How to lose friends
And influence nobody
Hey there,
Here’s an interesting stat I noticed over the weekend. MrBeast, one of the most prolific creators online, is outgrowing the ad budget of the organisations he caters to. The Super Bowl receives a bit over 200 million views. MrBeast’s average video crosses that figure with his subscriber base of over 128 million.
For a sense of scale, a Super Bowl commercial for 30 seconds costs about $7 million. MrBeast would need to bring in about $25–$30 million a month through sponsorships to justify the number of views he has. His is a unique case of the supply (of attention) outpacing the demand (for it). The guy has outgrown the advertisement industry focused on YouTube.
All creators toe a fine line between underpricing or overpricing their ad slots because the conversion rates can vary. MrBeast tried releasing his burger line through ghost kitchens a few years back to diversify revenue streams. That has proven a bad bet, ending with a $100 million lawsuit.
In some sense, it shows the crux of the problem with the internet today. Two decades after advertisements began popping up on the internet, we still do not know how to accurately capture value from eyeballs without mining hordes of personal data. Most Web3 social products we see in the market attempt to fix this challenge. (Or they claim to be working towards it)
Over the past weekend, Friend.tech began circulating on Twitter as brand new Web3 social product. I was keen to use it and see what the fuss is about. Several things are novel about it.
Firstly, it is built on Base, so transactions are incredibly affordable once you bridge over to the network.
Secondly, it is not an app that you download through the App Store. You simply save and interact with it as a web page on your home screen.
Lastly, it sets up a wallet in under a minute. I’m unsure where the keys are saved, but I presume it goes to your iCloud.
You sync your followers from Twitter and allow people to purchase ‘shares’, which rise exponentially, with more people buying them. They can then be used to access a token-gated chat where the creator can share various things. What likely excited folks from crypto-Twitter about this ‘social’ app is its allowing anyone to trade other’s shares. What does that even mean?
Say you are someone famous like Cobie with over 740k followers on Twitter. You could bet that his fame would translate to his ‘shares1’ appreciating on Friend.tech. The buyers on the app are betting on the clout a person could have over time. This clout is measured financially in the app on the basis of how many people own shares in a person. The higher the number of people owning a share and partaking in your closed chat, the “higher” the value of the (hypothetical) shares people own in you.
Cobie’s shares went from being worth $400 to $5000 at their peak – and they have now crashed back to sanity. An ecosystem of price trackers for these shares has since emerged.
Trading on someone’s fame is not novel. We had Bitclout in 2021. Chamath Palihapitiya touted it as the next Bitcoin for a brief period. Bitcoin is down 34% now compared to Bitclout’s 94.5% since he sent that tweet. Before that, there were social tokens. Alex Masmej and Kerman Kohli were pioneers in testing the probability of tying individual success to a token.
Friend.tech stood out to be novel because
It captured the attention going to Base’s nascent ecosystem
It allows anyone to become an asset and get royalties. Why bother with issuing NFTs when you can trade your reputation and..
It exploited a pre-existing social graph (on Twitter) to create a financial platform (in the app). Users syncing Twitter get a notification each time a friend from Twitter signs up to the app.
All of this is genius. The question I had was how much of it is sustainable. History offers some clues. In 2017, Earn.com had a campaign that allowed people to pay for a response from someone they’d want to hear from. For instance, you could pay $100 to receive a response from Ben Horowitz. It was quite a useful tool in theory, as it would deter spam and ensure monetary benefits that justify the time spent.
The problem with such a model is that it discounts the value of social capital. Putting a per-hour cost for Ben’s time, for instance, makes sense until you realise he could be making a billion dollars off a cold inbound e-mail from the next Adam Neumann. The internet’s beauty is in how accessible it makes people. Putting individuals behind a paywall is a bug, not a feature. Earn.com was eventually acquired by Coinbase.
We may be tinkering with a flawed idea. It may not be ideal to make it possible for retail participants to invest in an artist at all. The reason is quite simple. Audience attention is not retained in the long run by most creators. Even if you do retain them, as an audience ages, its preferences will evolve.
Having your audience vested in your success yields undue pressure on the creative process2. Sources of capital need to be patient while creators figure out what they are trying to do3. This may often not be true with retail investors looking to make a quick buck.
The fundamental reason why products like Friend.tech cannot scale is because attention is a scarce asset. We like to rotate out the sources of content we consume. It is the reason why we seek music or movie recommendations from friends. Content becomes stale over time. A user looking to sell their shares in a creator eventually causes sell pressure on the asset.
Large numbers of users leaving a chat, would mean those remaining in the community would eventually be sitting on losses. A reality many Bored Ape holders are slowly getting accustomed to.
Imagine running a chat full of resentful shareholders as a community. Most founders who have launched tokens have had to deal with that ordeal. The difference is that the individual has now tied their reputation to the equation. You have to engage with the community and keep it going even when you no longer wish to as your reputation is tied to the asset’s price. Artists (or creators) would be stuck doing crisis management instead of making content.
I may be overthinking this. It is quite possible that the gap Friend.tech solves for today is that of volatility and not creator monetisation. Crypto volatility is at the lowest it has been in a while. NFT prices are getting decimated due to bad loans. Markets need more volatile instruments to stay engaged. Trading the possible interest of retail participants joining a chat run by a Twitter celebrity solves volatility at its crux. It is just another casino, like Rollbit.
If you think about it - the products that are seeing traction in the current web3 environment are the ones offering incredible volatility. Meme assets, on-chain casinos, and now Friends.tech. This makes me believe, that the first iteration of a “truly social” web3 product that scales, would be a trading product and not a content platform.
STFX fits that role quite elegantly today. It is a platform that allows users to pitch trading ideas and raise capital from other retail users to join in on the trade. These primitives would use a mix of on-chain data and DeFi primitives to facilitate an new class of social-trading products that allow anyone to partake in a trade idea.
These platforms will not solve for content monetisation. Instead, their focus would be on facilitating crowds to partake in a trade in the most transparent way possible. DeFi product suites have matured enough to allow social products to be built on top of them. My thinking is that the first generation of “social” apps would become crucial on-ramps for DeFi in the next year. We have been speaking to a number of teams building towards that vision.
At its core, Friends.tech taps into some very human desires. A risk appetite, the desire for clout, and our aspirations of being in a community. When people buy "shares" on Friends.tech, they are buying the possibility of being in a room with their favourite Twitter celebrities. If the developers were optimising monetisation (for creators), they would have created a subscription model in the product. Instead, it uses a token-bonded curve designed to induce volatility in the pricing of the shares.
It is still early days for Friends.tech. My thinking of creator share ownership may be entirely flawed. A few decades back, talking to strangers on the internet was weird. Today, most couples meet on the web. We take rides on Uber without knowing who the drivers are. Most of us rely on Google Maps more than we have trust our own sense of directions. The tools we use, mould our behavior.
It is not common for users to “own” a share in their favorite creators yet. But who’s to say that may not change in the future. There may be a future where the next Taylor Swift bootstraps an initial concert by selling equity in her brand. And those brands, could be worth billions of dollars a decade on. The tools needed to enable it are here today. Consumer adoption of these tools may take a while as steep learning curves are involved and the laws may need changing.
Reading Anthro-vision,
Joel John
Note: Credit to Adrianleb from LobsterDAO for the title of this piece.
Part of what makes the product flawed is that there is no legal recourse for a “share” in this context being worth nothing. Creators can pump and dump their own shares as they please.
This interview by Rick Rubin is a good watch on the creative process.
The creator economy and early stage startups are similar in that both undergo periods of creative destruction and pivots. It requires sources of capital backing such endeavors to be tremendously patient.