Misaligned Incentives

Preston Brown

2 months ago by prestonbrown

We are now in an “Age of Social Media”: numerous people use some social media platform consistently. However, there is a problem. Many of the hegemonic social media institutions we have today like Facebook, Twitter, and Youtube were started with business models that did not focus on a self-sustainable minimum viable product.

Driven by a need to expand, and not a need to be financially viable, these social media companies operated on the subsidies of large investment companies. They built products devoid of value acknowledgement; instead opting to copy an advertising model from the previous age, and iterating a value model based on advertising rather than for their end users.
We now have cable television for the individual. Users consume content they are interested in, and marketers inject themselves into the queue—regardless of its relevance to the surrounding content.

... -> program -> advertisement -> program -> advertisement -> ...

Make no mistake, the medium is not the only thing that has changed in this consumption model. A user scrolls down their feed, their actions, attention, and reactions recorded. With the advertising model just described, the trust in legacy social media is extremely low. Right now, content AI recommendation takes on the role of an omnipresent overlord status. Users aren’t given any choice; they are just recommended things that the central governing AI thinks users will continue clicking on. This means that a lot of the time spent developing AIs is to benefit advertisers.

“How can our product better hypnotize people into buying things and clicking ads?”

Continuing to move down this value model is evidence that it’s highly effective.

Legacy social media can be easily reduced to misaligned incentives of the current financial model. Social media is, in essence, data hosting and content curation. Reimagining the financial model, one could realign social media to the benefit of its individual customers, and improve the overall experience.

Social media is a kind of “data hosting” product. The most widely used financial model for social media is ad subsidization. Social media companies accept money from companies to inject advertisements into their user’s feed. One easily recognizes the true customer in this system, and the misaligned incentives that arise. Rather than rehashing this culturally recognized structure again, I’ll emphasize a few points:

  • Advertisers will only pay for content that is agreeable with them
  • Users do not own their data, nor do they have insurance against its censorship or removal
  • Data must be collected on users in order to make a better “product” for the advertisers

This epitomizes the misalignment between users and customers. This incentive system favors advertisers over everyday users, both in company policy, and utilization of resources for the development of the product. A good product has its financial incentives aligned with its target market. A good social media’s target market is everyday users, not corporate advertisers. Ir would serve any company good to appropriate this mindset, motivating them to make a better product, creating a positive feedback loop of revenue and reinvestment.