How Facebook beat Myspace
Myspace is long gone and is nowhere near as popular as Facebook is today. But at one point, myspace was popular, valued highly, and considered to be the social media site. Why did Facebook change that?
In addition to some clever advertising of their product to college students, the network effects played an important role. Specifically, the college students that Facebook targeted were all playing a coordination game on one large cluster whose nodes were the college students that a particular student knew. In the beginning, MySpace was seen as the social media site by many users. However, college students at the time of Facebook’s release were not heavy users of MySpace. This is very important because it essentially means that in the payoff matrix of the coordination game, if two college students coordinate on MySpace, their payoff is vastly inferior to coordinating on Facebook. This is because although coordinating on Myspace still yields some benefit, since neither student would use it significantly to begin with (and since most other college students didn’t use it) they would have to spend time and make an effort into liking and wanting to be an active myspace user to derive benefit from it.
This is not the case with Facebook however. With Facebook, if the two students coordinate, they both derive some benefit, and that benefit is greater because of the novelty factor. Since Facebook was new to the college students, and since everyone else had begun hearing about it at the same time, it was enticing to the students to–in layman’s terms–figure out what all the buzz was about.
This is the foundation of the coordination game. A game such that if both students coordinate on Facebook, they maximize their payoff. From this, everything is history. While Facebook deserves credit for how they packaged their product and advertised it, once people began enjoying hanging out on Facebook because their friends used it, network effects took over and Facebook’s popularity grew (much like in a rich-get-richer process).
http://techcrunch.com/2011/06/28/sean-parker-on-why-myspace-lost-to-facebook/