The evolution of social media part II: From public, centralized to private, decentralized social networks

Abstract

The purpose of this study is to provide a roadmap through past social media networking trends and structure, in the hopes that it will shed light on the future of social media networking, and the impact it will have on business and campaign planning.

In this report, we examine how social media culture has transitioned through the dueling priorities of public and open sharing versus data privacy and anonymity. Drawing attention to the connection between digital finance and the development of online social networks, we discuss how the emergence of PayPal launched an era of shrinking user-anonymity. We then survey some of the controversies around Facebook’s insistence on creating a “real identity” network and the subsequent data leaks. Finally, we return to digital finance’s next evolution, cryptocurrencies, and discuss how blockchain has influenced the development of decentralized social networks.

Background and methodology

As the internet grows, the need for privacy and anonymity has dueled with the drive toward open conversation and human connection. At its inception in the 1970s, the internet was a single, open, transparent network for academics and researchers to share ideas. Robert Taylor, an early internet pioneer credited with inventing the internet, said in a 1999 interview with The New York Times, that the first institutions on the network were the US Department of Defense, the University of California at Berkeley, Stanford University, and the University of California at Los Angeles (Markoff, 1999). (Figure 1, Map of Early Internet) With these legacy organizations connecting to the network, and because the community was so small, neither privacy nor anonymity was needed. Every researcher and scientist that connected was inherently trusted. They spoke to each other openly, sharing research publicly and without anonymity.

^{Figure 1: Map of early internet, MIT.}

Around the 1990s, as more users connected, the expanding internet ecosystem elicited a paradigm shift. When it came to trust and public sharing, usership swung towards pseudo-anonymity. In this new era, users began adopting nicknames in chat rooms – ones that could not be connected to real identities easily. This continued until the early-2000s, when the emergence of PayPal, an online payments company, and the explosive growth of social media platforms challenged online anonymity. Making digital financial transactions required real identities and personal information. Social networking sites began mandating real names when registering accounts. Facebook was the first of the social networking sites to create real-name policies, and eventually, users became comfortable sharing identifiable, private information online. This led to a resurgence of the openness and transparent culture that existed when the internet first emerged.

However, the return to openness online came with unprecedented consequences the second time around – data leaks, identity theft, and controversies over government surveillance. As a result, the last five years have witnessed growing privacy in online interactions, and users are migrating to private apps and closed communities. As we look forward, the emergence of Web 3.0 could serve as a middle ground, combining the openness of the original internet with preserving users’ demands for privacy.

In this report, we examine the circumstances and structures that motivated the paradigm shifts around online cultures of user sharing and privacy. We also look at how network infrastructure is being adapted to accommodate changing attitudes and concerns around user privacy, to forecast future network structures. This understanding, in turn, can shape the use and integration of social media and advertising fund allocation for positive business outcomes.

To conduct this inquiry, we use social media analytics from Infegy Atlas and numerous other archival sources. We organize our findings chronologically into four sections:

1. PayPal and Facebook: linking users’ real identities and online personas
2. A reckoning around privacy
3. Facebook’s “lost generation” moves toward encrypted content
4. Web 3.0: The marriage of privacy, openness, and ownership

1. PayPal and Facebook: promoting a culture of “real identities” over online personas

As the academic-driven internet expanded beyond US legacy institutions like Stanford or UCLA, there was no structure to ensure people associated their online activity with their real names. As more people got online, the overall percentage of internet traffic associated with trusted institutions decreased, and eventually, the internet became a more anonymous place. Verge journalist Russell Brandom writes that after the internet’s early expansion from its research-focused roots, “...hardly anyone knew who you were online. Handles replaced real names...” (Brandom, 2017). While the internet had been available to researchers and academics for around 20 years, as a generalized, popular network, it was still in its infancy, and people generally felt skeptical and distrustful of it (Novak, 2013). Users weren’t required to connect their real names to their online personas, so they didn’t. This changed with the launch of PayPal in December 1998.

