How Blockchain can solve Facebook’s problem

‘If you are not paying for it, you’re not the customer; you’re the product being sold'

More people have woken up to the real meaning of this quote in the past few weeks more than ever since the dot com bubble. The recent controversies surrounding Cambridge Analytica and Facebook data leaks have raised an important question regarding the core business model around which majority of the internet companies are built. Advertisement based revenue model has been the core money-making strategy for many of the successful tech companies. Companies like Facebook and Google have intelligently built their services by letting advertisers use their service as a platform to target users based on their behavior. But, the real catch here is, the user data that is being used to organize the users based on their behavior is internal to these companies and only the categorization engine is exposed as a platform service to the advertisers. This is thought to be a win-win-win situation for all three stake holders. In this case, the platform company that makes money by charging advertisers, the advertisers who use these platforms to better know and target their users and the users who use these services for free respectively.

Let’s now take a look at the concerns associated with this business model.

1. User data, which fuels these micro-targeting engines works well for targeting users with ads. As it turns out, these targeting techniques can be applied not just for ads, but, even for maliciously intended content like fake news, articles, media, and other types that can spread false information and increase mistrust.
2. With the amount of content being shared on the internet through these platforms, we have reached a state where it is very hard to differentiate truth from popularity.
3. Users of these services are slowly losing trust and moving away from these services, thereby questioning the long-term sustainability of these companies and their business models.

This has raised real and important concerns about the defensibility of this business model. Now, how do we fix this?

I strongly believe Blockchain combined with a subscription model is the key to answering some of these issues. Let’s explore how Facebook can implement a Blockchain based solution to mitigate these problems in order to improve trust and also be able to provide all the existing services sustainably for the future.

Blockchain

The current issues for Facebook are mostly around data privacy and security. Blockchain is a great choice for solving this problem because, it is cryptographically secure and also has the ability to store an immutable audit trail of information access and makes it highly available and transparent to the users. A decentralized, secure system that is transparent and highly available will help in improving the trustability of the system.

Subscription model

Introduce an ad-free version of Facebook and make it a premium service. This model has been around for a while with many other successful SaaS products like Spotify, Medium etc. But, will this model work well for a product that has been historically given for free? Also, what percentage of the current users are willing to switch to such a model and what percentage really feel the need to pay for a service like Facebook for better privacy? These concerns may not augur well for metrics like customer acquisition and life time value of a customer. One way to solve this problem is, by introducing Tokens(since we have a blockchain now), and incentivizing the users using these tokens.

Tokens

My world view is that, privacy of user data is a very subjective topic. Not everyone likes giving away their data for using a freemium service and not everyone likes to pay for better privacy. How about getting paid for the data that you generate and own? This can be achieved using crypto-tokens. The value of these tokens will initially be driven by speculation and eventually depend on the services you expose off of the blockchain protocol you build. For example, Facebook can rewire their ad micro-targeting platform for advertisers by creating a workflow where, the user is consented whenever an entity wants access to their data. If the user wishes to give consent, both the parties exchange their information and a transaction happens from the requesting entity to the user in the form of tokens. This can be made possible using “Smart Contracts”. The end result is a win-win situation for the user and the advertiser. Essentially, this also builds an audit trail of data accesses that is immutable and secure. By storing user data across an open and decentralized network rather than individual applications controlling access to disparate silos of information, we reduce the barriers to entry for new players and create a more vibrant and competitive ecosystem of products and services on top.

Replace “Platforms” with a Protocol layer

Facebook currently allows application developers to use their “Platforms” to build applications. Instead, use the Blockchain network as a platform to drive application development. An open network and a shared data layer alone are not enough of an incentive to promote adoption. The second component, the protocol token which is used to access the service provided by the network fills the gap. Speculation is often the engine of technological adoption. When a token appreciates in value, it draws the attention of early speculators, developers and entrepreneurs. They become stakeholders in the protocol itself and are financially invested in its success. Then, these early adopters, financed in part by the profits of getting in at the start, build products and services around the protocol, recognizing that its success would further increase the value of their tokens. Since, Facebook already has a huge user base, it further increases the value of the tokens, which draws more attention from more developers, which leads to more applications, and so on. This is described by Joel Monégro from Union Square Ventures who writes

“the market cap of the protocol always grows faster than the combined value of the applications built on top, since the success of the application layer drives further speculation at the protocol layer”.

Fight Fake news by leveraging the power of Decentralization

I believe there is a reasonable scope for a decentralized network of nodes to fight against the spread of misinformation. One way to achieve this is by having a reputation score for the users for participating in validating information. On top of sharing posts, the users will also be able to validate the post for accuracy. Promoting an article that is not fake improves your reputation score and vice-verse. Besides, the users also get incentivized in the form of tokens for participating in the validation process. Essentially, this will build a network of highly reputed nodes that can effectively validate a post for its accuracy. Again, this opens up this network as a service, upon which developers can build interesting applications and services, thereby increasing the value of the token.

Conclusion

Blockchain technology is very promising. With the current shift in the business model and data handling practices of tech companies, I can only imagine the number of possibilities and solutions Blockchain technology brings to the table.

(These are completely my personal views and thoughts. So please be constructive in your feedback, without unnecessary bashing. ☺️)