The Economic Case for Using Direct Payments in Social Media
Anyone Can Publish Content
The raise of digital channels, especially the large social media platforms, have fundamentally changed how content is distributed and consumed in modern society. Although the internet has enabled anyone to become a publisher of content with the ability to reach nearly everyone in the globe without needing significant investment in printing or broadcasting infrastructure, it has also caused irreversible changes in economic and business models, as well as societal changes in how content is sought and consumed.
One of the main change the digitization and emergence of social media platforms as distribution channels for content, is in relation to how the content is paid for. In the recent past, consumers paid directly for newspapers, magazines, and books either through individual purchases, or through subscriptions, while the only content primarily paid by advertising was commercial free-to-air TV programming.
Advertising Dwarfs Other Sources of Income
Although many news outlets still maintain subscription revenue base, most content producers rely mainly on advertising. It is estimated that the global digital advertising revenue will amount to $627 billion[1] in 2023, nearly four times as much as the global subscription e-commerce revenue of $166 billion[2]. And most ($491 billion) of the digital advertising flows through the largest social media platforms and video sharing sites.
There is basis in economic theory that can explain the situation where few of the largest social media companies control most of the value that is generated by content and people’s attention.
Platforms Increase Polarization
As Robert H. Franck observes in his 2021 New York Times article titled “The Economic Case for Regulating Social Media”[3], basic economic theory tells us that the price of a good or a service is determined by the marginal cost of producing it. And if the marginal cost is virtually zero, which is the case when distributing digital content, then the price at which they are sold will also approach zero. This will then explain why content has migrated to the digital aggregators, who can earn money by selling targeted advertising and exploiting the vast database they have of their users.
The key then, for the social media platforms, is to try and keep their users on their platform as much time as possible, because it directly impacts the advertising revenue they can earn. And to do this, they are inclined to use algorithms that utilise negative emotional triggers to maximize engagement by their users, which then drives ever increasing polarisation across the globe.
The UNITT Solution
A move away from a centralized, advertising-led business model to a direct micropayment environment as proposed by UNITT can have several economic and sociological benefits. These include:
a) Direct Monetization for Content Creators: Tokenized payment system can enable content creators to receive direct payments for their work, fostering a more equitable distribution of revenue. Micropayments can allow users to pay for their content consumption with direct, small payments, creating a more sustainable income stream for creators.
b) Incentive for quality content: By introducing pay-per-view option for any type of content, creators have an incentive to create higher quality content as they can price it accordingly to reflect the utility the consumer will receive, as opposed to just having mass-market appeal.
c) Enhanced data privacy and security: Blockchain-based payment systems inherently have enhanced data privacy and security features. By decentralizing transactions and removing intermediaries, users can have greater control over their personal data, mitigating privacy concerns.
d) Global accessibility and financial inclusion: Payment mechanism based on tokenization and cryptocurrencies have the potential to foster financial inclusion, enabling users in underserved regions to participate in the digital content economy without the need for traditional banking or payment card infrastructure.
The internet needs a method of payment designed for it. Not only will it make business fairer for those who create all the content within it, it might also make the world safer.
[1] Statista, “Digital advertising spending worldwide from 2021 to 2026”, December 2023
[2] Businesswire, “Global Subscription E-commerce Market Insights and Forecast (2023–2028)”, November 24, 2022
[3] New York Times, “The Economic Case for Regulating Social Media” by Robert H. Franck, 11 February 2021