Between a blend of concerns surrounding privacy and the ways big companies, like Facebook and Google, use user information in respect to advertising and monitoring, there are a multitude of factors that will shift people towards anti-data digital mediums.
Amid the popular Netflix Social Dilemma documentary, The recent Section 230 hearings and the Hunter Biden Facebook censorship snafu, there’s a newfound awareness about the sophisticated methods many social media companies employ to present or hide information from users based entirely on data-driven profiles. As this awareness turns into displeasure and cancelled accounts, there’s an opportunity for new firms taking an anti-data approach to fill an important void.
For investors and strategic players in the space, here are three key reasons to keep an eye on firms with an anti-data approach:
- Increased Awareness Changing Perceptions
“The Social Dilemma” film opened eyes about the depth of social media’s reliance and usage of data. It related the average user’s actions with an algorithmic machine that creates a psychological profile of each user. With more engagement, the more accurate the profile becomes. The movie detailed how social media companies are less interested in selling user data, rather than manipulating what you are shown so user actions can be profitably monetized.
This approach presents multiple problems, including the proliferation of fake and potentially damaging news stories. The algorithms used by Facebook or Twitter are not built to determine truth. Therefore, when someone engages in a fake story, they then receive more such stories, because that’s the objective of these algorithms - to drive engagement and usage without regard to the negative effects on actual people. The “time on site” and number of clicks on an ad are what matters, not the individual users’ own enjoyment or free exploration. This is an opportunity to start, partner with, or invest in platforms operating ad-free models that are built for engagement on the users’ own terms, not one designed for addictive behaviors. Leading edge companies such as Leavemark, Mastodon, Friendica and others offer a more open approach that’s not driven by ad engagement and revenue.
- Users Know they Are People Not Products
Companies need to recognize this consumer awakening and shift their monetization models in response. For example, there’s ongoing contentious “Section 230” Senate hearings that offers new legal reforms to both the censoring and spread of false information. The hearings look at a part of the Communications Decency Act which shields tech companies from litigation over their content moderation practices. If this law is altered (and even if it simply raises awareness), companies will see the change in sentiment that people expect treatment as individuals instead of sellable products or data.
One avenue for changing monetization models is to shift to subscription-based platforms instead of relying on ad monetization. Another is to offer more avenues for users to opt-in to certain amounts of permissible data usage. Taking this strategic approach places more pressure on brands to build customer relationships and connections.
- 'Woke' Capitalism and Cancel Culture are Running Hot
The current period of “woke capitalism” and “cancel culture” mean users will no longer support platforms, entertainment offerings, or products that do not serve their best interests. If brands conduct themselves inappropriately, then they can expect a groundswell of objections and calls for boycotting through Twitter and other channels. Whether fair or not, these actions make companies take notice and adjust their offerings accordingly.
Expect to see more companies adopting proactive stances to stay ahead of cancel culture. For example, the latest iOS 14 update includes an orange-colored dot on the top of an iPhone screen when an app is using the camera or microphone. Users can deny or manage these functions through their device settings, giving them more control over the app-based interactions. It’s an important acknowledgement from one of the world’s leading brands that users want such a feature that provides them with more control.
While it’s unlikely that public pressure could “cancel” Apple, the move from the tech giant does speak to the need for firms and investors to take bolder action. There is a need for platforms to embrace transparency and give users greater control over data usage through an anti-data approach that supports users instead of manipulating them.
Peter Miselis, CFA, Investor Relations Advisor: With 30 years of experience in the investment and investor relations industries, Peter harnesses the insights and perspectives gained as an equity research analyst and portfolio manager, and the deep understanding of the capital markets to be a strategic asset to his clients. Peter has developed winning investor relations strategies in a wide range of sectors with a focus on supporting management’s growth initiatives, increasing stakeholder awareness, and advancing the corporate mission.
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