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Considering Facebook's dominance they should have nothing to fear, but internet history is  littered with fast rising and fast falling social networks

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Considering Facebook's dominance they should have nothing to fear, but internet history is  littered with fast rising and fast falling social networks.

A Statista survey found that with 1.5 billion users Face- book is not only the largest social network globally, but they control the second, third and seventh largest net- works: WhatsApp (900m users), Facebook Messenger (800m) and Instagram (400m). It seems they are well ahead of everyone else in network effects and have cre- ated high switching costs for users to move to another social network. When users have built up a set-up of perhaps hundreds of friends and have archives of their whole life including photos they don't easily switch to another company and network just because it's some- thing fresh.

Nevertheless, despite Facebook's clear lead, his- tory shows it's far from obvious that any social network incumbent can stay relevant and dominate long term. Friendster pioneered the online community in 2002, three years before Facebook, and gained over three million users within a year; attracting tens of millions of users at its height. It was, however, soon overtaken by MySpace that appealed to even more and younger users with their more hip feature-filled environment including music and music videos. By 2008, it was the leading US social networking site with over 75 million users and consistently ahead of Facebook in traffic. However, soon Facebook started to attract teenagers with their new features with corresponding losses for MySpace. This overview illustrates that networks can quickly gain millions of users and huge valuations, but can just as quickly face slowing growth, users leaving in millions and final implosion. Further back in internet history, there are several other implosions of those with social network ambitions: BBS, CompuServe, AOL, etc.

Founder and CEO Mark Zuckerberg has, however, seen the threats and taken action. Instagram was acquired in 2012 when they were becoming the biggest mobile photo-sharing service with many younger users posting content there rather than on Facebook's own web-based photo service. Next was WhatsApp, the biggest messaging service globally; it was bought in 2014 as users started to move their activities to mobile platforms. To fence off LinkedIn

they have launched 'Facebook at Work'. Not even Google has managed to remove Facebook from the social networking throne. Google's first social net- working effort was Buzz, based on its Gmail service, but it never managed to attract enough users. Many Facebook users tried Google's next and even big- ger bet, but soon discovered that not many of their friends followed so they returned and Google Plus, although still existing in another format, also flopped.

As of 2016, Facebook remains unbeaten and has perhaps learnt from social networking history. With their current valuation they can possibly continue to make defensive acquisitions as users are attracted to com- peting platforms, content and media, like Snapchat. But how long will it last? Some question Facebook's staying power and claim it's quite possible they will be overtaken. However, as reported by Forbes, Mark Zuck- erberg, however, only sees this as inspiration to build Facebook even stronger:

'This is a perverse thing, personally, but I would rather be in the cycle where people are underesti- mating us. It gives us latitude to go out and make big bets that excite and amaze people.'

Sources: Statista 2016; R. Waters, Financial Times, 29 January 2016; J. Gapper, Financial Times, 12 April 2015; J. Bercovici, Forbes, 11 September 2012; A. Liu, digitaltrends.com, 5 August 2014; R. Waters, Financial Times, 21 February 2014; and J. Gapper, Financial Times, 3 October 2013.

Questions

1 Why are network effects important for Facebook? Would you switch to another social network if it had better features even if it was considerably smaller?

2 What other social media networks and apps do you use that you think could beat Facebook? Why?