More on SNS monopoly

Is Facebook a natural monopoly? In my previous post, I argue quite vehemently that, unless DiSo is implemented and massively used, it could become one — and I’d like to tamper that opinion with a distinction notion in competition economics: chalengeability.

The SNS market offers grounds a natural monopoly: everyone wants to use the same service as their friends, and because everyone is connected to everybody else (presumably by a chain of less then six steps) all want to be on the same SNS — the reality is more complex then that, but the latest opinions converge to say that, by considering the importance of weak links and availability of celebrities, you end up with having any decently put SNS a possible candidate for an imperial market share. And that’s the catch, a notion introduced by Microsoft: market share doesn’t necessarily mean control.  Some markets let any small, independent, innovative player with little means take control quite easily. The idea applies to SNS far more then OS, Office software or Flight Simulation, so it’s ironic Microsoft paid for its development, but it is a very relevant idea for SNS.  We saw many flips in recent history; LiveJournal was a step to Friendster; Friendster paved way to MySpace, whose issues made Facebook possible. And protests against Facebook’s features, so easily visible thanks to the NewsFeed could make a fifth generation service, like Twitter, gain traction overnight.  The question is: would that next SNS have to be better? i.e.: Does being a incumbent help ou or handicap you?

A great framework to start from is the one laid in that great article from RRW.  I particularly like that Bernard Lunn makes crystal clear the argument that I’ve been hammering for the past years:

In a social network, the value for existing users of a new user joining the network plateaus once users have most of their own contacts in that network.

but I would like to extend the analysis. Users are sensitive to change: the expression “same old” is often used in IT and caries well the meaning that reproducing existing winning features is easy.  Testing is hard, and Melissa Chang rightfully say that public complains against Facebook feaures is their main asset: they know what to change, in detail; it’s also their competitors main asset — so it’s both important, but doesn’t differientiate them, just like Nick Carr argued that IT was, some years ago.

The real catch is that people adopt not the service that is the best, but those that they expect will be used by their friends soon. The most impressive is relevant only through what you think of your friend’s eyes.  Because you anticipate they are blasé about all those old tech, you look forward to the newest, different kid — and behind early adopters, you have people who know the trade well and over-estimate how much their relatives know about technology.  With increase public scrutiny on SNS, and semi-decent coverage by mainstream outlet, one might expect that Facebook is not only diging it’s grave by publicly sharing it’s issues, but also by going mainstream and letting the next cool kid surf on their wave.  Making your service the center of attention is not changing who your users are, but how well they understand your business, and would value alternatives.

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About Bertil

I'm a PhD student in Digital Economics, and I love viennoiserie. Je suis un doctorant en économie (numérique) et j'aime la viennoiserie.
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2 Responses to More on SNS monopoly

  1. Pingback: The open, social web | FactoryCity

  2. Pingback: Chris Messina reflecting on an open social web « Fredzimny’s CCCCC Blog

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