How Facebook prevents network cascades
Article: https://www.wired.com/story/facebooks-aggressive-moves-on-startups-threaten-innovation/
The attached article describes the business tactics Facebook uses to maintain its dominant position in the social media space. The strategy can be roughly split up into two distinct tactics. The first is to copy what the competition does. For instance, Instagram, a Facebook acquisition, copied Snapchat’s story feature which was followed by decreasing user growth for snapchat. Facebook has copied many more of its competitors’ features such as location sharing and in-app payments. The second main tactic Facebook uses to prevent their competitors from dethroning them is to simply buy them out. Facebook bought Instagram for over a billion dollars and Whatsapp for a whopping 23 billion dollars! To help with this tactic, they bought an Israeli startup that tracks trending app downloads and usage. In this way, Facebook can see what potential rival apps are doing well and could be a threat to their market share, and consequently a smart business acquisition.
This is relevant to our curriculum because Facebook’s theory (and success) can be explained using a threshold network cascade model. We model social media usage as a network graph where (for the sake of simplicity) two different technologies are being used F, (for Facebook) and A (for everything else) where most of the network is using F and there is some threshold value where users switch to A. Facebook’s first tactic of copying features is aimed at increasing the threshold value. More precisely, by copying features, they are minimizing the benefit of switching to A because a significant part of the benefit of A was this feature F didn’t have. Therefore, the benefit of A relative to F decreases, which in turn increases the threshold value making it more difficult to the adoption of A to spread. Facebook’s second tactic of buying up competitors essentially boils down to Facebook paying money to switch A users to F users by way of making technology A into technology F. The combined use of these tactics makes it extremely difficult for any startup to gain a sufficient market share to start a cascade which is precisely the goal of Facebook.