Strategic questions for social media companies

Before diving into technical approaches for how SMSs can address these requirements, it appears worthwhile to step up a level and consider SMS’s potential strategies for how to respond on a strategic (“business”) level.

This is important because the Digital Choice Act, and other coming legislation like it, is intended to and likely will have significant impact on any social media service’s position in its market or community. This is true both for commercial for-profit social media services, and – albeit to a smaller extent – not-for-profit open-source and community projects.

This potential should determine what strategy an SMS should select and also which technologies to choose to conform to the law.

Open or closed: a bit of history

How to best respond to the requirements of the Digital Choice Act depends on a fundamental strategic choice with respect to openness. Historically, many social media platforms have employed different strategies with respect to openness of their platform to 3rd parties.

For example:

• Twitter originally encouraged the building of 3^rd-party clients bypassing Twitter’s own user interface. It also made it easy to access Twitter-hosted content from 3^rd-party sites. This helped them gain rapid market share during their growth phase. Today, X, Twitter’s successor, is largely closed to 3rd parties or only accessible to 3^rd parties in limited ways and by paying very high fees.

• Facebook used to have open APIs to post 3rd-party content to personal accounts. When those APIs were shut down, many 3^rd-party integrations stopped working. Facebook has spent significant amounts of engineering since to prevent access by 3^rd parties.

• Projects such as Mastodon, Pixelfed or Bluesky use a strategy of radical openness by implementing open protocols and open-sourcing their code. As a result, innovation is higher, users love the interoperability, but none of these projects has so far identified a sustainable method to fund their operations beyond a certain small scale.

Today, it appears the most commonly employed strategy for social media services operating at scale is not openness, but to maximally protect all monetization opportunities of their franchise. Limiting or eliminating 3^rd-party access by setting up high technical and monetary walls is a key part of their strategy.

The Digital Choice act directly conflicts with this business strategy.

The key strategy question

The Digital Choice Act attempts to force walled social media gardens open, to make it easier for users to leave, and to interact with users on other SMSs. It is arguably designed to prevent SMSs from using their current, successful business strategy going forward.

This leads to the fundamental strategic choice for social media projects on whether to resist and attempt to maintain the status quote of closed, walled gardens, that are so profitable for them, or to change strategies (again) to take advantage of the opportunities that may emerge by virtue of all competitors also being forced to open up their systems. These choices are discussed in this section.

Strategic choice #1: fight this law

The objective here would be to attempt to continue protecting the monetization opportunities given by sole control over a closed social network behind a well-defended wall. This is to keep the cost unacceptably high for a user to leave, to prevent users from sidestepping ads or other toll booths, and prevent (current or future) competitors from leveraging the social graph for their own benefits and siphon off some of the business.

In this strategic choice, possible courses of action may include:

• To delay the time until regulatory action may be taken for non-compliance;

• To fight the law in court, on various grounds that certainly could be foundWe are not lawyers, so we won’t comment on those. ;

• Implementing support for the letter of the law, while undermining its spirit. As with all legislation that attempts to regulate complex systems, there would be numerous opportunities to do so, including (by far a non-exhaustive list):

  • To implement homegrown interfaces, rather than using established standards. In this case, bridges would have to be built for data portability and interoperability with other SMSs, for whose development and ongoing operations no obvious funding model exists. As a result, interoperability de-facto will not happen at scale, and the walled garden remains protected.

  • To use wiggle room in existing standardsThere are plenty of opportunities for doing this. Working interoperability based on the ActivityPub standards, for example, requires the agreement on a host of other de-facto best practices, many of which are not codified in the standards. to implement support in a way that does not, or does not reliably, interact with other SMSs implementations. Users will be frustrated and not use the feature; the franchise remains protected.

  • Make users interacting from outside of the SMS second-class citizens in the SMS’s user interface. For example, an SMS could show comments from users on their SMS right on the same page, while hiding comments from users on other SMSs several mouse clicks awayThis is the user interface currently implemented by Meta’s Threads for content from users delivered via the open ActivityPub interoperability standard from outside of Threads. It is currently unclear whether this is a temporary state of their implementation or intended to be permanent, and what rationale they have for it. It is consistent with this strategic choice. .

Strategic choice #2: leverage openness and interoperability

Rather than attempting to defend the walled garden, which given legal processes in many jurisdictions may not be possible globally over the long term, a social media company could lean into openness and interoperability with competing social media services and leverage the unprecedented, disruptive new opportunities they enable. (Recall that competitors are also required to open up.)

