Facebook and the network effect

Image via CrunchBase

I was having lunch with some colleagues this past week when I mentioned this Louis Gray post from earlier in the week: There Is No "Osborne Effect" In Web Services. The Osborne Effect basically states that buyers will wait to purchase something if they know a better or newer alternative is right around the corner. This causes a decline in sales of the current product, and in the case of Osborne Computer was cited as the reason for the company's failure.

I commented, "We should be so lucky as to have an Osborne Effect. Waiting is good. That's not the threat. The danger is that we have a network effect and what is going on around Facebook is not only scary it's also very dangerous." This comment brought on a look of confusion, and a demand for clarification. It was then that I mentioned this other recent piece of news, Google Vs. Facebook

In the UK, Facebook accounts for 15% of the total pageviews (or 1 in 7). In the US Facebook accounts for, now get this, 1 in every 4 or 25% of our total pageviews. Unbelievable!

ONE IN FOUR PAGE VIEWS! This is what happens when we have a network effect in social media. A single site, in essence, has become the Internet for a majority of people. They go to this single site and they never come out. It has becomes the only lens through which they view their world.

Network effects do have some beneficial uses, for example, having a phone that doesn't connect to any other phones is for the most part useless. When it comes to the Internet, however, a network effect is extremely dangerous. Why? Let me make a list:

• It kills off innovation. No one will invest their time or money in something different that stands little hope for garnering the public's attention. Doing it on Facebook becomes everyone's default.
• The kingpin gobbles up their competition. They purchase or otherwise destroy innovators that demonstrate any sort of threat, e.g. Facebook's recent purchase of FriendFeed.
• They use their monopoly position to destroy competitors through illegal means, e.g. Microsoft and Netscape.
• They lock-in your data, your very lifestream, so that the penalties for leaving are severe. See roach motel. They do this because they can.
  

Of course, when people go all-in at Facebook they aren't thinking about these sorts of things. They don't even consider that they are giving their entire in-the-flow life experiences to a private company that will keep it forever, and won't let you take it anywhere else. All they think about is that they are connecting with that old friend from high school. The evil aspects won't sink-in until many years later, and then it will be too late.