Peter Thiel, Max Levchin, and later Elon Musk created and launched PayPal to digitize financial transactions. At this point, ecommerce was just taking off, but most users didn’t feel comfortable putting their real lives (and credit card numbers) online for payments. PayPal convinced customers to share personal information like email addresses, bank account numbers and credit card information in return for verified, credible, and secure transactions.

PayPal’s strategy worked. According to The Founders: The Story of PayPal and the Founders Who Shaped Silicon Valley, “PayPal had become the most trusted person-to-person payment service on the internet” (Soni, 2021). Infegy Atlas data confirms this sentiment, where Trust has been the leading emotion associated with the brand over the last 15 years (Figure 2, Infegy Atlas - PayPal and Trust, 2022). Moreover, 45% of posts within that same timeframe reflect PayPal’s convenience and ease of use. The trust and convenience associated with early PayPal helped usher in a culture of willingness to share real names and identities online. This paradigm shift would eventually become the basis of Facebook’s founding.

^{Figure 2: Analysis of PayPal-related conversation showing Trust as leading emotion; Infegy Atlas data.}

At first glance, the creation and launch of PayPal appears divorced from social media. However, the same people who founded PayPal also appear in Facebook’s origin story. Peter Thiel provided $500,000 of the early startup capital used to launch Facebook (Levy, 2022). He remained on Facebook’s Board of Directors until 2022. Reid Hoffman, also an associate in the operations of early PayPal, founded LinkedIn – another social network that requires openness and real identities. Hoffman also invested $40,000 in Facebook in 2004 (Thomas, 2012). These influential individuals carried their legacy of transparency into their new social networks and the policies that shaped them. The first of these was Facebook’s controversial “Real Name” policy.

In her whitepaper, “The Politics of ‘Real Names,’” Georgetown professor Danah Boyd explains, “Facebook was launched as an alternative to pseudonymous MySpace” (Boyd, 2012). Early Facebook users viewed it as an extension of campus life, and Facebook’s initial structure of only allowing verified college email addresses supported this. This validation made users more comfortable putting personal information online. Founder Mark Zuckerberg remarked with glee in Facebook’s early days that over one-third of new users were comfortable using their real telephone numbers on the platform, suggesting a great deal of user trust (Land of Giants: “Facebook Gets a Facelift,” 2022). Data from Infegy Atlas notes that this real name practice was initially very popular, with a 64% positivity rate in 2009 (Figure 3, Infegy Atlas - Facebook Real Name Policy, 2022). Infegy Atlas’ sentiment analysis shows that early users’ trust in Facebook ranked as a leading emotion, with around 20% of posts showing that emotion from 2007 through 2009 (Infegy Atlas - Facebook Trust, 2022).

^{Figure 3: Sentiment analysis of conversation related to Facebook’s real-name policy (2007-2022); Infegy Atlas data.}

US Naval Academy Professor and privacy advocate Jeff Kosseff contends that a commitment to radical transparency was at the heart of Facebook’s policy on single identity (Kosseff, 2022). However, the escalation of this practice – from a campus social networking system – to a massive, global networking site where users from all over the world shared personal and real identities would never have occurred without the impetus provided by PayPal. University of Virginia professor Lana Swartz reasons that financial, media, and communication spheres are inextricably linked. In her book, New Money: How Payment Became Social Media, Swartz writes, “Money has always been social; money has always been media. Right now, we’re reconciling it as a form of “social media” (Swartz, 2020). While the intricacies of their connectedness are beyond the scope of this report, suffice it to say that the sociology of consumership and media have deep, tangled roots. Their interconnectedness has and will continue to impact the evolution of social media.

2. A reckoning around privacy

Beginning in 2013, Facebook and the larger social media ecosystem started to lose much of the trust they had earned when they first launched due to multiple scandals involving user privacy. This exposure of privacy issues in Silicon Valley began in May 2013 with Edward Snowden’s disclosures regarding US Intelligence Community surveillance. Snowden revealed that US telecommunications and social media companies like Facebook cooperated with US intelligence without requiring government warrants. Infegy Atlas highlights this global disclosure’s global attention, noting a 352% increase in worldwide conversation around “government surveillance” from 2009 through 2014. (Figure 4, Infegy Atlas - Government Surveillance Post Volume, 2022). This event set the ball rolling on conversations and critical inquiry into online privacy – a concern that gathered urgency as social media companies began to consolidate and become social media giants.

