At Jefferies’ 2023 Private Internet Conference, Faraz Fatemi, Partner at Lightspeed Venture Partners, shed light on the profound post-pandemic shifts in social media and e-commerce. Fatemi brings robust experience across the startup ecosystem, as both a member of founding teams and an investor in consumer social platforms.
The Evolution of Social Media
Fatemi reflected on the post-COVID trajectory of social media, tracing its evolution from the traditional social use case – powering communication between small groups of people, like friends and family – to the ‘recommendation media’ that dominates platforms today. Today, these platforms leverage algorithmic recommendation systems, feeding users content tailored to their interests.
Fatemi pointed to TikTok’s meteoric rise, observing, “platforms like TikTok proved that recommendation media, based around user interest, scales faster and delivers more content than traditional social media.”
Fatemi also identified trends on the horizon. He pointed to multiplayer media platforms as an opportunity to bridge social interaction and digital content, powering shared consumption experiences across networks of family and friends.
Monetization Models and the New Face of E-Commerce
As e-commerce and social media become increasingly intertwined, Fatemi notices significant experimentation with diverse monetization models. As ad dollars continue to gravitate toward legacy giants like Facebook and Google, early-stage businesses are venturing into uncharted territory.
“There’s quite a bit of innovation in traditional subscription, in-app purchasing, affiliate, and marketplace take-rate models. These new approaches are fueling the next phase of digital monetization,” Fatemi shared. “Much of this is rooted in AI, which impacts the product roadmap for early-stage social and content-led platforms.”
Fatemi pointed to AI-powered product placement and brand matching as one example. Algorithms are connecting brands with content and creators whose audiences align directly with their offering. These mechanisms, coupled with advancements in content recommendation, are driving huge advancements in e-commerce.
Preparing for the Public Market
On the IPO front, Fatemi’s outlook was cautiously optimistic. He believes many companies focused on improving margins and scaling during the downturn. Now, they are poised for a favorable reception in public markets.
“Of course, there’s some fear that if companies go public now, they may be subject to depressed multiples or suffer from limited IPO demand,” Fatemi acknowledged. “But just like the best companies in venture markets always get funded, the best companies going to IPO will attract strong interest.”
Fatemi believes businesses primed for IPOs 12 to 18 months ago are better prepared for public markets today. The sluggish IPO pipeline of 2022 and 2023 may fuel a series of successful public offerings in the months to come.
Fatemi’s insight into the rapidly transforming domains of social media and e-commerce reveal an industry that is not merely adapting to market shifts but actively shaping them. From the next phase of monetization to new applications of AI, the future of consumer social will reflect rampant innovation, with much yet to explore.