Network Effects on Instant Messaging Apps
Before smartphones have become popular and affordable, network effects played a big role when deciding which mobile carrier to go with. In my home country, sending texts is only free if both parties are on the same carrier. Therefore, other than considering the direct benefits of choosing one carrier over another (network coverage, costs of the plans, etc.), we also had to consider which carriers our friends were on.
Nowadays, this network effect no longer influences my choice of phone carriers because of the abundance of instant messaging apps. The most popular one in my home country is WhatsApp. It was one of the earliest apps that entered the market and gained a large share of users. Even though it has changed from a free app to a paid one, it still remains as the top messaging app. It provides essential features such as sending pictures, videos, voice recordings and participating in a group chat. Although other apps may have unique features that are absent in WhatsApp, most people still consider WhatsApp as their “main” messaging app. Other popular apps include Facebook Messenger (which became popular because most people already had Facebook accounts and we can message people without exchanging numbers as long as we can find them on Facebook), WeChat (from China) and Line (from Japan). WeChat and Line gained popularity mainly by promoting their ability to send “stickers” to friends.
Let’s analyze the gain in popularity of instant messaging apps through the concepts of network effects covered in class. When choosing an app, we would consider its direct benefits – such as unique features available in the app that is not provided by others and also the number of people using it – the more the merrier. It can be seen that WhatsApp has won the top spot by boasting the largest number of active monthly users.
However, just because most people use WhatsApp, it doesn’t mean that we wouldn’t install other messaging apps. We wouldn’t want to lose contact with friends just because they’re not using WhatsApp. Instead, we would install the alternatives that they use, after all it’s just a few taps away.
This shows how network effects have less influence on instant messaging apps, compared to other markets, such as social networking websites. Several properties of messaging apps distinguish them from other products. First, each app usually has access to our contacts – we don’t need to rebuild the social network when adopting a new app. Second, each app can send notifications to our phone – we can use several of the apps at the same time because we don’t need to check them individually. Third, the app doesn’t need to have “content” before it becomes more functional (as opposed to Facebook, where users have to post content to populate others’ newsfeed, or Instagram, where users have to upload photos for others to view). In messaging apps, users can get started right away. Their enjoyment is not based on any previous content generated in the app.
In the instant messaging app market, new entrants don’t need to “convert” users from one app to another. They just need to have people use theirs in addition to whatever they had originally. This can be done by providing more direct benefits – unique features. For example, Snapchat provides a way for us to send messages, pictures and videos which would self-destruct in a few seconds; Slack provides an environment that is more professional and suitable for the workplace. Their goal is not to compete with the most popular instant messaging apps and becoming the “main” app of users. Instead, they focus on differentiating their product so they deserve a spot on your phone, among all the other apps you have.
Sources:
WhatsApp and the Erosion of the Network Effect – The Atlantic