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+1: A look at the Game Theory Behind the Social Networking Arms Race

http://mashable.com/2011/06/28/google-plus/

After its inception seven years ago, Facebook has finally come up against a social networking site whose rise may threaten its user consumption. Within just a few weeks of its release, Google+ reached 10 million users. Although this may not seem like much compared to Facebook’s 750 million users, the rapid rise of Google+ was enough to push Facebook computer scientists into action. They needed to know why people had been attracted to Google+ in the first place; was it an added layer of security, a “circle” of friends to message, or simply just the idea of a new toy to play with? Whatever the reasoning, Facebook answered the call to this challenge with its best response: to add new features to the site that would contest those of Google+. Soon enough, Facebook users were seeing new features added left and right, like the Skype integration that challenged Google+’s “hangouts” and the option to allow the user to choose the people that can see their posts. As the months continued to go by, I began to ask myself when this arms race would end?

GOOGLE + vs. Facebook

Add Feature

Don’t Add Feature

Add Feature 20, 20 0, 30
Don’t Add Feature 30, 0 0, 0

This situation immediately reminded me of the game theory material we have been learning in class. So I thought to myself, what would happen if Google+ and Facebook both came up with the same idea for a feature to add to their social networking sites? Using arbitrary values, I came up with a chart shown above to illustrate the decisions each company would take in this arms race (a competition to simply remain evenly matched). By the logic that each company would try to add the feature in order to maximize their payoffs, it is evident that both companies would be stuck in an unending loop to try to “win” against the other. This means that adding the new feature would be a strictly dominant strategy for both companies. In the light of this conclusion, I cannot say when this game will end or who will be the winner, but I will definitely be enjoying the constant innovation while it lasts.

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