This is the second article in a series of posts on thinking about Facebook Kerfuffle. You can read the first article (on Leaky Platforms) here.
In this post, I focus on how networks can fall. To illustrate the tentativeness in the growth and decay of platforms, bear with me, as I start with a Romantic Comedy from the 80s.
In the under-rated classic Say Anything (above picture), John Cusack’s underachieving and kickboxing Lloyd woos Ione Skye’s accomplished and resplendent Diane, by playing Peter Gabriel’s “In Your Eyes”, on a boombox held over his shoulders, loudly beseeching her to come back.
It is an iconic pop-culture scene, freezing the eighties — before the advent of the late nineties of Windows and the aughts of Apple Music in our pockets — in our imagination. It is also a distinctly teenage moment, brimming with adamant and brash hopefulness.
Depending on whom you talk to, the boombox scene is either the pinnacle of all romantic gestures or the depths of skin-shedding creepiness that ought to never work. Empirically speaking, I think it works only in movies. Even in Say Anything, it almost doesn’t work. Diane goes back to Lloyd, only because she finds out that her dad has been embezzling IRS funds.
I want to connect this story to Facebook’s attempts to keep things from cascading.
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Positive Externalities
Let’s start with the scale of Facebook and the volume of users joining and using the platform. Facebook has more than 1.4 billion active daily users worldwide. Daily users constitute about 64% of the roughly 2.2 billion monthly users. (Monthly users are those users who used the platform at least once in the last 30 days). According to news reports, there are another one billion occasional users who have Facebook accounts but do not log in that often.
These numbers are staggering. The next biggest platforms such as WhatsApp (1.3B), the standalone Facebook Messenger (1.3B), and Instagram (900m) are all owned by Facebook. The biggest “social” competitor, WeChat has a relatively “paltry” 980 million users. (YouTube logs in at 1.5B users, but is not a predominantly social site).
As described in books exploring the economics of platforms, the platforms typically operate in “winner takes all” conditions due to positive externalities (i.e., users are more likely to join, if other users have joined before). This effect is pretty much evident in the above data.
Networks with positive externalities (network benefits), have the same kind of steep pickup in users as technology evolves above a threshold. We can see structurally similar findings (Bass Model-type S curves), in product introductions, such as iPod players, which I discussed in Snap Spectacles.
The Future is Bright until suddenly it is not.
The flip side of the stupendous scale achieved with positive externalities is the possibility of sudden decay. The decays that occur in such networks are extraordinarily fast. This theoretical property makes sense: As more users use a network, the better it is to use the network; As more users quit the network, the better it is to quit the network.
So networks are extraordinarily dominant until the moment of inflection, and then they collapse hastily. We do not have to go far into the history to confirm this idea: According to this fascinating Financial Times vignette from December 2009, MySpace went from a 60-70% to less than 30% market share within a year.
There is another asymmetric effect.
FOMO Hastens the Drop
In the previous post, I argued that many users on the Facebook platform (as against other platforms) are driven by nebulous goals associated with feelings such as FOMO – fear of missing out. People fear missing out, in the sense of, they fear not being aware of what happens around them. I use the term earnestly and without judgment. Many users have complicated social needs and Facebook does fill them. I think that we should not dismiss the choices of millions who have connected with their families overcoming geographic distances and others who found peers with similar interests.
But, such small-closed groups are not a Facebook thing. By Facebook’s own research, each person in the world (at least among the 1.59 billion people active on Facebook) is connected to every other person by an average of three and a half other people. This is a very tightly interconnected network.
Hence, understanding the nature of decisions driven by such nebulous feelings is the key to understand Facebook’s network challenge.
When I join a network because I am worried about missing something, I find out more about the thing. I also find out how I respond to learning more about the thing. Uncertainty becomes reality. I might find that I like being connected and feel fuller in life. On the other hand, I might learn that I don’t necessarily like knowing about LolCat memes, precocious children, Movember mustaches, and clap backs. (39% of Facebook users never responded to a page, or liked a post).
FOMO makes joining a network tentative, but the quitting decision or the decision to slow down usage is far more certain. Because of the realized certainty, it is hard to get those users back. To address these issues, Facebook does two things.
A. Facebook constantly tries to re-frame the nature of usage on the platform from “make the world more open and connected” (2009) to “time well spent” (2017). This part of the effort is to keep the frequent users meaningfully engaged on the platform.
B. Facebook also makes it incredibly hard for users to quit. When users quit or don’t log on frequently, Facebook really wants them back. It does so by constantly bombarding them by sending messages and emails and tracking cookies. This is like John Cusack playing a boombox outside the window.
In my mind, the relentless messaging fits with the movie example in many ways — the hopeless audacity, the loudness of the channel, the obviousness of the effort, and the lightyears to nuance. “We think you are totally missing out X; Come back and we can make it work. We don’t know how.”
Empirically, I doubt it works. This calculation works only when the users who leave are confused or have a high value on the things that they are missing.
To Conclude,
Facebook needs the infrequent users to remain the platform to keep frequent users’ “time well spent”. It is hard to do this well, and secure themselves against a future cascading drop. Only time will tell, if they can keep every user “happy” at this incredible size and scale, without sacrificing monetary growth objectives.
Perhaps, there is a case is for regulation to reach smaller scale or more multi-partite networks. However, winner-takes-all platforms are hard to regulate. The engagement of policymakers and academe on this issue has fallen short, both due to poor incentives and misunderstanding. This is the focus on my next (and final) post on the kerfuffle.
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