16 ms·

Facebook and the Cost of Monopoly

304 points by germinalphrase 10y ago

grenoire 10y ago
I'm not so sure if the neoclassical general equilbrium theory applies so aptly to social constructs. Interesting approach, and I guess it gets the author's point across..
- HenryBemis 10y ago
  Dynamics are not the same (as they were in the 80s). Although the principles of supply/demand tend to be the same, we are talking about product/service that sucks in the "naive" users that fail to see the end-game and only see the cat photos. Addiction plays a huge role and Facebook is playing its cards very well. "Tipping point" speed is x100 nowadays.
- trendia 10y ago
  I'm kinda suspicious of how it's used here, too. What exactly is the "price" that consumers pay when they use Facebook? Their time? Their generation of content? What exactly is the product that's offered? Connections to their friends? News articles? It seems that Facebook simultaneously acts as a supplier (of connections to people / news) and a consumer (of connections to people / news). So, it's not really clear what the 'price' and 'quantity' axes really represent in reality.
  - marcosdumay 10y ago
    The article is exactly about this.
    - trendia 10y ago
      The article talks a lot about how the price changes, but doesn't explicitly say what the price represents.
      - marcosdumay 10y ago
        It's quite literal about price for advertisers, and not so literal on revenue sharing for publishers. It explains what it is talking about both times, and also explains that talking about price for readers is nonsense.
  - r00fus 10y ago
    not Time but Attention and their capacity to consume, disseminate and promote ads. Your complaint would probably also apply equally well to Google as both are tech ad networks at their financial core.
brilliantcode 10y ago
What does Facebook have monopoly on? Last time I checked, Google still dominated online ad spend.
- hazelnut 10y ago
  the social graph
- Glyptodon 10y ago
  Access to consumer's social interactions maybe?
- Spooky23 10y ago
  Eyeballs. Facebook is like the new TV. There's a ton of interaction with it and most of that content is locked away from Google's reach. They are fundamentally more powerful than Google and are underpricing their ads.
  - slackoverflower 10y ago
    > locked away from Google's reach Not completely true when majority of their mobile users access the app through Android and majority of desktop users, Chrome.
  - brilliantcode 10y ago
    Youtube & Netflix is the new TV. I don't think lot of people sit on their couch and watch Facebook videos all night. I don't think Facebook can ever reach Google's level. Google is expensive for a reason because it's highly valuable since people are searching to buy. Facebook is cheap because you are really casting a wide net and hoping to catch a fish. This is less efficient than Google's Adword.
    - Spooky23 10y ago
      Maybe not, but they spend an hour a day wandering through the feed. Google is more transactional. Facebook are display ads that are displacing TV.
guelo 10y ago
It is important to Facebook to crush Snap, not only to maintain their dominance of the social graph, but also to send a message to future social networks: you can either be like Instagram and Whatsapp and let us buy you or be like Snapchat and be crushed. Snap's IPO payday of $3 billion is probably less than Facebook would have paid for them.
- kamikaz1k 10y ago
  $3 billion is what Zuckerberg offered to acquire Snapchat. Given all the cultural cachet and freedom I think they came out ahead. http://mashable.com/2014/01/06/snapchat-facebook-acquisition-2/#YPbz0JAbiiq9 http://mashable.com/2014/01/06/snapchat-facebook-acquisition...
  - sgift 10y ago
    Only if they still exist in a few years. They wouldn't be the first company with a great IPO that didn't survive for long.
    - ams6110 10y ago
      The space is hugely fad-driven anyway. Kids don't use Facebook. They use Snap, for now. Who knows in a few years. Twitter and Facebook are what their parents use.
      - adamlett 10y ago
        Facebook has close to 2 billion monthly active users (MAU). Instagram and WhatsApp – both owned by Facebook – each has around half a billion MAU. Your comment reads as "nobody goes there anymore, it's too crowded".
