What China’s Soul Tells Us About the Future of the Social Internet
Analyzing the Soul IPO
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What China’s Soul Tells Us About the Future of the Social Internet
Tomorrow, a Chinese internet company called Soulgate will go public on the Nasdaq. Soulgate makes Soul, China’s 5th-most-popular social app. Soul is little-known outside China, but the app is a harbinger of the future of the social internet. Soul’s mission is to build “a ‘soul’cial metaverse” (yes, that pun makes it into the SEC filings) and it describes itself as “an algorithm-driven online social playground.”
Here’s how it works:
You sign up for Soul—or, in the company’s words, you become a “Souler”—by creating a virtual identity with an avatar. Your avatar maps to your facial expressions and body language. You then take a personality test inspired by Myers-Briggs, and Soul’s algorithm uses your answers to connect you to like-minded people. You interact with these people on “Planets”, each built around a shared interest.
I’ll go into more detail below, but that’s the gist of it. Soul may sound strange, but the app has grown to 33 million monthly active users who open the app 24 times a day for a combined 40 minutes. Soul’s user base skews young: two-thirds of users were born in 1990 or later.
Last month, I tweeted that Soul is one of the most fascinating companies to file to go public.
At the end of that tweet thread, I wrote that Soul embodies key trends in consumer internet:
This is what I want to explore in this piece. I’ll look at those four key trends in more depth, and I’ll add a fifth trend too. I’ll use Soul as a guiding framework, while touching on other companies that build on these five trends.
Avatar-Based Self Expression
Content Creation + Discovery Tools
A Robust Digital Economy
Built for Socializers
Let’s jump in.
1️⃣ Avatar-Based Self-Expression
“Soulers” socialize through their avatar-based virtual identities—no real names, ages, or locations are required. In fact, Soul actively discourages sharing your real identity: “Our algorithms are designed to discourage selfies and self-identifying posts, promising an immersive yet discreet cyber personal space.” In this way, Soul is an antidote to the pressure cooker platforms of first-generation social media.
Using Soul’s avatar builder, you can design and customize your avatar:
Soul Lenses then track your facial expressions: you can easily express yourself when meeting new people, without revealing your identity or true appearance.
In my three-part series on avatars and digital identities (Part I, Part II, Part III), I wrote about the Proteus Effect—the proven phenomenon that our digital avatars influence our real-life perceptions and behaviors. Users with taller avatars are more assertive and dominant; users with more attractive avatars are more intimate and confident. As people take on new digital identities, those identities seep into their personalities.
This is what makes Code Miko, who I’ve written about before, so fascinating. The woman behind Miko—known only as The Technician—has created a vibrant and three-dimensional digital persona through the Unreal Engine and her motion-capture suit. Miko embodies a new class of vTubers (virtual YouTubers) able to separate private life from public creativity and self-expression.
Avatar-based socialization and synthetic media unlock new forms of expression. Kyle Qian calls this the pseudonymous future of the internet, pointing to Discord and Reddit as examples of the pseudonymous social web in the West. While Facebook, Instagram, and Snapchat popularized identity-based social media, a younger generation of startups are building tools and worlds for new forms of expression.
Genies, for instance, lets you design your own customized avatar. It’s like a 3-D version of Bitmoji. Here’s my Genie flexing some cool fits 💁♂️
Genies integrates NFTs (non-fungible tokens), meaning that you can shop exclusive digital clothing and accessories for your avatars. NFTs will be a key technology unpinning digital economies and how we express ourselves in virtual worlds.
And while Soul has innovated in China, Western counterparts ItsMe and IVMU—both also avatar-based social networks—continue to hover near the top of the U.S. App Store charts.
Most fundamentally, socializing through avatars lets anyone express themself online while preserving their privacy.
