Big Tech’s Growing Vulnerability

Today we’re going to talk about big tech censorship — and how it makes established social media platforms vulnerable to disruption. I’m going to try my best to avoid the political side of things and focus solely on the investing implications.

YouTube, Twitter, Facebook, Apple and other big tech companies have been increasingly banning users for expressing certain views — largely conspiracy theories. 

Alex Jones — a conspiracy theorist with millions of followers — was one of the first to be “de-platformed” in 2018. Within a few weeks, Jones was banned on Youtube, Apple podcasts, Facebook, Spotify and Twitter. 

Alex Jones has done some bad stuff. So most people didn’t seem to mind that he was banned. However, many of us believed this set a dangerous precedent. Banning people for expressing unpopular opinions is a slippery slope.

Fast forward to today. These platforms are using bans and other disciplinary actions to remove certain content and users. Last week Twitter suspended the New York Post for a controversial story they posted. And then didn’t allow retweets of it for over a week. Facebook also “limited the reach” of the story and restricted the posting of it.

Many smaller independent creators are also being “de-platformed.” YouTube recently deleted The Last American Vagabond — a channel with 2,000 videos and 5 million views. They didn’t really explain why, except to say the channel violated their “community guidelines.” 

A lot of these people who get banned express unusual or controversial views — like intricate conspiracies about COVID-19. If you disagree and think the content is hogwash, that’s fine. But censorship isn’t the answer. And I think censoring voices will  hurt these big tech platforms in the end.

There is certainly an argument to be made that these big tech companies are private and free to police their platforms however they like. However, that doesn’t mean censorship is the “right” thing to do”. And I don’t think most people want social media platforms to be the arbiters of “right” information.

The Opportunity

No matter how you view the big tech controversy, I think most of us can agree that these platforms are angering a portion of their audiences — and likely some of their employees too. 

According to Pew Research, 73% of Americans believe it’s likely that social platforms censor political views based on what they find objectionable.

Three-quarters of U.S. adults say it is very (37%) or somewhat (36%) likely that social media sites intentionally censor political viewpoints that they find objectionable.

The 2019 poll by Pew showed that 90% of Republicans believe it’s likely that social companies censor based on personal views, while 59% of Democrats believe so. Rightly or wrongly, the big tech companies are upsetting a significant part of their audiences. 

I think the public backlash is just beginning. This week, Congress hauled Facebook and Twitter into a hearing to discuss the “speech moderation” issue.

Importantly, people are fed up with social media companies for reasons beyond alleged censorship. They’re also mad about creepy advertisements, privacy rights, content ownership and more. 

Many people are looking for alternative social platforms. And this environment gives social startups a chance to attract users who are done with the established platforms. 

There are dozens of promising new social competitors popping up. They’re going after YouTube, Twitter, Facebook, TikTok, Reddit and new categories like audio chat (which is very hot). I stumbled across an interesting startup the other day called Rokfin. It’s a content/social platform that helps select content creators distribute their product and make money off of it. Rokfin seems to have decent traction. I haven’t done a deep dive yet on this one, but I’m watching it — and others.

I’m certainly not alone. Many of the best venture capitalists in the world are actively scouting for the next big social platform. There’s a reason for that. Social media platforms can scale up really, really quickly. They benefit from the “network effect,” where each user brings additional users with them. TikTok, which launched in September of 2016, already has 50 million daily active users in the U.S. 

With the established players looking a little wobbly, I think it’s time to start looking for deals in the social space. The big guys are vulnerable right now. They have a lot of customers who are switching or considering it. And that means disruption is just around the corner.

Note: In the social category, almost everything’s going to be a long shot. But each deal is worth investigating — because when social platforms hit, they tend to hit very big. Some of them will likely be worth taking a shot on.