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Google+ and Network Effects

Google+ is the site belonging to the search engine of the same name, and it’s purpose was presumably to compete with the social networking giant Facebook. However, for a number of reasons, the site has not been nearly as successful as facebook. If we time to be the price people pay to use the site, we can use network effects to analyze what some of the issues with the site were.

Part of the problem is that the positive externality of Google+ is not high enough for people to get great value out of it. If more users started using the site, people would be able to get more information from the site, as they could find out more things about their friends and family, particularly with the “Circles” feature that provides an easy way for many parties to communicate at once, and is a feature which no other service has provided to my knowledge. However, if people are not using the site, then there is very little value for one person to use it.

Graphically, this could be represented by the r(x)f(z) curve with the price being reduced, with time spent on the site representing the price, and the increased value of time spent on the site effectively lowering the price. If people are getting greater value from the site, the whole curve will be shifted upwards, lowering the place where the price will intersect with the curve, and meaning that less people will need to be using it to reach the first equilibrium point, and translating to a greater number of people using the site at the first, stable equilibrium point.

There was a significant amount of access on the site over the summer, when the access was invite only. I postulate that the exclusivity of the site made it more valuable to people, as they would assign a greater value to something that they believed was rare and highly desired by other people. Once everyone could use the site, this novelty effect wore off, and then reduced the value that people had for their time spent on the site.


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