^{Figure 4: Post Volume showing a 352% increase in conversations related to government surveillance; Infegy Atlas data.}

Another scandal began when a data scientist created a “psychology test” on Facebook to harvest user data in 2014. This data was then purchased by Cambridge Analytica, a UK political consultancy. They used it to serve polarizing political advertisements to targeted users (likely voters) in US swing states. The impact of this activity is said to have influenced the outcome of the 2016 US Presidential Election. Regardless, it became apparent that users’ data was being commodified and targeted on individual and personal levels, presenting a profound breach of privacy and trust.

While Cambridge Analytica became the best-known leak of private user data, Facebook and other large social media companies have had dozens of other leaks. In 2021, hackers, through a bug in Facebook’s phone number search tool, leaked 500 million individuals’ phone numbers into a publicly searchable database (Adams, 2021). Later in 2021, LinkedIn had a leak of 700 million scraped user accounts with a hacker putting them up for sale online (Cimpanu, 2021). The website, haveibeenpwned.com, launched in 2013 and allows users to check whether their information has been compromised. As of 2022, it revealed 11 billion hacked credentials in its database.

Infegy Atlas data reveals the volume and severity of these leaks, especially the Cambridge Analytica scandal. Infegy Atlas’ linguistic analysis portrays profound negativity around “Cambridge Analytica” (Figure 5, Infegy Atlas - Word Cloud with Cambridge Analytica, 2022). Furthermore, Infegy Atlas notes how conversations in 2018 pertaining to Facebook shifted from generally positive to generally negative as news of the scandal spread (Infegy Atlas - Facebook Sentiment, 2022). Ultimately, Facebook became the bookends for an era of open network and public sharing: it pioneered a culture of real identity on social networks and became the impetus for closed social networks and encrypted content.

^{Figure 5: Word cloud around negative topics relating to Facebook; Infegy Atlas data.}

3. Facebook’s “lost generation” moves toward encrypted content

In the wake of the scandals discussed above, Facebook users, especially younger ones, slowed down their interaction with the site. Reporter Amir Efrati, writing in The Information in 2016, provided data demonstrating that users reduced the amount of personal information they shared by 5.5%. This reduction occurred from mid-2014 to mid-2015, continuing to a 15% year-over-year decline (Kastrenakes, 2016). The downtrend in original content-sharing on Facebook had devastating circular network effects. Facebook uses organic, user-generated content to keep other community members on the site. When the original users stopped sharing, the other Facebook users had fewer reasons to return.

This content problem has continued to escalate into the present day – to the extent that a predicted 45% of teenage users will drop between 2021-2023, essentially creating a “lost generation” of Facebook users (Heath, 2021). Infegy Atlas data reflects this drop over the last decade: In 2011, people aged 13-18 made up the highest percentage of users conversing about Facebook on social media; in 2021, that same demographic made up the lowest percentage. (Figures 6: Infegy Atlas - Graph Showing Changing Demographics of Facebook Discussion, 2022).

^{Figures 6: Infegy Atlas Graph showing how the demographics of people discussing Facebook has become older over the last decade.}

As younger users post and share less on Facebook, they started moving to other, more private-facing and less scandal-prone networks. Snapchat seems to have claimed the youngest social media user demographic. Infegy data shows that 13-18-year-old conversants mentioning Snapchat online had around 100% growth from 2017 through 2020. (Figures 7 and 8, Infegy Atlas - Graphs Showing Changing Demographics of Snapchat Discussion, 2022).

