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MIT professor wants to overhaul ‘The Hype Machine’ that powers social media



More than 3.6 billion people use social media, and its runaway success has left the industry at a crossroads. There are now heated debates in Washington and Brussels over the future of antitrust regulation for this market, whether platform operators should filter certain content (and if so, which types), and how to open the market to new innovators.

To find my way through this thicket of interesting questions, I spoke with Sinan Aral, a professor of management at the MIT Sloan School of Management who also co-leads MIT’s Initiative on the Digital Economy. He has spent years analyzing the social media market, directly participating in its development as chief scientist of SocialAmp and Humin and as a founding partner of Manifest Capital.

This fall, he published his latest book, “The Hype Machine,” which explores what’s next for social media giants. In our discussion, we talked about the landscape of the market today, what responsibilities companies and users have to each other and what come next as the industry evolves.

This interview has been edited and condensed for clarity.

TechCrunch: Why don’t we start with how the book came together and how you got interested in this topic of digital media and how it affects our decision-making?

Sinan Aral: I started researching social media four years before Mark Zuckerberg founded Facebook. I have worked with all of the major social media platforms for the last 20 years: Facebook, Twitter, Snapchat, WeChat, Yahoo and the rest. I’ve published a number of very large-scale studies, and I’m also an entrepreneur. So, I’ve got a vantage point as a practitioner, but also as a long-time academic leader in this area.

We really have a full-blown social media crisis on our hands, as is obvious if you turn on the TV on any given day.

The reason why I wrote “The Hype Machine” is because essentially, we’ve seen this coming to a head for many years now. We really have a full-blown social media crisis on our hands, as is obvious if you turn on the TV on any given day.

My book takes off from where “The Social Dilemma” documentary and Shoshana Zuboff’s “The Age of Surveillance Capitalism” leave off, which is to ask, what can we concretely do to solve the social media crisis that we find ourselves in? The book argues that in order to do that, we have to stop armchair theorizing about how social media works, and we have to stop debating whether or not social media is good or evil. The answer is yes.

The book goes through the fundamentals of how social media works. So, there’s a chapter on neuroscience and social media, and economics and social media, and that eventually informs the solutions in the book, which cover everything from antitrust and competition to federal privacy legislation. How do we secure our elections and our democracy? What do we do about Section 230 of the Communications Decency Act? How do we balance free speech and hate speech? How do we deal with misinformation and fake news?

I think for a lot of us in tech, we’re a bit stuck. On one hand, these technologies have produced jarring amounts of wealth in the tech industry, but they have also caused a large number of harms. What do we do next?

Let me start by saying that the general framework of the solution is about what I call the four levers: money, code, norms and laws.

Money is the business models, which create the incentives for how the advertisers on the platforms and the users behave. Code is how we design the platforms and the algorithms underlying the platforms, which I go into in great detail. Norms are how we adopt, appropriate and use the technology. And obviously, laws are regulation.

In terms of solutions, I think the entry ticket for solving the social media crisis is creating competition in the social media economy. Platforms that lack competition don’t have any incentive to change away from the attention economy and their engagement-driven business models, nor do they have any real incentive to clean up their negative externalities in our information ecosystem, whether it’s hate speech or misinformation or manipulation.

Now, when I say competition, the first thing on everyone’s mind is always, “Oh, you mean break up Facebook.” But the point I make in the book — and I take a very clear stance on this — is that breaking up Facebook in this economy doesn’t solve the problem. This economy runs on network effects. The value of these platforms is a function of the number of users on the platform. Economies that run on network effects tend toward concentration and monopoly.

So, if you break up Facebook, it’s just going to tip the next Facebook-like company into market dominance. What we really need is structural reform of the social media economy, and that involves social network portability, data portability and interoperability legislation.

Let me push back on this a bit though. Terms like “data portability” always sound nice as a solution, but have we ever effectively used this tool to open a market?

This isn’t the first time that we’ve done this. During the AOL-Time Warner merger, we forced AOL’s AIM product to become interoperable with Yahoo Messenger and MSN Messenger. And it went from a 65% market share to a 59% market share one year later, down to like 50%, then it ceded the entire market to new entrants three years later.

Another good analogy is number portability in the cell phone market. It used to be that you couldn’t take your cell phone number with you when you switched from one cell phone provider to another, and then we legislated that they had to let you take your number with you. That was akin to a social network at the time, because all of your friends knew to call you at that number.