    - stale2002 10y ago
      The people who sold their stock options have already come out ahead. Whether or not the people who bought those shares go under water isn't their problem. AKA, the early investors are going to make way way more money than if they had sold to facebook.
sgift 10y ago
I don't know. The whole post reads to me like it can be summed up as "I like Snapchat, I don't like Facebook" and some padding to disguise that. Saying Snapchat innovated and Facebook stole also reminds me of Apple suing Samsung for using rounded corners on phones i.e. ridiculous in my opinion. As if "hey, let's use the camera some more" was some grand vision that only Snapchat had.
- Analemma_ 10y ago
  I think it's more that he has a distaste for Facebook's "90's-Microsoft-esque" strategy of watching like a hawk for any potential competitors in the space, and going to them with a "either let us acquire you, or we will crush you" offer, and how successful that strategy has been so far. Most people have a vague sense, if only for aesthetic and "fairness" reasons, that we don't want the world to work like that. Unfortunately, the world doesn't care about our wants.
  - spacelizard 10y ago
    Don't be fooled by the showboating, behind every attempt at executing these aggressive strategies is a crumbling organization rife with disharmony and malcontent. They would not be focusing on what other companies were doing nearly this much if they did not feel threatened by it.
    - bigbugbag 10y ago
      Yes, when your success relies on a monopoly or dominant position, your future is at stake if you don't use your dominant position to remove any competition that may chip at your domination. This is exactly why monopoly are hurting everybody but the people profiting from it.
  - SerLava 10y ago
    Eh, the aggregate of all our baseless wants and opinions can make shit fly that normally would not fly.
- IBM 10y ago
sparkzilla 10y ago
Your company fails when you stop innovating and start copying, and enters a death spiral when smart employees (and investors) leave, because they know that no amount of fancy demos and vaporware will make up for the declining quality of the core product. Eventually the neglected core becomes weaker and weaker to the point where it fails spectacularly. We are saw this with MySpace, are seeing it with Wikipedia, Google Search, and if Facebook continues on the same path, it won't be long before they suffer the same fate.
- rdruxn 10y ago
  How is Wikipedia getting weaker?
  - sparkzilla 10y ago
    Number of editors is in decline. Presentation hasn't changed in 15 years. Policies are moribund. No innovation. No leadership. It's just a matter of time.
    - digitalzombie 10y ago
      > Presentation hasn't changed in 15 years Craiglist presentation hasn't changed either. I don't think this point is relevant if the UI is good enough or have been this way for so long that people are used to it. Changing it would be weird. > No innovation. You want to innovate an online encyclopedia? How exactly do you do that? And without sacrificing integrity? > It's just a matter of time. What is this time to event thing that you speak of?
      - sparkzilla 10y ago
        >Craiglist presentation hasn't changed either. I don't think this point is relevant if the UI is good enough or have been this way for so long that people are used to it. Changing it would be weird. There are many problems with Wikipedia's presentation of information [1], but the point is that, even if Wikipedia's UI was the best there was, new media inevitably come along that change the way customers want to access their information. For example, you may think it's 'weird' to change Wikipedia's text-heavy UI, but kids brought up on Snapchat, WhatsApp and Instagram might want a more visual interface for their encyclopedia. >You want to innovate an online encyclopedia? How exactly do you do that? And without sacrificing integrity? Beyond UI, Wikipedia has many problems in its data structure, policies, and integrity, by which I mean the veracity of its information, and its endemic bias. Rather than discuss them here, please read my blog post: Wikipedia's 13 deadly Sins. [1] >What is this time to event thing that you speak of? The rapid collapse of an incumbent site due to its monopoly position and consequent lack of innovation i.e. the point of the original post. Your response appears to confirm that the lack of imagination that goes hand-in-hand with monopoly products is not just confined to their creators. Their customers want the monopoly, until they don't. Wikipedia, Craigslist, Google and Facebook are not unassailable. Everything dies. [1] http://newslines.org/blog/wikipedias-13-deadly-sins/ http://newslines.org/blog/wikipedias-13-deadly-sins/
whatnotests 10y ago
I kept reading the title as "Facebook and the CAST of Monopoly" - needless to say, the article made no sense since I was looking for Uncle Moneybags.
pascalxus 10y ago
I think he's making a good point here about the effect of a Facebook monopoly on the rest of the ecosystem. Facebook stifling other social networks is the least of our worries. The effect on the advertising ecosystem is enormous! and Affects nearly every other internet company in the world that needs to acquire users! In this regard, so far Facebook as enabled countless businesses to exist with it's high value advertisement platform, but this could change as their monopolistic powers increase.
