There are, according to investor and Sifted columnist Nicolas Colin, three barriers to creating breakout social media startups in Europe — market fragmentation, investor experience and ecosystem mindset. Of these, fragmentation is especially difficult for early-stage entrepreneurs: How can you even get a social network off the ground when your home market is fragmented by language and cultural norms? Noticeably, the United States and China, home to a number of successful social media unicorns, do not face fragmentation at that scale.
That said, fragmentation is not a death sentence. It just means that European social networks need to build different types of networks to scale.
Avoid one-to-many networks
Recent social media successes from the US and China, including Clubhouse and Douyin or TikTok, are one-to-many or ‘broadcast’ networks — their primary interactions involve engaged content creators broadcasting to consumers (or followers).
These connections are relatively distant — there are no direct personal relationships between content creators and consumers. By its very nature, this type of network requires a high creator-to-consumer ratio to ensure sufficient engagement. So in order to scale, startups algorithmically recommend creators (or content) to followers — which is easier to do in relatively unified markets with more monolithic user pools (like the US and China).
This approach has obvious downsides in a naturally fragmented market like Europe: suggesting a French-speaking comedian to a German-speaking follower is not likely to result in a meaningful interaction. This naturally fragments the network along language and cultural boundaries.
Focus on one-to-one networks
Instead, European startups should find a way to leverage this natural fragmentation. One way to do this is to prioritise networks that allow users to create close, one-to-one connections, i.e. stronger, direct personal relationships (e.g. as on WhatsApp). For instance, someone in London is more likely to have close relationships with other people in London, as opposed to Paris. And Londoners who do have close relationships with Parisians are likely to share some common traits with them. In this type of network, users need fewer connections to derive value, and linguistic or cultural differences are no longer barriers because the network mirrors the social dynamics of the market.
European startups should... prioritise networks that allow users to create close, one-to-one connections.
Europe has only created a handful of successful social networks, but it is remarkable how closely they adhere to this approach. First up is Yubo, a Paris-headquartered social network that allows teens to discover and develop new friendships. Users can discover each other on a Tinder-style, swipe-based interface or interact in small groups via live video. In other words, it emphasises direct interactions and friendships by connecting users based on interests, language, and cultural preferences. Yubo now has 40m users across 40 countries (many of them in Europe) and recently raised €40m from high-profile European investors.
Another, more recent example is Peanut, a women-only social network. Unsurprisingly, Peanut has many parallels with Yubo. It helps women to discover new (platonic) friends and discuss topics ranging from pregnancy to menopause — by connecting like-minded women who are going through similar life experiences. This approach has helped Peanut grow its user base by 60% from December 2019 to May 2020 to reach 1.6m, culminating in a $12m Series A funding round. Even Skype, Europe’s first social (or communication) unicorn managed to side-step regional fragmentation as free Skype-to-Skype calls relied on closer (professional or personal), one-to-one relationships between users.
Networks with close, direct connections should clearly be the predominant approach followed by European social networks. However, the broadcast (or one-to-many) approach may still be valid in specific situations where market fragmentation is desirable — typically, vertical social networks in naturally fragmented verticals.
For instance, K-12 (or kindergarten to secondary) education is fragmented across Europe, both by language and by the curriculum, which is set by regulators. Any social networks in this vertical would naturally need to fit into this structure.
One example here is Polish startup Brainly. It allows students to post questions about their homework and receive help from other students using the app (one-to-many relationships). Another startup, based in Germany, takes this a step further. Knowunity not only allows students to answer questions, but also share notes and build a social following. In both cases, interactions are fragmented by region — but this is desirable because the curriculum and teaching language are also likely to be fragmented along the same lines. As a result, Brainly now has over 350m users, while Knowunity has become the #1 ranked education app in Germany just a few months after its launch.
Market fragmentation because of linguistic or cultural differences is a reality in Europe — but that does not close down opportunities to create breakout social networks. It merely gives European startups a different set of rules to play by.