Can referral programs tip the scale into a manipulation game? 🎰

For TikTok’s and other platforms, it’s a hot focus for regulators…

TikTok recently shut down its Lite Rewards in the EU.

The rewards program was designed to engage users through an arguably addictive, algorithm-driven product feature, in the form of a rewards system for users 18+, that classified under the EU’s Digital Services Act (DSA) as a “systemic risk” for user behavior manipulation.

Under the DSA, TikTok triggered the requirement that it perform a risk assessment, and then implement any necessary mitigation efforts. In the EU, Bytedance is designated as a VLOP because it’s the operator of TikTok.

🤔 Why are we seeing these new initiatives happening?

TikTok and other platforms are trying new ways to retain their audiences, but also their product developments are making traditional ad serves more complex when compared to pre- or post-roll ads or having screen real estate like in a website to deliver an ad.

The over-regulation issue is also happening with AI developments, such as Meta’s announcement in June that they were suspending AI developments, and won’t release the next version of the Llama model, in the EU due to the regulations.

We’re going to start seeing a “splinter net” where depending upon which jurisdiction you fall, your experience of the internet will be different. For creators, this is impactful because continued access to global monetization options is on the line.

If platforms are forced to maintain different product offerings based on local laws, then it ultimately impacts the audience reach, and revenue streams, for creators.

For example, TikTok Lite had a way for the rewards to be turned into fan funding for creators. If that’s off the table, then creators ultimately lose out on that revenue potential, especially if the audience is one that otherwise wouldn’t have been monetized.

Another issue here is the increased cost of operation for platforms. These risks assessments and other compliance obligations aren’t cheap, and arguably take away revenue share that might end up being split with creators.

Of course, the counter argument is that the platforms have made significant revenues and market share, so this isn’t really hurting them. But the more regulation we see, the more costs it brings across the ecosystem.

Thanks to Kaya Yurieff for the opportunity to contribute my thoughts as part of today’s Creator Economy newsletter with The Information!