2️⃣ Interest-Based Communities
Soul sends its users off to one of 30 “Planets” that are based on their interests. Planets include “Pragmatist,” “Artist,” and “Thinker.” On Planets, users join “Rooms”, which offer text, voice, and video chat. Some Rooms are oddly specific: my favorite is the “Couple’s Fight Room.” In this room, two Soulers simulate a couple fighting through voice chat. Everyone in the room gets a turn playing one of the “couple” fighting. Other popular rooms include Werewolf Room and Karaoke Room.
Soul emphasizes “forging genuine interpersonal connections.” In its SEC filing, the company writes:
We like to think the Soul app as a virtual social playground, where Soulers can create, share, explore and connect. Much like a physical playground, Soulers form spontaneous circles of interest-based groups and build new connections, creating an inter-woven network of meaningful virtual relationships. Each Souler belongs to one or several small and tightly-knit groups; each post receives comments and likes because of the content itself but not the peer pressure to respond. We believe the Soul virtual playground enables Soulers to freely engage with new people and share their ideas by breaking free of the constraints of offline connections.
In the first two generations of the web, digital interactions largely mapped to offline connections. AIM, MySpace, Facebook, Instagram, Snapchat. We mostly talked to people online who we knew in the physical world. Soul embodies the next generation—one built on AI-driven, interest-based connections.
In The Evolution of Social Media, I wrote about how I envision social interaction as a set of concentric circles:
If the last decade focused on Rings 2 and 3—Instagram, Facebook—then the next decade will focus on Rings 1 and 4. Rings 2 and 3 are about status; Rings 1 and 4 are about community. While Ring 1 platforms like WhatsApp and iMessage will benefit from our desire for intimate connections, the Ring 4 platforms are most interesting. These are the platforms that connect us with strangers and that create communities around us that we didn’t even know we wanted to be a part of.
TikTok is the best example, with its AI-powered feed surfacing content from anywhere in the world, tailored to our interests. And TikTok is firing on all cylinders. Last week, I tweeted this:
It’s already out of date. Bytedance just announced $34 billion in 2020 revenue, propelling it to 3rd on this list.
AI-powered connections are powering a new generation of online interaction. Soul proves this out with more deep, intimate connections than TikTok. In some ways, Soul is an AI-driven Discord—a community-centric place to find like-minded people. The app embodies a new wave of social internet companies: instead of several hundred or several thousand potential people to interact with, you now have seven billion potential connections.
3️⃣ Content Creation + Discovery Tools
Content creation is foundational to Soul: about 1 in 3 users creates content. The company provides tools that make it easy to create. From the F-1:
To better reflect the prevailing youth culture, we have developed easy-to-use emoji and meme-creating tools, where Soulers can type and doodle on top of our pre-made templates. We also developed a vote feature where Soulers can initiate votes with texts or pictures.
Soul’s focus on creator tools aligns with the internet’s steady march from consumption to creation. Over time, the internet is becoming more participatory as barriers to creation are removed.
The next step will be for this culture of creation to extend to more immersive, avatar-based virtual world experiences. While ~60% of TikTok users and ~30% of Soul users create content, only 3% of Roblox users are creators.
Soul’s avatar-based socialization and virtual world Planets give the company the potential for these more immersive creator-built experiences.
Soul also pairs content creation with content discovery. Like on TikTok, distribution on Soul is democratized. The company says:
We employ a decentralized traffic distribution method to ensure that content created by every Souler is distributed equally across the community and receives similar amounts of reach and engagement.
The future of internet communication combines democratized creation with democratized discovery. Like TikTok, Soul emphasizes both of these; unlike TikTok, Soul’s focus on avatar-based interaction gives it an opportunity to replicate this playbook with more immersive, metaverse-like experiences.
4️⃣ A Robust Digital Economy
Today’s dominant social networks primarily make money through advertising. Facebook, for instance, makes 99% of its revenue from ads.
Soul, on the other hand, makes nearly 100% of its revenue ($104M over the last 12 months) from value-added services. Value-added services, or VAS, are a fancy way of saying micropayments in a digital economy. Soul has its own in-app currency, Soul Coins, which users can purchase to buy virtual items and premium privileges—think, fancier avatars and virtual gifts to friends.
