What is the biggest corporate drama this year till now? Well, most will agree that the drama involves Elon Musk and Twitter.

Musk on 4th April 2022, made it public that he bought a major stake in the social media platform Twitter and became the largest individual shareholder. Then begins a series of seemingly weird occurrences - Musk accepted an invitation to join the board of Twitter before rejecting it. Fast forward to April 25th - after a “poison pill” attempt by Twitter, it seemed that Musk and Twitter reached an agreement for the billionaire to acquire the company and take it private. The deal value of staggering USD 44 billion.

Musk discloses his plans for Twitter. Apart from taking Twitter private, the plans included making the Twitter algorithms open-source and waging a war against spam accounts, etc. He also floated the idea of removing Twitter’s dependence on advertising as the primary source of revenue. He expressed that Twitter may charge some fees for commercial and government accounts.

Fast forward to the second week of May, Musk declares that the Twitter deal is on hold before going completely aggressive on the “libs”.

Anyways we do not know whether this deal will ever come to fruition but this article is not about Musk or Twitter. This article is about Web 2.0 and rather the limitations of it.

Let us first talk about the history of Web 2.0. Web 2.0 is a post Dotcom Bubble phenomenon. Although the term Web 2.0 was coined by Darcy DiNucci in 1999 itself, Web 2.0 started becoming popular only in the early 2000s.

The basic idea behind Web 2.0 is a participatory web. Users stopped being just consumers and started becoming creators. From Slashdot and Craigslist to Facebook and Twitter. Facebook was founded in 2004 and Twitter in 2006. Web 2.0 led to digital platform businesses. Users are no longer only interacting with the website, they are also interacting among themselves. Platforms also started bringing together different kinds of users and facilitated interactions among them. Amazon Marketplace brought together buyers and sellers and facilitated transactions, youtube brought together content creators and content consumers and facilitated interactions among them…the websites started to become facilitators rather than creators.

Platforms started to look like networks connecting similar or diverse kinds of users. These networks grew at staggering rates due to network effects. Network Effect is an economic concept that means that people like to join a network when they see other people joining the network. So, people join Facebook when their friends join Facebook. Another example is more sellers join an eCommerce platform when they see more buyers on the network and vice versa.

While these enormous networks created some of the largest companies in the world - let that be Facebook, Twitter, or Amazon, neither the companies themselves nor the legal structure tried to acknowledge the value created by the users.

It should be noted that when someone buys the Twitter platform, he is not buying a piece of software but a network of people.

People who have invested a lot of time and sometimes monetary resources to become part of the network.

People many of whom are influential outside Twitter - Politicians, government officials, celebrities, etc.

In the current practice, network participants, even if they are highly influential within and outside the network, practically have no say in the governance of the platform. The platform builders decide the rules that the network participants have to follow. The governance can be obscure and can be random depending on the judgment of the person implementing the rules.

One of the biggest criticisms against Twitter and many other social media platforms is that the way they penalize users by limiting reach or even removing them from the platforms is often unjust and obscure.

Now, Elon Musk wants to “fix” these problems. Will Musk’s suggestions make Twitter a “bastion of free speech”?

One of the plans for Twitter that Elon Musk has is to take the company private. Now, the deal on hold is about Elon Musk buying Twitter as a person and not through one of his companies. In a way, if the deal is successful Twitter will become Musk’s personal property. While this is not a problem for a piece of software, such ownership of a network of more than 200 million people (Twitter’s average monetizable daily active user was 2017 million in 2021) gives a person enormous power over public discourse…more power than most elected officials around the globe have.

Personally, I do not believe in the “good guy dictator” narrative. So, the centralization of so much political power would be a cause of concern.

Now, are users value creators or value exploiters on these platforms? If users are value creators, should they not have some control over the governance of the network they create value for?

To answer this question, we need to understand what value is. Value is the source of future revenues. So, the brand creates value, patents create value and in the case of web2 platforms - networks create value.

So, what is the source of future revenues for Facebook, Twitter, Amazon, Udemy, ……

l User networks. Users who keep coming back to the platform.

Advertisers would not pay Facebook or Twitter without the daily users who spend time on the platform and no seller would like to give commissions to Amazon without the buyers who regularly visit Amazon Marketplace.

So, if the users are the value creators then why do not have any say on the governance of these platforms?

This is the primary limitation of Web 2.0. Not only social media users, sellers on eCommerce platforms from whom ecom platforms deduct 25%-30% commission or drivers for ridesharing companies practically have no say on how the platforms should work. The value creators on these platforms are realizing this and the tension between the platforms and the value creators is increasing.

Now, why am I talking about all this?

When people ask why we need Web 3.0 - this is why?

Web 2.0 has created enormously biased economic systems - value creators are completely disconnected from the governance of the platforms and have not been given their fair share.

This is what Web 3.0 can fix by giving all network participants the ability to influence the governance of the platform they interact with; it is not limited to only social media - eCommerce, ridesharing, and all other network businesses will eventually become decentralized so that people who create value get a share of the value.

As the whitepaper of Decentraland Metaverse notes

“The development of large proprietary platforms, such as Facebook, has allowed hundreds of millions of users to gather, interact, share content, and play games. Their network effects helped cultivate vast online communities and gaming companies.

These platforms, controlled by centralized organizations, manage the network’s rules and content flow while extracting significant revenue from the communities and content creators who drive traffic to the platforms.

Decentraland aims to establish a network that allows its content creators to own and capture the full value of their Contributions.”

Hopefully, then Elon Musk would not have to stand up for our “free speech” and we can vote our preferences on how a social network and other platform businesses should be governed.