Research has shown that number portability created about $880 million of consumer surplus every quarter for years and years after it was instituted in Europe, and it created a lot of competition. We should have something very similar in social networks, around social network portability and data portability, so that we could create competition.

Now, if you break up Facebook after these kinds of structural reforms to the market, that’s a different question, but breaking up Facebook without structural reforms to the market economy is like putting a Band-Aid on a tumor. It’s not going to solve the underlying lack of competition that the social media economy has.

“The Hype Machine” details how we might do that and suggests that there could be a stack of commodity messaging formats that would be required to be interoperable. Then, you could have unique messaging formats for every platform on top of that. But things like texts, short-form videos, stories that either persist or disappear, that kind of stuff should have a level of interoperability that’s legislated. The entry ticket to solving the social media crisis is creating competition.

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Will this time be any different for Twitter?



As Twitter seems to buy its way into competing with Clubhouse and Substack, one wonders whether the beleaguered social media company is finally ready to move past its truly awful track record of seizing opportunities.

Twitter’s pace of product ambition has certainly seemed to speed in the past several months, conveniently following shareholder action to oust CEO Jack Dorsey last year. They’ve finally rolled out their Stories product Fleets, they’ve embraced audio both in the traditional feed and with their beta Spaces feature, and they’ve taken some much-publicized steps to reign in disinformation and content moderation woes (though there’s still plenty to be done there).

In the past few weeks, Twitter has also made some particularly interesting acquisitions. Today, it was announced that they were buying Revue, a newsletter management startup. Earlier this month, they bought Breaker, a podcasting service. Last month, they bought Squad, a social screen-sharing app.

It’s an aggressive turn that follows Twitter’s announcement that it will be shutting down Periscope, a live video app that was purchased and long-neglected by Twitter despite the fact that the company’s current product chief was its founder.

TikTok’s wild 2020 success in fully realizing the broader vision for Vine, which Twitter shut down in 2017, seems to be a particularly embarrassing stain on the company’s history; it’s also the most crystallized example of Twitter shooting itself in the foot as a result of not embracing risk. And while Twitter was ahead of that curve and simply didn’t make it happen, Substack and Clubhouse are two prime examples of competitors which Twitter could have prevented from reaching their current stature if it had just been more aggressive in recognizing adjacent social market opportunities and sprung into action.

It’s particularly hard to reckon in the shadow of Facebook’s ever-swelling isolation. Once the eager enemy of any social upstart, Facebook finds itself desperately complicated by global politics and antitrust woes in a way that may never strike it down, but have seemed to slow its maneuverability. A startup like Clubhouse may once seemed like a prime acquisition target, but it’s too complicated of a purchase for Facebook to even attempt in 2021, leaving Twitter a potential competitor that could scale to full size on its own.

Twitter is a much smaller company than Facebook is, though it’s still plenty big. As the company aims to move beyond the 2020 US election that ate up so much of its attention and expand its ambitions, one of its most pertinent challenges will be reinvigorating a product culture to recognize opportunities and take on rising competitors — though another challenge might be getting its competition to take it seriously in the first place.

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Sila Nanotechnologies raises $590M to fund battery materials factory



Sila Nanotechnologies, a Silicon Valley battery materials company, has spent years developing technology designed to pack more energy into a cell at a lower cost — an end game that has helped it lock in partnerships with Amperex Technology Limited as well as automakers BMW and Daimler.

Now, Sila Nano, flush with a fresh injection of capital that has pushed its valuation to $3.3 billion, is ready to bring its technology to the masses.

The company, which was founded nearly a decade ago, said Tuesday it has raised $590 million in a Series F funding round led by Coatue with significant participation by funds and accounts advised by T. Rowe Price Associates, Inc. Existing investors 8VC, Bessemer Venture Partners, Canada Pension Plan Investment Board, and Sutter Hill Ventures also participated in the round.

Sila Nano plans to use the funds to hire another 100 people this year and begin to buildout a factory in North America capable of producing 100 gigawatt-hours of silicon-based anode material, which is used in batteries for the smartphone and automotive industries. While the company hasn’t revealed the location of the factory, it does have a timeline. Sila Nano said it plans to start production at the factory in 2024. Materials produced at the plant will be in electric vehicles by 2025, the company said.