Soul’s business model aligns with the social web’s migration from digital advertising to digital commerce. As always, gaming foreshadows the future. In 2010, micropayments in game economies made up 20% of gaming revenue. Today, that share is 75%; by 2025, it will grow to 95%.
Roblox has Robux, Minecraft has Minecoins, Fortnite has V-Bucks. And digital economies are forming beyond gaming too: Amazon offers Amazon Coin, Snap offers Snap Tokens, Duolingo offers Gems, Bumble offers Bumble Coin. We’re moving to a world in which internet companies make more money from value-added services, transacted through virtual currencies.
In its F-1 filing, Soul includes a chart showing that VAS will grow at a compound-annual growth rate of 25% from 2020-2024, beating out advertising’s 19%.
China has always had more diversified internet business models than the West. Tencent (which owns 50% of Soul) has a much more diversified revenue mix than Facebook. But non-advertising-centric business models are becoming more common. For instance, Kuaishou, TikTok’s main competitor, makes 62% of its revenue from virtual gifts (33% comes from ads and 5% from e-commerce).
Soul takes this shift a step further—instead of being 99% concentrated in ads, it’s 99% concentrated in VAS. It inverts the ad-dominated models of U.S. tech companies, and we’ll see its VAS-based model become more popular in the West.
5️⃣ Built for Socializers
What’s unique about Soul is that it takes elements typically reserved for gaming—avatars, virtual “worlds” with Planets, etc.—and inserts them into an unapologetically social platform. Over the past decade, we’ve seen games look more and more like social networks while still disguised as games: Fortnite launched Party Royale as a place to meet friends, hosting concerts with Travis Scott and Marshmello; Grand Theft Auto introduced a Casino that serves no in-game purpose beyond socializing; and Animal Crossing broke Nintendo’s first-year sales record by letting people catch fish, hunt for fossils, and just generally hang out in a colorful virtual world.
But Soul is a social platform first and foremost; its roots aren’t in gaming, but in digital, avatar-based interaction.
There’s a taxonomy of gaming players called Bartle’s Player Type. It sorts players into four categories—Killers, Achievers, Socializers, and Explorers. Most people, it turns out, are socializers: they’re there just to hang out and have a good time.
Soul is built for the socializers. In its SEC filing to go public, the company makes this clear: the word “community” is mentioned 43 times, and the word “social” appears a staggering 235 times. Interestingly, Soul notes that it is using tech to solve loneliness and that the loneliness exists because of tech:
We have especially attracted young generations in China, who are native to mobile internet and who therefore more palpably experience the loneliness technologies bring.
This captures the double-edged sword of consumer technology. As more of our lives go digital, we more deeply feel the gaps where rich, in-person interactions used to be. Yet technology is also a salve for that isolation, connecting us in new ways to new people.
Soul shifts social media from a popularity contest built on a social graph rooted in the offline world, to a playground for digitally-native, AI-selected, interest-based social connections.
The five trends above signal where the social internet will go over the next decade:
More of us will have digital personas that unlock new forms of self-expression.
Our connections will be driven by AI and by our interests, not by geography.
Anyone can create content and anyone can get discovered.
The business models of the social internet will shift to digital economies built on micropayments.
And though everything will become more “game-like”—meaning more immersive and avatar-centric—the primary purpose will be to socialize.
In many ways, Soul stitches together aspects of dominant U.S. social platforms: it’s TikTok + Discord + Instagram + Roblox + Snapchat. But Soul is also pushing the boundaries, and its innovations will inspire startups in the West.
Sources & Additional Reading
Bartle Taxonomy of Player Types—thanks to Zack Hargett for sharing this framework with me!
Kyle Qian wrote a good piece about Soul and pseudonymity on the internet
Related Digital Native pieces:
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