PayPal On Facebook Pay And The Power Of Consumer Choice
During last week’s lecture, we’ve learned how the network effects, also called the direct-benefit effects, plays a role in our daily lives. By definition, this is when someone obtains explicit benefits from others when the mimic the actions of other people around him or her. This concept could be easily explained by an example of Youtube videos in our lives. While we are browsing videos on Youtube, we are likely to click on the videos that seems popular on the website, that is, has a large amount of clicks, this is because we are inferring there must be something interesting from the video that led to people watch it, and by such inference the clicks of this clip would grow larger and larger, and such behavior also call “the rich gets richer” in our textbook. This is a real world phenomenon of the network effects.
Furthermore, Facebook is launching a new program Facebook Pay recently, this is a strategy of employing the network effect on their products. Since Facebook has a large user community and people using Facebook are usually friends of each other, they are more likely to mimic the behaviors of each other thus more people would use this program. However, Facebook needs to consider its competitors, such as PayPal and Apple Pay, which already have a substantial share of the mobile payment market when they are introducing the Facebook Pay.