[The Editors' Verdict] Is Web 3.0 a Threat to Major Platform Companies?

Im Juhwan, Honorary President of the Korea Communications Society

In early last month, Meta (Facebook) announced its Q4 2021 earnings. Revenue increased by 20% compared to the same period last year, but net profit decreased by 8%, causing great disappointment in the market. Immediately after the earnings announcement, Meta's stock price plummeted by 26.39% in just one day. This wiped out about a quarter of its total market capitalization. This drop was reportedly the largest since Meta went public in 2012.

Meta cited Apple's enhanced privacy policies as the main reason for this poor performance. In May last year, Apple updated its iPhone operating system, iOS, allowing iPhone users not to provide personal information to app developers. Since personalized advertising is Meta's primary source of revenue, this policy inevitably dealt a significant blow to the company.

Major platform companies operate business models that attract users through search engines, videos, social media, etc., and generate revenue by receiving advertisements from businesses. Currently, social media companies like Meta and Twitter derive over 90% of their revenue from advertising, and Google also earns more than 70% of its total revenue from ads. Personalized advertising is the most important aspect of advertising, and it is impossible without personal information.

The World Wide Web (WWW) was introduced in the early 1990s, marking the beginning of the Web 1.0 era. At that time, the main function was reading, primarily consuming information on websites. Currently, we are in the Web 2.0 internet environment. Web 2.0 adds writing to reading. Social media and YouTube, which we frequently use, are all forms of Web 2.0 that enable two-way communication.

Even if P2P (peer-to-peer) services exist, communication between two parties occurs through intermediaries. Platform companies like Google, Meta, and Twitter act as intermediaries, allowing users to create content and write comments. All content and data generated in this process are monopolized by centralized platform companies, and most of the revenue from advertising and other sources goes to these platform companies.

Web 3.0 has recently gained new attention. Web 3.0 allows not only reading and writing but also owning. It refers to a next-generation decentralized network structure where all data is distributed. Although the concept of Web 3.0 has existed for a long time, there were no feasible means to realize it until blockchain technology emerged.

Blockchain enables P2P transactions without intermediaries. It makes possible truly decentralized P2P services without intermediaries, such as social networking services (SNS) without Meta or Twitter, ride-sharing without Uber, and home-sharing without Airbnb. Personal information can also be stored in a distributed manner on the blockchain, potentially making it impossible for current platform companies to collect personal data for personalized advertising. Recently, the emergence of Non-Fungible Tokens (NFTs) and the Metaverse (extended virtual worlds) on blockchain is expected to accelerate the era of Web 3.0.

There are also claims that it remains to be seen how decentralized Web 3.0 will realistically establish itself as a business model. Jack Dorsey, founder of Twitter, argues that venture capitalists will own Web 3.0, making it another centralized internet.

However, in Web 3.0, blockchain acts as the intermediary, creative content can be owned by users through NFTs, and users can fully receive the profits. If this happens, Web 3.0 will certainly pose a threat to existing platform companies.

This content was produced with the assistance of AI translation services.