Messaging Application Adoption: Does the Best Technology Always Prevail?
With its creation back in 2004, Facebook leveraged a unique interface to allow users to more actively engage with their friends. While it originally started as a basic profile navigation site, it quickly developed additional capabilities to enhance opportunities to stay in touch with other users. One of these capabilities and the focus of this blog, was group messaging. Facebook’s online platform allowed users to start conversations with a series of friends remotely. While it was very similar to texting, it presented a number of unique features that caused other companies to follow suit. While the space has become really crowded with similar companies, two main ones stand out as the leaders: Groupme and WhatsApp.
Both of these companies were founded in 2010. As a result, users generally adopted the application that they first received exposure to by a friend or other news source. As is the case with most technology, however, we would expect people to transition toward the application with the best technology and most benefits to its users, regardless of their starting point. Interestingly though, this might not always be the case. Although it is sometimes difficult to measure the quality of a product, a survey by Versus noted that people generally rate WhatsApp higher than GroupMe. If we accept user’s ratings as a proxy for quality, then we could assert that WhatsApp is the better product and would expect the number of WhatsApp users to increase over time while the number of GroupMe users decreased, reflecting the transition from one application to the other in order to maximize benefits and a user’s utility.
While this may be the case for a number of products, the fact that both applications see widespread use across the nation suggests that there must be another driver in people’s decision making process: network effects. Network effects reflect the underlying reality that sometimes benefits are not only derived from the product but also from other people who are using the product too. To provide context of such a situation, I turn to a personal anecdote about my experience with the two applications in question. I first downloaded GroupMe several years ago due to pressure from some of my friends on a group project. During the project, I realized how many of my other friends were using the app and how they were able to talk with each other in an interactive manner. So, I decided to keep the application even after the project finished. A year or two later, I traveled internationally with several other friends. Each of them, however, used WhatsApp. So in a similar manner to my first decision, I downloaded the application and started using it with them. While I more thoroughly enjoyed this application, upon returning home I realized that none of my other friends used WhatsApp. Realizing I would be unable to convince them all to switch over to the, in my opinion and as suggested by the survey, better technology, I gave up and switched back to GroupMe.
While my actions may be unique in the extent to which I was exposed to both applications, they can be reasonably explained by the network model and individual rationality. When I first started using GroupMe, the benefits I received were largely derived from the fraction of the population of my friends that were also using it, which was substantial. When I traveled abroad, however, the benefits switched. Since none of those friends used the application, the benefits to switching increased dramatically and the necessary threshold for switching was reached. Given that the technology of WhatsApp was better, this would seem like the natural progression regardless. Upon returning to the US, however, I was stuck in a situation that would seem counterintuitive, given that I was transitioning back to worse technology. Regardless, my behavior can still be pretty easily explained by game theory, specifically through the lens of a coordination game. While I would have been made best off by having everyone else switch to WhatsApp, there were a number of barriers that prevented this from occurring. Realizing that I would not derive any utility from using the application by myself, I switched back to GroupMe, which ultimately lead to a nash equilibrium (though not a socially optimal one I may add). The dense cluster of GroupMe users in the region served as a barrier to entry that prevented the better technology from taking hold, leading to a sub-segment of the population that remained isolated from a substantial portion of the rest.
While we still continue to use GroupMe and presumably will continue to do so in the foreseeable future, it could be argued that it is too early in the process for widespread adoption to take place. In mini simulations of the game, we can see that different people adopt new technology during different iterations. This could be the case here, where enough of our external friends have not downloaded the application causing us to not fully appreciate the benefits of adoption. If such a threshold was reached though, my group of friends would slowly make the transition to WhatsApp. As we can see from the WSJ article, however, the technology underlying the applications and other competitors continues to advance. So while at the current stage the benefits of better technology may help encourage switching to a different app, future developments may cause commoditization of the features and benefits, as we can see through the increase in the cross-platform capabilities of many of these apps (creating increased competition with Facebook). In this situation, people would no longer be dissuaded from using their current application and utility would only be driven by the fraction of the population using the applications. Thus, behavior would not switch unless some external driver created a disturbance in the market, leading us to conclude that network effects are substantial and that the best technology may not always prevail.
Sources:
- http://www.wsj.com/articles/whatsapps-billion-users-can-now-text-from-windows-and-os-x-apps-1462931643
- https://versus.com/en/groupme-vs-whatsapp
you might like to see this: https://www.similarweb.com/blog/worldwide-messaging-apps