Cracks and Fissures 2022
Thoughts on 2022, meme-ify your life, the decline of media brands and Instagram, your place on-chain, a coming wallet war, an open web renaissance, irrational investing, continued disruption and more.
We’ve been playing with generative art stuff and, together with incredible collaborators Alex and Adrian, turned Algo the bear into code and poured in an AI, GPT-3 powered soul. More examples through the post.
Welcome to People vs Algorithms 12.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses, most recently as global President of Hearst Magazines, one of the largest publishers in the world.
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My son popped into my office this week and playfully proclaimed: "Hey Dad, you should become a meme.” This is obviously not on my 2022 to do list. He continues: “Gary Vee is a meme. Did you know Gary Vee is a meme? Do you know him? That dude's intense." With that he breaks into a parody of Gary and his early life garage sale / eBay arbitrage hustle, something I presume he saw on TikTok. Gary has made it to my son's feed.
I have long admired Jeff Bezos for his cunning and grit but saw him too much this week. I mean, I want to go to space and live forever too, but the Instagram pics of jacked Jeff and his friend Lauren in St. Barts, the goofy heart sunnies and skin-tight silk shirt. Jeff has jumped feeds. I liked the nerdy version better.
Then there's Elon. I love Elon. He's the wacky strongman of the feed. I loved this line from his recent Lex Fridman interview. When asked about his source of strength and belief to persevere through the humanity's most difficult engineering problems, he pauses for a long time and responds. "Hmm. I just really not how I think about things. I mean, for me, it's simply this, this is something that is important to get done, and we should just keep doing it or die trying, and I, I don't need a source of strength. Quitting is not in my nature.... and I, I don't care about optimism or pessimism. Fuck that, we're going to get it done."
It's 2022 and these are the people in your meme-berhood.
At least it’s not Trump. There are many others, depending on the metaverse you call home. Their stories unfold across Twitter and TikTok, Page Six and podcasts. They take more mindshare than the president or old school celebrities. Memes are are our new cultural lego blocks. This is our world now and chances are, it only gets weirder.
I was reluctant to put out 2022 predictions. Everybody does it and, frankly, I don't know if I have much to add. I've read a handful over the past couple of days. This week Scott Galloway debuted his 2022 roster in a jam-packed live-streamed ceremony. He had a couple of good observations, some of which I touch on below.
Trung Fan is a Twitter genius and more. He put together a terrific personal year in review which I liked alot. Few others stood out TBH. Most are obvious or outlandish.
I started thinking about pressure points and where cracks are starting to show. It’s where new things grow. And right now there are lots of cracks. Change is a constant, but our present feels pretty momentous.
Were are we moving from? The easy answer from Web2. To get a bit more specific (and this is largely a media lens) an ecosystem dominated by a handful of dominant communication and commerce platforms. A search monopoly. Fragmented, proprietary and friction-filled solutions for online identity and payments. A media industry that has moved through a period of intense disruption and while a few look like they have gotten to the other side, most including lifestyle media, local news, cable, radio are hanging on or being reconstituted and hoping things get a bit less dynamic and more predictable.
Add a banking and payment system that has not fundamentally changed in a really long time and bunch of oligopolies in telco, insurance, packaged goods, healthcare. In short, a system where powerful distribution systems and network effects protect incumbents.
It’s worth noting that we are also moving from a pretty remarkable year for most digital media companies and lots of DTC sellers. 2021 saw low costs, robust ad demand, and for many that I have spoken to, surprisingly healthy profits.
So what's on the other side? Hopefully a healthier open web to start. The promise of a common data and programming layer that everyone can build on top of. A portable, user controlled identity system. New ways of thinking about ownership and governance that broadens stakeholder involvement across industries. New ways of connecting people, content and money.
Here are a few places we will see the most change in 2022 and beyond. I will do my best to contain the hyperbole that comes naturally with these things though a small amount is useful and fun.
A new class of content creators continues to steal mindshare and build brands
I will commit the cardinal sin of media executives and extrapolate my personal media consumption habits and those of my family across the broader market. I don't see a future where professional news gathering is not vital. But more and more of my time is being spent with a mix of self-powered journalists, expert / hobbyist / writer hybrids. Like what you are reading right now. It's the All-In Podcast. It's Tung Fan Twitter. Its A16's content feed. It’s a dozen brilliant Substack writers. Or thousands of bedroom content creators on TikTok.