This would allow nimble and innovative social media companies to focus on the new opportunities that become available when the walls of the previously many walled social networks suddenly fall away and can form a single, global, interoperable, social web that includes all users of all social media services combined as peers that can interact with each other as easily as within a single walled garden.

This scenario is very disruptive to an established social media business, because in this scenario, the basis of competition and monetization changes very dramatically: instead of focusing on pressing ever more rent from users who cannot leave the walled garden (and those who want to reach them), the focus must be on new value and value chains that were previously impossible or less attractive.

As one example, a new competitor could implement an SMS that shows no ads, or far fewer ads, and convince users to it instead for that reasons, without users losing their content or their friends and followers.

Some of the enablers for such new value chains are (non-exhaustive):

• The emerging, single, unified, global social network will, by definition, be larger than any of the currently walled social networks, leading to more business opportunities with more potential users, demographics, geographies, industries, use cases and so forth. Depending on the size of an SMS, it could be orders of magnitudes larger.

• Users will use a variety of SMSs (websites, apps, etc) to access this unified social web, and that enables rapid innovation on features and business models not possible in a traditional walled social garden.

• Integrations into websites and apps that we do not traditionally think of as social media becomes much more possible, leading to currently impossible, valuable and novel user experiences that would be out of place in a traditional social media site or app.

Discussion

We cannot predict the degree to which either of these strategies would be successful, for whom, and in which time frame. It is of course also possible to combine them, e.g. to lean into some required features and resist others, or to have different strategies in different jurisdictions. These considerations would be highly specific to a given SMS.

However, we can make several observations that appears to have general applicability:

• While Utah is the first US state to pass this law, other US states are also considering similar legislation, and some expect that the European Union will also require social media interoperability in coming updates to its digital legal initiatives, such as in 2026. The strategic choice should be evaluated from the perspective of its viability on a global basis, not just in the context of a relatively small US state.

• It is generally relatively more advantageous for smaller social media services to interoperate with their competitors than for the market share leaders, as it allows part of the network effect that is working against them today to work for them instead: an innovative social media startup or medium sized social network generally gains more than it loses by being part of a larger network. We expect that mid-size and smaller social media organizations will be more willing to use the “lean into open” strategy compared to the market share leaders.

• As a result, should the functionalities required by this act become widely required, this act gives today’s smaller social network a substantial opportunity to take market share from the incumbents who have less of an incentive to immediately change to this new world order.

• Attempting to fight the legislation for a prolonged period of time, only to have to give in to openness some (long) time later may be the worst of all strategies. There will be competitors who lean into openness, and take market share in this rearranged market quickly, which may be hard to recover from for slow incumbents. The history of technology is full of examples where nimble upstarts completely eviscerated the incumbents who were slow to embrace disruptive change, and the Digital Choice Act certainly constitutes extreme disruptive change for social media companies.

• All social media companies – almost all of which favor walled-garden strategies at this time – are faced with the same strategic choice. Different companies will likely come up with different answers, spanning the entire spectrum from hard-resist to delay and fast lean-in. We note that even if a market share leader on social media today were to be successful in resisting having to implement the Digital Choice Act, or even manages to get the law repealed, it may well then face competitive defeat against a larger open social web that’s the aggregate of several of their smaller competitors who leaned into openness as a strategy even if their assumption that the laws were going to prevail turned out to be wrong. This is effectively what happened to AOL when it lost against the open web in the 1990’s, and it didn’t even require any legislation!

• The Digital Choice Act is just one example in a series of successful legislative advances related to digital technologies that include better privacy and data rights. Originated in a province in Canada, they spread to the European Union with its highly impactful GDPR, and have since been passed into law in many jurisdictions around the globe. These laws also continue to be tightened with updates (such as the CPRA update to the CCPA in California), and to our knowledge, not a single one of these laws has been revoked or substantially weakened in updates since. Based on this track record, it appears unwise for an organization to bet on being successful resisting the kinds of new rules required by the Digital Choice Act.

We have no particular advice for organizations that wish to fight this disruptive change, and believe the “fight this law” strategy would ultimately fail, at which point the competitive standing of the company would be much diminished. So for the rest of this paper, we assume that social media companies will decide to fully lean into the opportunities of the open social web, and outline some of the choices for how to do that.