Regulation Could Create an Opening for New Social Networks

Regulatory requirements typically burden startups more heavily because they have fewer resources for lobbying and compliance. In social media, the network effects of Facebook and Instagram have made it especially difficult to launch a challenger, while the category has not attracted a large flow of founders.

That scarcity could create a contrarian opportunity: although new regulations may raise the barriers to entry, a nascent social-media company that manages to clear them could generate more value over time. It remains unclear whether the opportunity is large enough to attract many founders. In AI, by contrast, startups are concerned that large labs could absorb the market.