Influence of Network Effects
In our study of network effects, we analyzed how “for some kinds of decisions, you incur an explicit benefit when you align your behavior with the behavior of others.” In Alexis Madrigal’s article “WhatsApp and the Erosion of the Network Effect,” the telephone is used to exemplify this idea. Madrigal quotes, ‘“The more people who own telephones, the more valuable the telephone is to each owner.”’ After considering the numerous examples discussed in lecture and in the textbook, it seemed reasonable to assume that the topic of network effects becomes relevant in the adoption of all communicative technologies. This, however, is not the case. In her piece, Madrigal offers an interactive technology for which network effects have little influence.
Interestingly, Madrigal argues that network effects are beginning to play a relatively lesser role in present-day society. She claims that the world is becoming increasingly dependent on mobile technology and that in this specific area, network effects do not matter much. She asserts, “With a phone, your network of contacts goes with you to any app you want, instantly, and the push notifications allow friends on any of the apps you’ve installed to contact you at any moment.” Because of this underlying interconnected structure, little to no work is required for an individual to use multiple communications platforms. To further her point, Madrigal contrasts mobile technology with desktop technology. When using a desktop, “The switching costs between full-blown social networks on the web is high.” This is because desktops currently lack what mobile devices are able to take advantage of: compatibility and interconnectedness. As a result, “Switching [requires] a lot of members on the network to make the same decision.” This in itself relates to the terminology introduced in Chapter 19, namely the concept of a threshold. All in all, the contrast between the two types of technology effectively demonstrates that while network effects remain influential on desktop technologies, they are less so on the mobile technologies that we more frequently employ in today’s fast-paced and on-the-go lifestyle.
I found this article particularly fascinating because it provided an interesting twist on the class material. Of course, it first reinforced the contents of the curriculum by incorporating core principles of network theory (i.e., network effects) and applying them to familiar real-world contexts (e.g., WhatsApp, Facebook). In addition, the piece offered exceptions to the common pattern one typically observes. The counterexample Madrigal uses in this article is thus, in a sense, similar to our conclusion that crowds are not always wise despite the “wisdom of crowds” theory. It will be interesting to see if the influence of network effects diminishes even further in the future.
Source: http://www.theatlantic.com/technology/archive/2014/02/whatsapp-and-the-erosion-of-the-network-effect/283980/