- bigbugbag 10y ago
  I remember reading a piece on how facebook influence on online advertising had a very significant potential for causing a collapse of the online advertising business model by both driving prices down and pulling advertisers away from other websites, but also by exposing the fact that online advertising is mostly hype and fraud eventually causing the online advertising bubble to burst.
deepnotderp 10y ago
Remember when "innovation" was novel computer architecture or a totally new product category and not "a social network for pictures... that disappear!"? Pepperidge farm remembers.
- deleted 10y ago
  [deleted]
- blowski 10y ago
  Pepperidge Farm? What's that?
  - xeromal 10y ago
    If that's a genuine question, it's a meme based on a family guy segment.
    - akinalci 10y ago
      If that's a genuine answer, the Family Guy segment is based on a long-running advertising campaign by the Pepperidge Farms brand of baked goods. I guess I'm old.
  - habosa 10y ago
    The parent post is referencing this meme: http://knowyourmeme.com/memes/pepperidge-farm-remembers http://knowyourmeme.com/memes/pepperidge-farm-remembers
  - bigbugbag 10y ago
    A running gag from the animated TV show family guy.
- jimbokun 10y ago
  Remember "No wireless. Less space than a nomad. Lame." https://slashdot.org/story/01/10/23/1816257/apple-releases-ipod https://slashdot.org/story/01/10/23/1816257/apple-releases-i... I think Pepperidge farm remembering past innovations as more glorious than current day innovations is not a new phenomenon.
yggda 10y ago
If prices do rise, that's still indirectly bad for Facebook. While in the short term they are going to make more due to the price increase, other ad networks will follow the trend and increase their own pricing/ restrict supply. This would make other content on the web more profitable, and produce better content removing some of that traffic from facebook. If high price ads are better (less clickbait e.g.) then this would be a benefit for consumers.
joshjkim 10y ago
surprised there's not more focus about network effects (a nod and link to "aggregation theory", which is more about distribution), and the fact that any social network's value, is tied to that in a big way, and therefore (at least in theory) most social products or features's value is also tied to the size of the network. so FB's argument could be that the value/benefit of its copying features/products (both to itself and users) should take into account the scale of its network. having tried to open a formatted Pages doc with MS word, I can see MS making a similar argument. Don't even get me started on excel vs. numbers (though excel and google spreadsheets is not TOO bad actually...) One thing I've found super interesting/impressive about Snap is that it didn't try to outcompete FB in terms of sheer network size for its usage stickiness, and instead turned smaller, tighter and more private networks into a differentiator, while at the same time providing advertisers/brands with a competitively massive audience - not an easy thing to identify, much less execute on. TBD if that differentiator is enough to keep them alive vs. FB's more traditional network-effect-driven advantage, which will be hard to beat on its own terms. I think Snap's success will depend a lot on its ability to avoid being tempted to play that game (see: Twitter!). Relatedly, I think there could be a lot more thought given to how we should think about monopolies in the context of markets where networks effects are crucial to the business value (aka. Facebook and Google most obviously, arguably Amazon, Apple), because one logical conclusion is that in a market where network effects are a major factor, the biggest network should be best positioned to provide the most value and therefore (assuming it doesn't actively eff things up on other fronts) should continue to grow until it dominates the market...which seems to pretty much be what happened, and it makes pretty good sense for the most part. in these cases, it actually seems BAD to break these networks apart, since their scale is arguably one of its primary values to the customer - this doesn't mean of course that they can't abuse their monopoly powers (I think they probably do to some degree and will continue to), but interesting to think that the traditional "break up monopolies" impulse doesn't make as much sense. this leads me to think it will just be more consumer-protection-related regulation (under the banner of consumer privacy, or maybe even public health, given all the "social media addiction" thought pieces out there these days ha). random other thought: this all also reminds me that Mark Zuckerberg has not made a peep about wanting FB to be thought of as a "utility" in a long time (or maybe he has and I just missed it...but couldn't find any recent mentions), probably in part because they are now a lot more at risk than ever before of being regulated like one (see this talk from 2013: https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be-cool/ https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be...). Also kind of funny to hear him talk about "we don't want FB to be cool" too, because now it seems like FB very much wants to be cool again now that Snap has become cool and has threatening user counts.)
