The radio revolution propelled FDR to the White House, TV propelled Kennedy, and social media won this election cycle for Donald Trump. This is the observation of a right-wing blogger that crossed the half a million subscribers threshold just days before the 8th of November. Paradoxically, the success of social media could be the undoing of social media incumbents.
It is no secret that Donald Trump was generally disliked by mainstream media. Luckily for him, alternative media reached critical mass and was able to offer a competing source of commentary and news analysis. Websites like Drudge and Zerohedge now compete with The New York Times and Wall Street Journal. The elevation of Breitbart chief, Steve Bannon, to Senior Counselor for the Presidency of Donald Trump proves the point.
Social media, especially Facebook (NASDAQ:FB), Twitter (NYSE:TWTR) and YouTube (NASDAQ:GOOG) (NASDAQ:GOOGL) provided a platform for Trump supporters, a group that only a few years ago would not have had a way to voice their opinions and their support for either candidate. In short, the democratization of the ability to express one's opinion broke the monopoly of mainstream media.
Then what is the risk for social and alternative media incumbents? The stellar emergence of these new platforms is a shock to mainstream media and as can be expected, there's a reaction. Calls for the censorship of supposed "fake news" websites are printed by almost all mainstream outlets. And this is likely just the first salvo.
However, the reaction of mainstream media by itself doesn't pose a threat to the new media. Trump's administration will make sure to safeguard the freedom of expression at the new platform that elevated him to power.
The risk is one of self-inflicted censorship. Namely, that Facebook, Twitter and Google might engage in self-censorship and will try to limit the freedom of expression of bloggers, journalists and ordinary users who all share the same anti-establishment streak. Indeed, conservatives have long complained that Facebook is censoring some of their posts. Twitter is apparently shutting down accounts of some of Mr. Trump's more vocal supporters. The tendency to self-censor seems to be on the rise.
Facebook, Twitter and Google enjoy commanding market shares in their respective segments. If they continue to limit the freedom of expression on their platforms, this will surely trigger the emergence of competing, new social media players. This begs the question, why would these publicly-held companies inflict so much damage upon themselves?
One possible answer is that we shouldn't underestimate the fervor of the political views of the controlling shareholders/founders of these companies. It is possible that the founders are appalled by what their creations have wrought and that they will accept some damage to their own pocketbooks as atonement.
In addition, internet companies' employees could exert significant influence on the direction top management and founders are taking, either by voicing their opinions or by taking action on their own initiative - for example, the arbitrary removal of posts that they, the employees, find offensive.
Finally, it is possible that the heads of social media companies are over-reliant on the network effect and believe that their market shares are unassailable. This would be a grave mistake, as history teaches us that all companies are vulnerable.
In any event, even if the people that run social media incumbents show resilience and safeguard the freedom of expression of their users, this election cycle proved this arena is way too important to be left at the mercy of a triopoly. The emergence of strong new social media players, either spontaneously or by political design, is highly likely. A precipitous market share decline of the incumbents and decentralization of social media is to be expected.
For the public, it's good news. For the shareholders of the incumbents, not so much.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.