Table of contents:

1. 1. The dream and nightmare of building a social network
2. 2. Dynamics of the startup economy
3. 3. Dynamics of the attention market
4. 4. Case Studies
5. 5. Summary

The dream and nightmare of building a social network

Social Networks can improve the world. They promise to engage us with content we find enjoyable, to enhance democracy, improve information gain.

Existing Social Networks however centralize power, which is the antithesis to democracy as well as untarnished information flow. While social networks promised us more and deeper connections, it is arguable whether this goal has been achieved. It is arguable whether all of the large social media platforms leave their user better educated, with better mental health, and more confident, loving, and happy after using their systems. We must be careful with the psyche of people at a large scale. At locality, we believe that physical proximity is a crucial aspect of building truly social networks. That is why Locality Social Cloud contains Geo Features.

Existing social networks with their business model have made people addicted, polarized, extremist, and lonely.

This paper states that “the PIRUS dataset shows a 413% rise in internet playing the primary role in the radicalization process for those under the age of 30 compared to the previous decade. “

Because communication structures human societies and the structure of human societies structure individual lives, to some degree of their participation, good communication structures are an imperative asset to a flourishing humanity. Since every single one of us shares the same planet and universe, the actions of each individual can indirectly affect any other individual’s life.

It is important whether we share common ideas and values. If we do, our interests are aligned and we can act together towards some greater goal at a large scale.

Digital Tooling should enhance life. It should genuinely connect people, genuinely teach people, and genuinely improve people’s mental health. Developing new kinds of communication structures will get us out of the current era of mass psychosis and perceived insanity.

These things are already clear to many people. But the solution is not. And only a few manage to navigate the obstacles that come next. And that is how many grand ideas land in a tar pit.

Dynamics of the startup economy

According to this statistics, startups still have a failure rate of more than 90%. The average cost of starting a business is 40.000$. Combining team problems, marketing problems and lack of product demand, we get 74% of the combined risk of startup failure.

If 90% of startups fail, then why did global venture funding total to 66.5 Billion Dollars just in Q3 of 2024?

A startup is scalable. Scalability means you have some product at a low margin cost that produces a lot of value. Furthermore, your startup should be in the exponential class of growth; Anything else is a small business, not a startup.

Exponential businesses roughly fulfill the following stochastic differential equation:

f = f’ + dW,

where dW is some noise that represents unforeseen non-chaotic random effects on your startup, f means the cumulative value of your startup and f’ the value growth rate. The solution to this differential equation is a geometric brownian motion, a stochastic variant of the exponential function.

For example, a social network would fit this equation, IF and only if, the users themselves act as distributors of the social network; Put differently, once a user consistenly invites more than 1 other use to the social network, congratulations: You are now in an exponential class of growth. If you do it well now, you can go places.

And if you built your startup with the Locality Social Cloud, you will not randomly go broke.

According to a joint study by the National Venture Capital Association and IHS Global Insight, venture capital backed revenue accounts for 21% of U.S. GDP and 75% of these companies could not have existed without a strong venture-capital-network.

Silicon Valley took hold of the worldwide market through strategies like ‘Blitzscaling‘ and Monopolization. According to Peter Thiel, according to some people the Don of the Silicon Valley Mafia, startups should aim for building monopolies. This thinking is widely spread in Silicon Valley. This was summarized in the catchy slogan ‘competition is for losers’. The argument goes as follows:

Capitalists don’t like competition, because competition competes all the capital away. Capitalists like high margins. You should rather aim for a monopoly in a niche market than being subjected to comparability, which reduces prices. Building companies is about building something unique: Something different.

Thiel argues that big tech companies like Google obfuscate their monopoly by making the market seem larger than it is; Google argues, they do not have a monopoly in ‘search’, because they are ‘tech’ companies that compete with giants like Apple and Microsoft etc.

Furthermore Thiel argues that entrepeneurs have the tendency to make their ideas more special and unique than they really are: ‘We are the only chinese restaurant in town XYZ’ is what one would say. But maybe they are just competing with all other restaurants.

