Meta and Google were recently dealt a landmark legal blow over addictive product design days after the US state of New Mexico won a $375m verdict against Meta after a jury found it had misled teens and put them in danger of sexual exploitation.
This is the latest flurry of legal and regulatory trouble for social media giants, in the US and the EU. Yet it is nothing compared to what awaits them. Thousands of individuals, school districts and many states are suing.
Share prices have taken a beating. However, social media companies have not only turned into a liability in any portfolio; they are a ticking time bomb, as there is no plausible path for this to be reversed in the long run. While child safety appears to be the most important, possibly insurmountable, challenge to social media, it is the tip of the iceberg.
The deeper problem has always been at the technology level. The insoluble problem is social networking as a technology offers little functional or productivity benefits to its users. Technologies such as the internet, mobile phones, search, cloud computing or AI all make us do things faster, cheaper or better.
The upside of these technologies is clear, whether that is a startup having immediate and scalable access to state-of-the-art IT infrastructure, or a private individual not having to visit a bank branch anymore. The reason social media became so successful, on the other hand, is because of addictive designs and dopamine loops, extreme polarisation and sensationalist misinformation, echo chambers and hyper-targeting.
Social networks have reached the vast majority of all humans, so the only way they can continue to grow their market is to make users spend more time and data on their platforms. To achieve that they have to double down on those features that are detrimental to individuals and to society.
To make up for this unfavourable benefits-to-risks ratio, tech lobbying numbers have been exploding continuously.
The regulatory environment is always a source of significant risk for technology platforms, but it can be mitigated when the technology promises huge gains for the economy, society or defence. GenAI or CRISPR gene-editing are examples where it was inevitable that at some point regulatory concerns would yield to the technology’s benefits. Despite dystopian predictions about an overpowered AI, no serious commentator is calling for a halt to all AI funding.
To make up for this unfavourable benefits-to-risks ratio, tech lobbying numbers have been exploding continuously. In 2025 the number was 17 times higher than it used to be in 2000, and it eventually surpassed $120m. Two-thirds of that has been spent by only four companies: Meta, Amazon, ByteDance and Alphabet. The same trend is visible in the EU. In 2025 Meta alone paid more than €10M to about 17 full-time lobbyists.
More lobbyists are a sign of weakness. For most tech companies lobbying was always a defensive play rather than an attempt to, for instance, secure government contracts. It was this lobbying power that gave social networks the room to balloon. It made the companies behind them play in the same league with tech giants that were built on truly transformational tech.
This might create an aura of inevitability and too big to fail, but their original problem haunts them here as well. If there is no productivity benefit of the underlying technology, size is irrelevant. If Microsoft suddenly decided to shut down its cloud or Apple stopped producing hardware, the entire economy would be in deep trouble.
On the other hand, had TikTok been barred from the US it would have made people more productive, not less so. One in five American teens said they are on TikTok constantly. There is a host of other productivity-boosting benefits of cutting back on social media usage, such as increased cognitive capacity. Empirical evidence shows strong social media use causes impaired attention, reduced working memory and diminished executive functioning.
Is it any wonder there is a strong bipartisan and global push against social media on so many fronts? We haven’t even touched on topics such as interference by rogue governments, bot manipulation, harassment, misuse of user data and so much more.
Like the tobacco industry, social networks will not be completely eliminated. Yet regulation will damage their business models irreparably. It might take years, but it will come. Precepts such as required ID authentication (at least for active users) will be inevitable to make social networks acceptable, which will save (young) people but also kill the social network business.
Successful tech investors have different strategies that can lead them to success. They might focus on tech themes, on hype cycles, or on picking the future tech shooting star. But there is one thing every one of them has to get right: picking a technology that will be successful in future.
Successful technologies are always productivity boosters, so, those plummeting share prices should not be misread as a “sale” of good companies. The companies might be good, but they are built on a decaying foundation that cannot last in the long term. Luckily, these days there are so many more productive disruptions you can take your money to.
Pejic is author of Tech Money, a book that uncovers the new rules of investing in the technology age and explains how investors and executives can profit from them.
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