shostack 10y ago
A meta-question for those who follow Stratechery or the Exponent Podcast and are perhaps more deeply engrained in some of these companies being discussed... Do you find the analysis to typically be pretty thorough and accurate? I love the podcast and I think I've listened to every single one at this point, and they always talk through their reasoning at length in a logical, (mostly) structured manner, which I love. However in the back of my mind there's this little voice that says "they used to be management consultants and still do consulting, so of course they are good at making their arguments sound convincing--but how sound are they really from a strategic standpoint?" Some of it we'll never know because it is in the realm of "what-ifs" but just curious for others' thoughts on the signal-to-noise ratio of their content.
- deleted 10y ago
  [deleted]
- mkeeter 10y ago
  I have the same meta-question, and would love to hear what other folks think – I enjoy Exponent a lot, but feel like it veers into just-so stories [1], and the theories / models could be interpreted to argue for any particular outcome In particular, Episode 101 left me feeling skeptical [2]. Aggregation theory / unbundling somehow predicts both Netflix winning and Spotify losing, but I was left with the impression that – had things gone the other way – an equally persuasive argument could have been made. [1] https://en.wikipedia.org/wiki/Just-so_story https://en.wikipedia.org/wiki/Just-so_story [2] http://exponent.fm/episode-101-tv-is-the-oak-tree/ http://exponent.fm/episode-101-tv-is-the-oak-tree/
- dilemma 10y ago
  Stratechery is generally very high quality but there's a lot of storytelling and a lot of ideology in there. I'd even call it magical thinking; something to make business analysis exciting for a wider audience than just executives. "The arrival of artificial intelligence" is an example, because AI hasn't arrived and it won't.
  - pixl97 10y ago
slackoverflower 10y ago
A lot of people underestimate that Snapchat has already captured a whole generation and formed their network graph on their platform. Another thing to remember is that this new 'format' that Facebook is ripping off is very much a cultural adjustment. I do not expect Facebook's most active users right now (30-60 years old) to be pulling out their phones out every 5 minutes, opening the Facebook app and taking pictures of themselves and what is around them. Snapchat has captured the audience that does do this, and it only happens on their app.
- JetSpiegel 10y ago
  > A lot of people underestimate that Snapchat has already captured a whole generation So did Hi5 back in the day, and it still went the way of the dodo. If you cater to attention-deficient people, they will leave in droves as soon as the next fad comes along.
  - bigbugbag 10y ago
    So did facebook and it will follow the same path sooner or later, hopefully sooner.
- dmihal 10y ago
  I keep seeing posts about how great Facebook's DAUs are for their Snapchat clones. This may be an anecdote, but my Instagram stories are mostly older people and brands. Snapchat is still where I go to catch up on what my friends are doing, and it's even more popular with younger generations.
jimbokun 10y ago
Peter Thiel: "Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT&T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers." Um, he managed to pick the THREE OF THE MOST FAMOUS EXAMPLES OF GOVERNMENT ANTITRUST ACTIONS, while trying to argue monopolies do not harm innovation. Doesn't the fact all three of the previously dominant monopolies faced anti-trust decisions against them, before major new competing technologies sprang up, make it clear how important anti-trust actions are for encouraging innovation?
- aylmao 10y ago
  +1 +1 +1 +1
- kjhughes 10y ago
  Thiel is challenging you to consider that the government's antitrust actions were unnecessary and counterproductive: Unnecessary because eventually upstarts find a way to leverage new technology to open new markets where monopolists' advantages no longer apply. Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition. You may disagree, but to refute his argument effectively you'll have to do better than merely reassert conventional wisdom about monopolies.