A particularly convincing example Thiel gives for this pattern is the flight industry. He argues that all flight companies combined, with a totaled turnover of more than 500 billion annually, have less profit than google with just a fraction of the turnover; Because they all compete. Anybody can buy planes. But only google has all your data and the google-infrastructure and the google algorithm.

There are multiple ways to build monopolies. One of them is a technique that was used by most existing large social media companies, as well as seller-buyer-platforms: Network effects.

They find a way to aggregate both sellers and buyers (for example in the product categories of ‘transporation’ in the case of Uber or the product category of ‘attention’ for social media companies) and once the lock-in is complete, they enshittify their apps and make everything expensive. Up until that point many of them operate at a loss to ‘catch’ the market.

Another, favoured way, is just with superior technology. This was the case for early Google. If your technology is really superior and next level, based on patents and cutting edge, you even get constitutional rights to build a monopoly: That is what a patent is. Monopoloies based on better technology are encouraged to encourage innovation.

Oncy the monopolies are reached, these companies lobby governments for regulation. Regulatory moats will make it harder for future competitors to come up with the resources to get past the initial regulatory hurdles, stifling innovation and competiton. In this sense, many regulations are the extended arms of monopolists.

Going against network effect is very difficult. We will later in this article explore, how the existing social networks went against the network effects of their times.

But next, we will explore how tech companies use habit-creation as a tool to keep their users hooked, to strengthen their existing network effects and to create a habit-moat that further discourages users from leaving their platforms.

Dynamics of the attention market

According to this source, users spend 87% of their time in 5 apps and 97% of their time in 10 apps. 75% of downloaded apps are never used again.

Former Google and Facebook tech lead Patrick Shyu argues here:

„You can probably assume that most user behavior is so glued to these social Networks like YouTube and Instagram that people just don’t want to go anywhere else. They may visit your website for, say, one minute and then they will never come back. So, within that short amount of time, you need to show as much value as you can.“

— TechLead

That’s no coincidence, as we will explore. Behind the scenes of these large networks you got so-called attention engineers working on creating user-habits. TechLead further elaborates the problem this creates for new digital services:

„And my concern is, when you go out and you create your app or independent website, you’re trying to take people off of these incredibly sticky social networks where people enjoy spending their time. They don’t wanna leave these platforms. And that’s sort of evidenced by most people downloading 0 zero apps per month, evidenced by people spending 87% of the time in apps, instead of 13% on the web, visiting your potential website.“

Existing large technology companies know about the power of habit and use it to their full advantage to create incredibly sticky apps, by deliberately crafting user-habits. That’s the reason 10 apps share 97% of users’ attention. The power of habit is illustrated by the following little story:

Our “QWERTY” keyboard layout system was designed by Christopher Sholes in 1868 and had to take into account the mechanical limitations of a typewriter when laying out the keys. At the same time, the “QWERTY” system is not optimal; our fingers travel up to several meters of distance too much every day due to its suboptimality. However, every attempt to establish a more efficient alternative has historically failed due to the force of habit.

And while the story of the “QWERTY”-System may be a historical quirk, other examples show the deliberate use of habit crafting that companies engage in.

Google paid Apple $9 billion to be the default search engine on the iPhone. They know that users operate their browser’s default search engine out of habit and that their business model in the search business is more vulnerable than it may appear to some. Credit card companies often even offer gifts to their new customers because they know they have a very high customer lifetime value due to the habit-forming effect of a credit card. Amazon Prime, with movies directly on Amazon, is incredibly valuable to Amazon because it ties its customers to Amazon through a habit-forming effect. In particular, to increase the perceived usefulness of the habit, Amazon displays competitor prices and products. As a result, Amazon thus establishes itself in the long term as a habit-forming solution to the need to buy something on the Internet.

The simplest model of a habit consists of “Trigger. Habituated action. Reward.”.

The first goal of attention engineers is to find a trigger that happens often throughout the day and create using the app as a habituated action.

“Products that successfully create habits alleviate the customer’s pain by laying claim to a certain feeling. To do this, product designers must know the inner triggers of their users — more specifically, the pain they want to fix. […] The ultimate goal of a habit-creating product is to alleviate the customer’s pain by making an association so that the user sees a company’s product or service as a source of relief.”

