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Venmo’s Increased Popularity through Social Networks

The article I picked is about the app called Venmo, which allows for people to send electronic payments to one another.  The article goes into the features of Venmo and how this app is taking over the mobile payment industry.  The article begins with the growth of Venmo financially.  Venmo has grown to profits of $314 million in payments in Q1 of 2014. , which is equal to Starbucks’ mobile payment app.  The article then goes into the social networking aspect of the app and how this app to transfer funds is now social networking site filled with things like a news-feed and comments.  It then goes into how this app is really strong with the younger generations but is now growing steadily with older people.

If feel that this topic and this app’s success relate to a couple network’s topics.  I feel that this app’s success could be partially attributed to network effects and to an information cascade.

Venmo’s partnership with Facebook allowed for Venmo to display users money transfers, through the app, on Facebook.  The younger generations, more specifically college students, use Facebook and buy things.  When people buy things together then they usually try to split the cost of this item.  This is where Venmo comes in and allows for these people to split these costs.  The app of Venmo allows for money to be transferred easily, but so do other apps like Paypal, Square Cash, and Google Wallet.  What distinguishes this app from the rest is its tie to Facebook and Social Networks.

Venmo’s posting on Facebook shows non users of Venmo that some people prefer to use Venmo than other mobile payment apps.  When people are exposed to users only using Venmo then an information cascade is likely to occur.  By observing others use this specific app for this specific purpose, non users could look at this and make an inference on this.  They can infer that this app is the best for mobile payments, therefore making an information cascade.

Venmo’s social networking on its own app also allows for a network effect to occur.  “The benefit to you from a social networking site is directly related to the total number of people who use the site” (Chapter 17 of Networks Book).  Even though they already have a positive externality, since many people use Venmo, users of Venmo always want their friends, who are non Venmo users, to download the app to increase their externality.  This increase in Venmo users also increases the profits to which Venmo will receive.



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