It's not just me. According to a new study from the Consumer Technology Association, user-created content accounts for 39% of weekly media hours consumed by Americans vs. 61% for traditional media.
The advantage in 2022 continues to go smaller, lean, expert, connected content producers (more from an earlier post here). Which leads to the next point.
Web3 doesn't solve legacy media's ills
I just can't see how the core Web3 innovations make life any easier for most media companies, particularly those carry the weight of legacy distribution and cost structures. It’s only getting easier for new creators to compete.
And more time is spent hybrid creator / consumer environments, gaming in particular, where users are invested and cost structures low.
Beyond ‘22, I see potential for blockchain powered payments solutions that better support subscriptions offerings for premium content. It’s hard to tell if this will offset what seems to be growing subscription fatigue.
That said, we have supply overload problem and too much stuff available for free.
Advertising will remain important, but I don’t see how Web3 innovations will materially change user experience or yield. At least not in the short run. Take this from someone who has spent too much of my professional life trying to figure out better ways to make advertising support professional media.
Our programmatic dominated system of banners and fake native ads feels tired. Need proof, just look at any local newspaper site. Incentives are misaligned. After 20 years of ad innovation, most are still a cluttered mess. Platforms were able to get it right with experience control, data, scale and sophisticated buying interfaces that swept up long tail dollars. The open web still has much to do here.
There's the promise of a better, higher yielding ad ecosystem where consumers carry their data across the internet through a blockchain powered authentication system. And, new thinking about subscriptions architecture driven by the blockchain hold promise (Jarrod Dicker has good thoughts on this). That said, all it feels pretty speculative.
Affiliate revenue, a profit life line for many, will continue to provide meaningful revenue diversification but we are starting to see Google congestion as every pub on the planet competes for revenue producing search terms. This intensifies in 2022.
And what about the big guys? Web3 stuff is not suddenly going to replace all the Web2 platforms. We still need search and social. A new layer gets added, the substrate below changes shape and slowly loses relevancy. It will take a long time.
Most see disruption coming for Facebook. A contrarian prediction is Facebook outlasts Instagram.
There's something wrong with Instagram
The 11 year old service is showing its age. Admittedly something like a billion people use it globally each month (this post is about cracks, not implosions). But 2021 was notable because TikTok beat instagram. The former gained 13% in usage with American's 13-17. Instagram lost 4% points (Forrester). Instagram is a FOMO fueled, vortex of self-absorption. Maybe it’s me, but it feels like it’s best days are behind it.
TikTok is going to keep taking share because of the content not the algorithm. TikTok is about entertaining the audience. Instagram is about the poster (didn’t say poser). And while Meta may respond to the threat by spitting out copycat video features, it's really hard to change the prevailing mode of a platform. Reposed TikTok videos on Reels are not going to take back the throne. Endless bad PR doesn't help.
Somehow I see Facebook as more resilient. It’s the phonebook and community groups and garage sales and it’s like going back home for the Holidays. It's not always fun, but your family is there and there's plenty to drink.
My space remerges on the blockchain
You can see the shape of a new user-owned web inside of the Ethereum and it's emergent domain system, ENS. ENS is the Ethereum Name Service, analogous to the Domain Name System (DNS) that converts IP addresses into common .com names. It's like a nickname generator for the long hexadecimal string that points to your address on the Ethereum blockchain. You've probably started to see crypto people use these in their Twitter IDs, as YourNameHere.eth.
Here's where you can start to see flickers of an blockchain powered social system. Now you can point your browser at ETH address, append .xyz at the end and see everything the owner has stored on chain. Try it here: https://mattkane.eth.xyz/
Today this is largely your NFT collection, but it the future this is ground zero for online identity. Tools will be quickly be created to enable presentation control, permissioning, network connections, etc. This is the seeds of new digital ownership and the beginning of a social alternative.