“It took eight years and 35,000 iterations to create a new battery chemistry, but that was just step one,” Sila Nano CEO and co-founder Gene Berdichevsky said in a statement. “For any new technology to make an impact in the real-world, it has to scale, which will cost billions of dollars. We know from our experience building our production lines in Alameda that investing in our next plant today will keep us on track to be powering cars and hundreds of millions of consumer devices by 2025.”

The tech

A lithium-ion battery contains two electrodes. There’s an anode (negative) on one side and a cathode (positive) on the other. Typically, an electrolyte sits in the middle and acts as the courier, moving ions between the electrodes when charging and discharging. Graphite is commonly used as the anode in commercial lithium-ion batteries.

Sila Nano has developed a silicon-based anode that replaces graphite in lithium-ion batteries. The critical detail is that the material was designed to take the place of graphite in without needing to change the battery manufacturing process or equipment.

Sila Nano has been focused on silicon anode because the material can store a lot more lithium ions. Using a material that lets you pack in more lithium ions would theoretically allow you to increase the energy density — or the amount of energy that can be stored in a battery per its volume — of the cell. The upshot would be a cheaper battery that contains more energy in the same space.

The opportunity

It’s a compelling product for automakers attempting to bring more electric vehicles to market. Nearly every global automaker has announced plans or is already producing a new batch of all-electric and plug-in electric vehicles, including Ford, GM, Daimler, BMW, Hyundai and Kia. Tesla continues to ramp up production of its Model 3 and Model Y vehicles as a string of newcomers like Rivian prepare to bring their own EVs to market.

In short: the demand of batteries is climbing; and automakers are looking for the next-generation tech that will give them a competitive edge.

Battery production sat at about 20 GWh per year in 2010. Sila Nano expects it to jump to 2,000 GWh per year by 2030 and 30,000 GWh per year by 2050.

Sila Nano started building the first production lines for its battery materials in 2018. That first line is capable of producing the material to supply the equivalent of 50 megawatts of lithium-ion batteries.

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Daily Crunch: Calendly valued at $3B



A popular scheduling startup raises a big funding round, Twitter makes a newsletter acquisition and Beyond Meat teams up with PepsiCo. This is your Daily Crunch for January 26, 2021.

The big story: Calendly valued at $3B

Calendly, which helps users schedule and confirm meeting times, has raised $350 million from OpenView Venture Partners and Iconiq.

Until now, the Atlanta-based startup had only raised $550K, but the company says it has 10 million monthly users, with $70 million in subscription revenue last year.

“Calendly has a vision increasingly to be a central part of the meeting life cycle,” said OpenView’s Blake Bartlett.

The tech giants

Twitter acquires newsletter platform Revue — Twitter is getting into the newsletter business.

TikTok is being used by vape sellers marketing to teens — Sellers are offering flavored disposable vapes, parent-proof “discreet” packaging and no ID checks.

PepsiCo and Beyond Meat launch poorly named joint venture for new plant-based food and drinks — The name? The PLANeT Partnership.

Startups, funding and venture capital

Fast raises $102M as the online checkout wars continue to attract huge investment — The new funding was led by Stripe.

SetSail nabs $26M Series A to rethink sales compensation — SetSail says salespeople should be paid them throughout the sales cycle.

Mealco raises $7M to launch new delivery-centric restaurants — By launching a restaurant with Mealco, chefs don’t sign a lease or pay any other upfront costs.

Advice and analysis from Extra Crunch

Ten VCs say interactivity, regulation and independent creators will reshape digital media in 2021 — We asked about the likelihood of further industry consolidation, whether we’ll see more digital media companies take the SPAC route and, of course, what they’re looking for in their next investment.

The five biggest mistakes I made as a first-time startup founder — Finmark CEO Rami Essaid has some regrets.

Does a $27B or $29B valuation make sense for Databricks? — A look at Databricks’ growth history, economics and scale.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

President Joe Biden commits to replacing entire federal fleet with electric vehicles — His commitment is tied to a broader campaign promise to create 1 million new jobs in the American auto industry and supply chains.

Meet the early-stage founder community at TC Early Stage 2021 — Early Stage part one focuses on operations and fundraising and takes place on April 1-2, while Early Stage part two focusing on marketing, PR and fundraising and runs July 8-9.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

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