^{Figures 7 and 8: Demographics of users discussing Snapchat have become younger over the last five years; Infegy Atlas data.}

Attractive features that distinguished Snapchat from Facebook were its pioneering, self-deleting messages and a less intrusive ad network. Other apps and platforms have created their own variations that allow for private communities. For example, apps like WhatsApp and Telegram offer end-to-end encryption, while Discord facilitates closed communities. A commonality between these increasingly popular apps is that they have decentralized communities that prioritize smaller, more intimate social groups versus content virality. This increased focus on online privacy heralds Web 3.0 as the next logical progression of the internet’s development.

4. Web 3.0: The marriage of privacy, openness, and ownership

Web 1.0 was the original internet of static, text-based websites. Web 2.0 is today’s internet, where users can interact with dynamically changing content hosted on centralized servers controlled by large companies. In this final section, we unpack how the desire for user anonymity and user-ownership of data via decentralization motivates and shapes the future structure of Web 3.0.

Cryptocurrency design mirrored in the foundations of Web 3.0

We previously discussed how innovations in digital finance (PayPal) directly impacted the social networking policy of Facebook and other social networking sites of its era. With Web 3.0, we once again see financial systems perpetuating changes in social media structure and culture. This time, cryptocurrency design and the drive for decentralized finance are set to become the blueprint for Web 3.0.

Decentralization and anonymity forms the underpinnings and core of cryptocurrency design – inspired, in large part, by the libertarian leanings of its early creators. Distributed ledger technologies, like blockchain, facilitate how users acquire, buy, and sell cryptocurrency – independent of centralized funding monopolies like banks. According to Swartz, “unlike cash, every Bitcoin transaction is appended to a public ledger, the blockchain. To protect the identities of payers and payees, each transaction is encrypted,” (Swartz, 2020). In other words, instead of linking identities via personally identifiable information, transactions are correlated with pseudonymous placeholders that require an additional step in order to link to someone’s real identity.

This structuring builds a veil of anonymity into the cryptocurrency system – one that takes significant time and resources to reverse-engineer and reveal the identity behind the transaction. Ultimately, the type of anonymity granted by blockchain-based ledgers protects the privacy of the individuals in the cryptocurrency transaction.

The ideology and structures of decentralization perpetuated by cryptocurrency have already begun to influence social networking. This movement to scale decentralized, encrypted communities into the overall network is paving the path to Web 3.0 and generating much online conversation. Social listening data shows the meteoric conversation growth around “Web 3.0,” recording a 1200% increase in post volume on Infegy Atlas over the last five years (Figure 9, Infegy Atlas - Showing Huge Growth of Web 3.0, 2022). Ultimately, Web 3.0 could pave the way to a more anonymous, decentralized, and user-owned internet.

^{Figure 9: Post volume depicting explosive growth of Web 3.0-related discussion; Infegy Atlas data.}

An era of platform decentralization

As mentioned above, new social networking platforms are utilizing decentralization technologies and design – the most notable example being Mastodon. Mastodon is an open-source social network founded in 2016 by a collective of programmers who allowed free use and adaption of their program. While it does not utilize blockchain, Mastodon applies decentralization to create a federated, or distributed, social network (Figure 10, Federated Networks Schematic).

^{Figure 10: Illustration of a centralized versus a federated social network. Centralized networks have one central structure that controls all the ancillary nodes. Federated networks are distributed without one central structure; Infegy}

Using Mastodon’s publicly available code, anyone can create an instance. These instances talk to each other, but there is no central organization to regulate online behavior or enforce a “real name” policy. Mastodon users view themselves as an alternative to centralized organizations and are averse to a centralized company managing them. Case in point: Infegy Atlas data shows #deleteFacebook as a top performing hashtag around their conversation (Figure 11, Infegy Atlas - Word Cloud Around Mastodon Related #DeleteFacebook Conversation, 2022).