And, as Scott Galloway points out in his 2022 predictions, NFTs quickly become an important status signal, perhaps more important than physical goods. Naturally we need places to show them off. Token driven initiatives from lux brands will proliferate in 2022. He speculates about the potential of coin offerings from Chanel and utility-driven tokenized initiatives from prestige education brands like Stanford. Just this week, wine maker Robert Mondavi launched their first NFT wine collection.
The battle for wallet dominance looks a lot like early browser wars
Starting points are extremely valuable, particularly when connected to money and identity. MetaMask is the clear wallet leader today. Expect many to challenge this position, starting in 2022, including platform and OS incumbents. From Cointelegraph:
Flash forward to today. Web 3.0-enabled wallets are the tools that millions are using to participate in the brave new world of decentralized autonomous organizations (DAOs), community-driven DeFi protocols and the Metaverse. They are the portal to these applications, just like the browser was the portal to the websites of the early internet. Soon they will be the default interface for a new internet — the land they will be fighting for.
The open web finds new relevance
Back in 2020 I gave the chairmans speech at IAB’s Annual Leadership Meeting in which I spoke of my love and hope for the open web as a boon to free speech, the enthusiast mind and to media. But, the open web needs to evolve if it's going to compete with walled gardens and mobile apps. It needs new memory (RIP the cookie), a native identity and payment system, functional advantage by way of open, composable systems, and god willing, a better way of carrying advertising. The blockchain as a shared data platform is a potential enabler of all. I am long on the open web in 2022.
Emergence of a payment-powered super-app
The second most important habit creating application outside of personal communication is payments. It represent an important battlefront in building daily gravity outside of social apps. The power positions here are mobile OS owners, Apple and Google. In China, super-apps like WeChat essentially function as the mobile OS. Expect moves in 2022 to combine financial applications, payments specifically, with content and other daily utilities in food delivery, transportation (more on super apps here). Someone is going to try to pull this together and challenge the dominance of OS owners. Companies to watch here include Apple, Block, PayPal, Stripe, Pinterest, Uber, Lyft, Seamless. Google and Facebook are obvious movers here but antitrust constrained.
Audio is way too important to be controlled by so few
Apple and Spotify are the two companies that matter in podcasting, controlling about 60% of distribution. Obviously podcast content can be promoted and distributed widely across the web and social media, but platforms drive mass discoverability. Podcasting has become way too important a medium to be controlled by two companies. 2022 will see media companies challenge the position, starting with the New York Times whose new audio app is now in beta.
Investing continues to depart from economic rationality
When ownership becomes part of the fabric of the online experience, everything becomes investing. And when this happens, valuations detach from expectations of future cash flows. Value becomes a cultural measure and often a political one. Investing gets meme'd. It can be weaponized, as it was with Gamestop and AMC against the power of Wallstreet insiders. Or it's a bet on the distant future as it is with bitcoin, an asset that has no cash flow, no staking reward, but holds promise as inflation hedge, a gold replacement and a bet on the overall potential of a bitcoinized world. How do you value something in this scenario? You look look for energy flows on on chain, Twitter, Discord and Reddit. Sorry, I said it.
As silly as it seems, nostalgia is a powerful force here. What else would explain the effort to raise money around the Blockbuster brand, turn it into a DAO and resuscitate it as a player in the streaming business (I will not be investing).
So too is passion and community. LinkDAO is an interesting innovation in membership and investment, quickly raising $10m though an NFT sale to fund operations and prepare to buy its first golf course in 2022.
Or think about the democratizing power of a blockchain powered angel venture platform. Balaji Srinivasan outlines what it would look like here.
Reduced friction, new asset classes and blockchain powered resale markets beget broad participation which will naturally lead to speculative behavior. Seasoned investors will scoff and talk of a return to rationality. I think 2022 will be full of surprises where advocacy meets underwriting.
Value reference point slowly shifts from fiat to crypto
And what if... what if we start talking about the value of things in a crypto denomination more than we talk about value in terms of fiat? Now I realize this is a ways out, but sooner or later we will stop making the mental conversion between ETH and USD and find a new common global valuation measure. "I love your new Tesla, how much was it?", "It was ten ETH, I got a terrific deal because it didn't come wit the latest software release." If regulators thought it was hard to get in front of a crypto market with trillions of dollars of market cap, full cultural adoption of a new investment language will further limit options.