• Hooked: How to Build Habit-Forming Products

Triggers could be: A certain time of day, a certain feeling, an external stimulus like a sound, a certain thought, entering a certain environment, etc. etc. A very specific trigger could be: You sit on your Strandmon chair after work and listen to some Jazz. As an external stimulus, you can initially tap into existing user habits like checking their email or WhatsApp messages. These are the channels through which you can send an external stimulus trigger that causes the user to use the app.

Tinder wants you to open it up whenever you start to feel a little horny. Twitter wants you to be angry. Facebook wants you to be bored. YouTube wants you to open it up when you are afraid of silence. However, not all triggers need to be internal. Setting a clock to a specific time of day to go to the gym could be an external trigger. Planning to go to bed is an external trigger that causes you to brush your teeth. Your clock in the morning may cause you to start your morning routine on autopilot.

Once you have selected your trigger, you have to think about the value you can provide to the user. The perceived value of the reward is a significant factor in habit formation.

Traditionally, social media apps have aimed for multiple kinds of rewards: Status, attention, social opportunities, fun, pain relief, escapism, knowledge, and money. Status, attention, and money are rewards to creators, while fun, pain relief, escapism, and knowledge are rewards to consumers given by creators.

Locality Social Cloud shares content and users across apps. Through this, you can offer users initial content and enhance the reach of existing content. This can give creators more confidence to invest time and energy in your early social network; as hard as it sounds, their content can outlast you.

Any app that does not create user habits will die in the long term. Any app that does not construct user habits does not solve a problem for the customer and does not enhance their life. Because if it did, once they encountered a triggering situation or state of mind, they would think of your product as a solution to their problem or enhancement to their lives. Naturally, apps that create daily habits are more viral. But even apps that are seldom used should construct habits.

Case Studies

Facebook was initially been launched at the local university of Mark Zuckerberg with a LAMP-Stack. For each new university, a new instance was started. Being limited to one single university circumvented the problem of scaling, which was ‘solved’ later, after raising millions of dollars. Facebook allowed users to usurp their MySpace content.

According to the founder of Instagram when he started developing there were like 20 competitors developing similar apps. He went the extra mile to implement GPU-accelerated photo filters. Additionally, he put speed first and did tricks to hide delays for users in stuff like uploading. The image was being uploaded in the background while you spent time on the ‘finalize’ page.

TikTok started as an AI-driven News-Aggregator app. Its unique advantage over Facebook and Instagram was being mobile-first, which allowed it to create a tremendous StoryBuilder named CapCut. This StoryBuilder allows TikTok users to create high-quality content, which severely widens the bottleneck of good content on a social media app.

While all others are distracted by AI, you can find the next crack in the existing social landscape. Locality Social Cloud is the Excalibur in your hand and allows you to create a tech advantage that is unheard of in the existing ecosystem. Through event synchronization, you can bring the capability of smartphones to produce content to their theoretical limits.

Central to a social network is its distribution strategy: A social network is nothing without users that fill it with life. You can do guerilla marketing like distributing flyers at your local university. You can identify key groups and throw a launch party. If you are an influencer or thought-leader you can invite your existing community on other platforms. Get creative. The key point is to have a critical mass of users that simultaneously start using the product. If 100+ people simultaneously start using your product, you have some idea based on your data, whether you are ready for scaling or must improve on your product first. You will have some idea whether the users like your product or not.

Locality Social Cloud took writing Social Networks down to earth. What has traditionally been considered a technologically difficult endeavour considering scale, software architecture, encryption, synchronization, live-features and collaboration features, is now simple.

It is now on you to take this technology and mix it with your domain expertise, unique insight and network to do your part in creating the social ecosystem of tomorrow.

Summary

Existing social media companies create habit-barriers that are difficult to break through.

Traditionally, technology has been a key limiting factor in the development of new social media, making their development costly. As social networks have become more sophisticated, more product management is needed between initial beta and final product. With Locality Social Cloud you can iterate rapidly and have access to existing content via content syndication. Creating a successful new social media app is now a matter of product management and distribution strategy.

Best regards, Malte