^{Figure 11: Linguistic analysis of common hashtags in the Mastodon-related conversation; Infegy Atlas data.}

Thus far, decentralized social networking sites seem to facilitate users’ desire for unregulated, free speech – particularly regarding political perspectives. Truth Social, a new social network, funded in large part by former US President Donald Trump, is essentially a Twitter copycat. Social listening data shows 714% post volume growth in online conversation relating to Truth Social, with post volume still trending upward in July 2022 (Figure 12, Infegy Atlas, Truth Social Growth, 2022). Since Truth Social uses Mastodon’s open-source code, its popularity is likely to draw more attention to the original framework of Mastodon (Eddy, 2022).

^{Figure 12: Trends on conversation around Truth Social continues upward; Infegy Atlas data.}

More decentralized social networks have emerged in the last five years. Numerous alternatives have hosted decentralized communities, not tied to larger Silicon Valley tech companies. These networks have not had the staying power or appropriate venture capital funding and most have shut down shortly after their founding.

Reclaiming user-ownership of content through NFTs

Many Web 2.0 critics accuse traditional social networking as centralized and opaque. The minute a user clicks “Share,” they lose ownership of that data, as it gets uploaded onto a centralized server controlled by a larger tech company. Amid the Cambridge Analytica scandal, LA Times columnist David Lazarus wrote that user data “belong[s] to Facebook, and the company will enrich itself by doing with it whatever it pleases” (Lazarus, 2018). This situation is not unique to Facebook: other centralized networks exhibit similar control over user data and content.

Web 3.0-based networks could solve these issues by providing a structure for content creators to own and control their data and intellectual property. One such solution is the use of blockchain-based technologies and the creation of non-fungible tokens (NFTs).

An NFT is like a virtual provenance of ownership that anyone on the internet can verify. For example, a photographer could create and tag their work with an NFT before uploading it to the internet, allowing the original photographer to maintain copyright control over the original work even as the image spreads across the internet. Rebecca Carroll writes in The Fordham Journal of Intellectual Property, Media, and Entertainment Law that the expansion of NFTs could challenge the existing copyright system and that NFT marketplaces of digital goods can “effectively enforce rights, reducing a need for government regulation,” (Carroll, 2022).

Users are clearly interested in forging a system by which they can regain control of what they put on social media. Infegy Atlas data shows that NFT-related conversation has exploded 45,324% from 2017 to the present. While much of that conversation has dipped due to the declining price of NFTs, the conversation remains highly elevated, unlike other online trends, suggesting NFTs are here to stay (Figure 13, Infegy Atlas - NFT Post Volume from 2017 through the present, 2022).

Ultimately cryptocurrency-inspired technologies are advancing to create decentralized, federated networks and how users – not social media companies – maintain content ownership. The new ecosystem of Web 3.0 presents a host of benefits and risks to both online and offline communities.

^{Figure 13: Post Volume Related to NFTs from 2017 through 2021; Infegy Atlas data.}

Conclusion

Over the last five years, the pendulum of online interactions has swung back towards a desire for privacy and anonymity. Consequently, legacy social media is already changing to accommodate this. Communities online will shift slowly from these centralized, regulated networks to decentralized worlds, linked by the autonomy and anonymity of Web 3.0. Marketers and social media planners must deeply understand these structural transformations across social networks to effectively deploy their advertising dollars.

References and sources

Infegy Atlas Workspaces and Queries

Infegy Atlas (2022), Infegy Atlas - PayPal and Trust

Infegy Atlas (2022), Infegy Atlas - Facebook Real Name Policy

Infegy Atlas (2022), Infegy Atlas - Facebook Emotion Graph (2007-2008)

Infegy Atlas (2022),  Infegy Atlas - Government Surveillance

Infegy Atlas (2022),  Infegy Atlas - Facebook Negative Keywords

Infegy Atlas (2022),  Infegy Atlas - Cambridge Analytica Sentiment Shift

Infegy Atlas (2022),  Infegy Atlas - Growth of Web 3.0

Infegy Atlas (2022), Infegy Atlas - Hashtag Analysis of Mastodon

Infegy Atlas (2022),  Infegy Atlas - Truth Social Post Volume Growth

Infegy Atlas, (2022), Infegy Atlas - NFT-Related Conversation

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