Planet Money's 'The Indicator': The life and death spirals of social networks

SARAH MCCAMMON, HOST:

Meta's new social network, Threads, has been around for a little over a month. It got off to a red-hot start, but then engagement quickly fell off. So how is it actually doing at luring users away from X, the network formerly known as Twitter? Wailin Wong and Darian Woods from NPR's daily economics podcast, The Indicator, spoke with an economist who specializes in social media.

DARIAN WOODS, BYLINE: For Ben Golub, his first encounter with modern social media was as an undergraduate student at Caltech.

BEN GOLUB: As soon as Facebook rolled out, I joined, and that's the first time I remember a social platform taking off.

WAILIN WONG, BYLINE: At that time, it was still called the Facebook, right?

GOLUB: Exactly - TheFacebook.com.

WONG: Ah.

WOODS: Today, Ben is a professor at Northwestern University, and his specialty is the economics of social networks. Ben doesn't just study online platforms. He joined Threads on the first day that it launched.

WONG: But, you know, Ben was eager to find his people on Threads, economists.

WOODS: And this mindset is at the heart of what Ben studies, something called network effects. In a market with network effects, the way people value something is different than in other kinds of markets.

GOLUB: Your valuation depends on how many other people are using it and, often, who is using it. Classic goods like bread - that just doesn't happen. I mean, as long as you can buy that thing, it doesn't really matter to you how many other people are buying it or who's using it.

WOODS: Meta/Instagram launched Threads with a huge advantage, which is that Instagram already has 2 billion active monthly users around the world. And the company made it really easy for Instagram users to sign up for a Threads account.

WONG: For new Threads users, the next step is finding people they want to follow. And Ben says Threads took a light-handed approach in tailoring people's feeds.

GOLUB: They kind of left it open-ended. And so in my area, which is economics, people started doing stuff like posting these lists, like, a list of 50 usernames, and then people could go through and follow.

WOODS: And Ben says at the same economists who were doing these role calls were also posting on Twitter about what was happening in Threads. And so the people hanging out on econ Twitter would get curious and check out Threads too. And that's network effects in action.

GOLUB: Threads kind of feels fun without the sort of overtone of decline that, for me, has characterized recent Twitter.

WONG: This overtone of decline that Ben describes is a feeling that's permeated other subgroups, too, not just econ Twitter. Some users were unhappy with features like the app's new limit on how many posts they could read per day. Others have pointed to an increase in hate speech. Advertisers have left, too. Elon Musk said recently that ad revenue has fallen by 50%.

WOODS: Now, the arrival of a new player doesn't necessarily mean that the incumbent has to die. Think about the ridesharing platforms Uber and Lyft. Plenty of drivers and riders use both apps.

WONG: Network effects can lead to a winner-takes-all scenario. That can have benefits for consumers, say, if there's one really vibrant online community where everyone else is hanging out. But there's also downsides, like, if the dominant company makes unwelcome changes, and people have nowhere else to go.

WOODS: It's still too early to say whether the platform formerly known as Twitter is headed the way of MySpace and Friendster.

WONG: Either way, I'm sure economists will be talking about it online somewhere. Wailin Wong.

WOODS: Darian Woods, NPR News.

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