Blockchain pressures oligopolistic positions in finance and beyond
It's not hard to see increased pressure on big banks and card companies, this coming off a year that Chase will clock profits of around $45B. Gross margins for Visa and Mastercard are in 60-80% range, powered by a 2-3% tax every time we transact. It's gonna take time but the rise of decentralized payment infrastructure is going to hurt. The pressure points will start with scale online retailers putting pressure on fee structures. Witness Amazon's decision to stop accepting UK issued Visa cards beginning in late January.
The first crypto use case will be the avoidance of complex and costly inter-country transfer fees. This is the tip of the iceberg. Defi disruption will touch all parts of the financial value chain.
Other use cases are more speculative but worth highlighting. Just look to network TV over spenders like dominant insurance and telco companies. This is usually a good sign of a sector prime for disruption. The "software is eating the world" thesis is about to come for mobile operators.
OpenRAN is a promising new way of building mobile networks with software decoupled from proprietary hardware, based on open standards and the ability to run in the cloud on off-the-shelf servers — all of which promises to boost competition and lower prices.
Just as disruptive forces are enabling a smaller class of media operators, horizontal applications like Shopify democratize online commerce and pressure Amazon and Walmart.
Technology is creating a small business renaissance.
Fast culture feeds continuous disruption
Perhaps the past few years have conditioned us to expect and exaggerated amplitude, frequency and decay of news cycles. Ryan Broderick thinks we should just expect things to be faster:
Trends, memes, news cycles, laws, politics, social movements, fashion, music, food — it will all get faster. Our institutions over the course of the pandemic have ceased to function on their own. Whether we want to admit it or not, now, and possibly for the rest of our lives, the machinery of our various societies will operate downstream from content. This didn’t happen overnight. It’s a process that I would say started at some point between the first Myspace band to secure a major label record contract and Barack Obama’s presidential campaign, before it really go going by the time the Oreos Super Bowl moment happened, and then completed itself at some point between the release of Olivia Rodrigo’s “Driver’s License” and Kyle Rittenhouse’s appearance this week at Turning Point USA’s conference. For non-American readers, I’m confident you can replace those references with your own cultural equivalents.
Two fissure points have caught my attention recently, angry young men and the anti work movement. On the former, news out of South Korea last week was notable. Fed by growing economic insecurity, young men are lining up against the feminist movement in South Korea and becoming a powerful political force: “Men in their 20s are deeply unhappy, considering themselves victims of reverse discrimination, angry that they had to pay the price for gender discriminations created under the earlier generations,” said Oh Jae-ho, a researcher at the Gyeonggi Research Institute in South Korea.
Over the past six months the r/antiwork subreddit has grown to over 1.5 million members, directed their energy at a growing list of causes:
The group has made headlines in recent months for coordinating efforts on everything from a Black Friday boycott to overwhelming Kellogg’s jobs website with fake applications in order to make it harder for the company to replace striking workers. In another sign of the Reddit community’s influence, Goldman Sachs cited the sub in a recent research note on how the broader antiwork movement could lead to decreased labor force participation in the long term.
Related, it's never been harder to be a CEO particularly as it relates to balancing the often conflicting demands of stakeholders. There are endless examples with Disney / J Law and Amazon / labour as examples. Recent backlashes inside Discord and Ubisoft communities showed complexity in managing invested user groups hostile to perceived NFT cash grabs.
Let’s summarize a bit.
Discourse is energy, energy becomes movement, movement begets momentum. It gets a name. Here's we call it Web3. It's a marketing concept and meme for change. It's creating a new media, financial and social constructs quicker than we can process them. Overlay this change with disruptive cultural energy driving generation shifts in how we think about work, diversity and equality (and a pandemic) and you get a dynamic and unstable environment. Just when we thought things might get more normal. Brace yourself, 2022 is going to be full of surprises.
At times like these, perhaps it useful to be like bear — calm, empathetic, alert but fierce when you need to be.
Thanks very much for reading. Wishing all of you a prosperous and safe year ahead…/ Troy