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Network Effect and Censorship

In the past 10 years, the meteoric growth of social networks have enabled millions to connect to friends and family around the world through a single click of the mouse. These giant hubs of communication really help solidify the connections people make with each other as no longer will you forget who you met outside as you can simply add them on the social network. The goliath in the social media world right now is Facebook, as it drove Myspace to the ground and went on to become one of the most prevalent and influential social networks out there. While many small social networks often try to upstart Facebook, they have most often failed due to the lack of appeal of their “innovative” idea. However, recently there has been one social network that threatens to take away Facebook’s users by paying users to post on their social network. Tsu, pronounced “sue”, is a brand new idea that will allow any user who post statuses to gain a percentage of the advertising money back to their own pockets. This is supposed to incentivize the users and let people gain benefits (money) from building their social networks. The controversy arose when Facebook began banning all posts that came as a result of Tsu and all posts that provided a link to Tsu. This prompted Tsu to call out Facebook’s censorship. It is almost as if Facebook was scared that a smaller social network might somehow overtake the behemoth itself. While many Facebook employees have commented that it was the spammy nature of Tsu’s posts on Facebook that caused it to be banned, there is always this air of unfairness permeating throughout Facebook.

This incident can be directly related to when we talked about network effects in class. While Facebook is at a stable equilibrium right now and has the majority of the market, a new product, Tsu, that might be better than Facebook, has come onto the scene. Assuming it is better than Facebook since if it isn’t, there is no chance for it to overtake Facebook, we can say that the reservation price for the market is higher for Tsu than Facebook. While normally Facebook would not be worried about this issue as there would be no incentive for Facebook’s users to switch to Tsu due to the fact that both social networks are free, the introduction of payment with user posts on Tsu is possibly enough incentive to get some users of Facebook to try out the new social network. And once Tsu’s user base exceeds the unstable equilibrium (greater than a certain fraction of the population begin using it), or tipping point, then there will potentially be a massive exodus of users from Facebook to Tsu as everyone’s friends will be using Tsu, and they will want to use it too. There will be no stopping of this as we assumed that Tsu’s intrinsic value is higher than Facebook’s value. Due to this, the demand for Tsu will be higher. In order to prevent Tsu from reaching this tipping point, Facebook has decided to lock down and prevent sharing of Tsu’s link. This will make it less likely that people will hear about Tsu, and thus less people will be able to try it. This will prevent Tsu from reaching the tipping point. Since it is an unstable range before the tipping point, if Facebook can do this for a long term effect, effectively 0 people will be using Tsu. Another possible way this can connect to lecture is why users choose certain social networks. Given equal choice, a user can based their choice on an information based or direct benefit based reason. An information based reason in this case might be the fact that since the majority of the world are using it, then the social network must be pretty good and he can connect to more people. Therefore, he should use it too. A direct benefit based reason might be that since the friends he wants to connect with are on one network, he should use that network since he wants to directly communicate with his friends. Even if the social network is not very good and no one else uses it, as long as his friends use it as well, he will want to use that particular network. This is a direct benefit for the user.


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November 2015