an impulse buy.
This addictive social shopping experience has fueled Pinduoduo’s growth. Its the fastest-growing e-commerce company in Chinese history, reaching $15B in GMV only two years after launch; Alibaba and JD.com took 5 and 10 years to achieve that same scale. Within four years, it was bigger than eBay. Today, it has nearly 500M monthly active users and does $145B in GMV.
It’s even closing in on Alibaba:
Pinduoduo also enjoys low customer acquisition costs. Social sharing is done primarily on WeChat, and WeChat owner Tencent is an investor in Pinduoduo. Through WeChat, Pinduoduo’s average customer acquisition cost is only $2, compared to $39 and $41 for JD.com and Taobao.
This year, Pinduoduo has been on a tear. Its market value has more than doubled since the beginning of the year: on January 1st, the company was worth $44B; today, its market cap is $105B.
In the U.S., we’re still waiting for a true analog. The recently announced Facebook Shops and Instagram Shops, powered by Shopify, may be the closest we get to the discovery-driven Pinduoduo shopping experience.
Sources & Additional Reading:
The Miraculous Rise of Pinduoduo | Elad Natanson | Forbes
Pinduoduo’s Growth Story Needs a New Chapter | Michael Norris | Technode
Everything You Need to Know About Pinduoduo | Arjun Kharpal | CNBC
Quick Hits
📹 Cameo grew 1,000% from the week pre-Covid to a peak around Mother’s Day. To date, the company has sold 1 million celebrity videos and is on track for $100M in bookings this year. (Link)
🍎 Chegg essentially invented the textbook rental market, then expanded into live online tutoring. Chegg has thrived during the pandemic, seeing “almost a doubling of the business overnight.” The stock is up 40% this year. (Link)
🥜 In what has to be the oddest advertising stunt of the year, Planters killed off its beloved Mr. Peanut, then showed his funeral in a Superbowl commercial. Now, its new mascot—Baby Nut—is beginning to appear on its products. (Link)
You can even shop Baby Nut merch here.
🕴️ A London-based startup called Teooh raised €4M to expand its virtual gathering platform. People create digital avatars and then get together virtually—for work meetings or just to hang out. From April to May, events created on the platform grew 107%. (Link)
💰 Big-name advertisers like Unilever, Coca-Cola, and Starbucks have stopped advertising on Facebook, boycotting the spread of misinformation and hate speech. This erased $60B from Facebook’s market cap in two days. But Facebook’s revenue is incredibly diversified, as the Axios chart below shows: only 6% of revenue comes from the top 10 advertisers, with the majority (~80%) coming from the long-tail of 8 million advertisers. Ben Thompson wrote about this yesterday in a piece worth reading. (Link)
🎟️ First, Warner Bros. moved Christopher Nolan’s upcoming Tenet from July to August 12th. That made Disney’s Mulan the first major movie that will hit theaters during the pandemic. But then Disney pushed Mulan a month to late August. The studios are desperate not to lose money on their big budget hits—and they’ve already invested millions of pre-release marketing dollars. If I were a studio executive, I’d use this opportunity to test a new release strategy: charging maybe $30 or $40 to watch the film at home (less than it would cost a family of four to go to the theater) before moving it to streaming services in a couple of months. (Link)
🇮🇳 India banned TikTok, WeChat, and dozens of other Chinese apps, citing cybersecurity concerns. This a blow to TikTok, as India is its biggest market outside of China; last month, about 1 in 5 downloads of TikTok was in India. (Link)
🎵 Speaking of TikTok—YouTube and Instagram are coming after it. YouTube is testing a feature that allows users to record 15-second videos. And Instagram is expanding “Reels” to parts of Europe after a successful test in Brazil last year. Instagram probably hopes Reels can do to TikTok what Stories did to Snapchat. Like TikTok, Reels includes easy-to-use editing tools for video creation and its own page within Instagram where anyone’s video can go viral. (Link)
📈 And finally, I enjoyed this chart from Charlie Bilello and Packy McCormick. The biggest companies in the world are increasingly consumer or consumer-like companies that we interact with every day.
Have a great Fourth of July weekend! 🎉
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