Web3 can bring new life to today’s social networks. And, they need help, with declining revenue and growing user disinterest.
Ten years ago, media company Coub launched the world’s first short video sharing social network, offering its users the ability to create and share short videos called “coubs”. The novelty has proven to be in great demand: in two years since its launch, the number of users of the platform has exceeded 45 million. The new social media format led to the emergence of projects such as Musical.ly in 2015 and Periscope in 2018.
Coub, Web3 and why it works
Although competitors had significantly greater financial resources, Coub was able to retain over 106 million users and reach over 650 million monthly views. Now, the company aims to compete for millions of creators through the introduction of NFTs and Web-3 monetization. The new trend could be decisive in the current battle between the social media giants and save them from falling revenues.
The situation is starting to change, as social networks and video hosting platforms have almost reached their end in terms of growth. The latest financial reports from major market players are irrefutable proof of this. For the first time in its history, Meta Corporation, owner of Facebook and Instagram, won less in the second quarter of 2022 than in the same period last year. Its revenue stood at $28.82 billion vs. $29.08 billion respectively. Advertising revenue fell 1.5%, while net profit fell 36%. Company officials attribute the underperformance to “weak advertising demand due to macroeconomic uncertainty.”
Google is in a slightly better position, while YouTube’s modest results were the biggest disappointment in the company’s report. The service’s ad revenue managed to grow lean 4.8% in annual terms. This performance turned out to be YouTube’s lowest growth rate since 2019. For comparison, growth rates were 84% last year and 5.8% even in 2020 during the pandemic. .
Investor doubts about the outlook for social media are best reflected in stock prices. Shares of Meta have halved since the start of 2022, from $330 to $160. Shares of Alphabet, Google’s parent company, lost a quarter of their value, falling from $145 to $118.
Latest corporate financial reports reveal sluggish growth
The Chinese company Bytedance, owner of the TikTok service, is not a public entity and therefore does not publish any financial statements. However, he seems to be doing well, since according to unofficial sources, its revenue in 2021 increased by 70%. However, the growth momentum has slowed down significantly. ByteDance saw its revenue increase by 100% in 2020. The company appears to be gearing up to address some issues, as evidenced by its abandonment of IPO plans and the start of a full-scale reorganization.
ByteDance’s main competitor – Beijing Kuaishou Technology (BKT) – listed its shares on the Hong Kong Stock Exchange in February last year. BKT is the developer of Kuaishou (Quick Hand) mobile video sharing app. The app is very popular in the Chinese hinterland, as well as in developed countries like Brazil, Pakistan, and Indonesia. The value of BKT shares increased by 161% on the first day of trading and reached HK$345 from an initial placement price of $115.
Yet prices have fallen 400% in a year and a half, with a share currently the penalty about 80 Hong Kong dollars. The case is a vivid illustration of the crisis towards which social networks and video hosting platforms are heading.
Out of the frying pan and into the fire?
American companies are trying to save themselves from the crisis by copying TikTok — Alphabet launches YouTube Shorts, while META provides the Reels service. Meanwhile, a short-video pioneer Coub.com decided to bet on fundamentally new technologies – Web-3 and non-fungible tokens (NFT).
At first glance, this may turn out to be a risky business. According to an analysis report by NonFungible Corporation, NFT market fundamentals saw a decline of 25% QoQ in 2022. Total net profit for market participants fell $2.3 billion to $460 million. Profits from resales of NFTs fell by 46%, but losses from these operations increased by 23%. The number of Google search queries on NFT-related topics has quintupled over the past six months. The conclusion is obvious: NFTs are out of fashion.
However, rumors about the death of the NFT market might be exaggerated, as the same report points out. The average price of NFTs is down just 6% since the start of the year, while cryptocurrency exchange rates have fallen 300% over the same period. The volume of search queries on NFT-related topics may have decreased, but nonetheless remained the same as in fall 2021.
Another interesting phenomenon to analyze: the volume of buyers and sellers is closer than ever with a majority of buyers – 132,000 and 100,000 respectively.
Grand View Research, which studies the NFT market, predicted that the NFT market will grow from $15 billion to $200 billion by 2030. The company’s analysts also expect the NFT market to grow an average of 33.9% year over year. another in the medium term. It looks like the Web3 vector looks quite promising.
Web3: How Watch-to-Earn Monetization Works
Switch to Web3 and introduce the Watch to win (W2E) social media doesn’t just need NFT. To make a smooth transition for its 100 million users, Coub developed the DAO based on two types of tokens. The infrastructure also includes the W2E application, NFT Marketplace, Coub Wallet and the legal mechanism ContentID.
Two types of tokens are needed to make monetization possible for creators. In the case of Coub, a token is intended to be used to reward users for watching, reposting, liking and commenting on videos. The second can be used as a utility token to buy NFTs or swap against digital currencies on crypto exchanges. Authors of “coubs” will be able to accumulate token rewards as other users interact with their works, then turn videos into NFTs and sell them.
With NFT Marketplace, video creators can finally get the monetization missing from today’s platforms through converting videos to NFT format which can then be sold. Buyers of these NFTs will be able to estimate the potential value of their coubs based on viewing statistics compiled and verified by the blockchain. This will also allow them to gauge future NFT ownership revenue that will continue to be generated with new news even after a change in ownership.
The innovative mechanisms of Web3 can open a way out of the crisis for all social media and, most likely, set an example for all these services. The “giants” of the media market could start to integrate the blockchain into their services, as they have done in the past by introducing the short video format.
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