The Great Unraveling: The Upsides—and Downsides—of Network Effects (Part 1)

Have Social Networks Facebook and Twitter Already Begun Their Terminal Descent?

The recent narratives around Facebook and Twitter (X) couldn’t be much different. Meta just posted another stellar earnings report while Twitter is hemorrhaging ad revenue. But the two OGs of social networking may be more similar than you think. There are growing signs that the social fabric of their respective networks is ripping at the seams.

They appear to have already begun—and may indeed be well into—the great unraveling.

The New York Times reports that Twitter’s Q2 2024 revenue came in at just $114 million, which is down a staggering 83% vs. two years ago. Advertisers have primarily fled due to brand safety concerns, but Elon Musk telling them to go f**k themselves probably didn’t help.

Meanwhile Meta’s Q2 2024 earnings report showed a continued rebound in an ads business that was staggered by Apple’s App Tracking Transparency initiative in late 2021. All key metrics are up in recent quarters, from Monthly Active People (aka MAUs) to Impressions to Average Price per Ad.

Nevertheless, there are cracks in the foundation of Meta’s business. The same is true of Twitter. Both companies are losing their grips on the powerful network effects upon which they were built.

In Part 1 of this two-part article, we’ll explore recent data that illustrate what’s happening and the potential causes. In Part 2, we’ll consider what this means for the future of social media.