  - eggie 10y ago
    > Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition. If you have enough resources, it's often it's cheaper to quash-and-copy the competition than innovate. You may start labs to grab up smart minds, but this practice seems to be as much about suppressing competition as culturing innovation. And it seems to more to support the former than the latter. I would love some good examples of how this isn't the case.
  - dragonwriter 10y ago
panabee 10y ago
no analysis feels complete unless it factors both benefits and costs. this post seems lopsided on the cost-side. the author persuasively portrays the negative effects of a facebook monopoly, but does not objectively delve into the benefits. consider the subsequent disruptions spawned by AT&T research, for example. even though AT&T itself did not commercialize most of these products (e.g., the semi-conductor), can anyone credibly argue AT&T did not foster innovation? similarly, google's search monopoly produced cheaper smartphones, free worldwide communication, and self-driving cars. facebook's monopoly lets it advance research on AI, drones, VR, internet access, and human-to-human communication. it's far too early to judge if facebook harms or helps innovation. perhaps there is enough data to assess google, however. one of google's victims is yelp. if yelp is worth $20B instead of $3B, but we don't have all the benefits of google's massive cash flow, is society better off? if we repeat the process for every google competitor, we can start to engage in an unbiased evaluation of google as a monopolist. to clarify, i'm neither advocating for nor disparaging monopolies. the author is very sharp and one of the best tech analysts today. i'm simply hoping for fair and balanced analyses so we can reach informed conclusions.
RangerScience 10y ago
This is a neat article, but I'm distracted by a thought only tangentially related: What does it mean that Facebook has a monopoly through the network effect? So - Diamonds. Classic monopoly. Physical good, limited natural supply captured completely by a single business entity. (Notably, AFAIK, the same is true for Areva and nuclear fuel). Microsoft. Monopoly. Software goods. Their monopoly was achieved (AFAIK) through business deals and a quality-enough+ product. Has nothing to do with available supply. Facebook. Network-powered monopoly. Achieved through a good product, maintained by good-enough+ and the network effect (and their adaptability). The number one hurdle for any FB "killer" (as opposed to unbundlers - arguably, Instagram, as an example) is competing with FB's network effect. There's zero supply that FB has controlled to maintain it's monopoly. I'm not sure where this thought wants to go, but I'm trying to think up other categories or interesting things that fall into these categories. Thoughts?
- fiatjaf 10y ago
  I was about to write something like this. This is not a monopoly in any normal meaning that word is used. It is the network effect.
- bigbugbag 10y ago
  > So - Diamonds. Classic monopoly. Physical good, limited natural supply captured completely by a single business entity. You should reconsider using diamonds as examples and analogy: https://priceonomics.com/post/45768546804/diamonds-are-bullshit https://priceonomics.com/post/45768546804/diamonds-are-bulls... It seems to me the reason you don't understand facebook monopoly because you seem to believe it was achieved through a good product which is not at all how it happened, (if the product is any good it's for facebook). They got there through a lot of tricks from the black book of shunned upon dark tricks to control supply (new registered users). They kickstarted by seizing the universities students in ways that got them a lot of flak at the time then grew further by breaking their initial promises and more black book tricks and dark patterns. Once they reached critical mass and user lock-in, the people themselves would recruit new users and further improve network effect. There's also the shadow side that happened behind the scenes and can be pinpointed to around the time of Peter Thiel involvement. So "Facebook has a monopoly through network effect" means that due to the sheer number of people registered it has an effective monopoly. If you peruse the HN comments (or elsewhere) about facebook you will often see people that complains about facebook being a pile of crap that they can't leave because other people they want to stay to stay in touch are all there and some are only there. This is monopoly through network effect.
zeteo 10y ago
>The result of monopoly pricing is that consumer surplus is reduced and producer surplus is increased; the reason we care as a society, though [..] is deadweight loss. >Facebook may have a monopoly in social networking, and while that may be a problem for Snap or any other would be networks, Facebook would surely argue that the lack of deadweight loss means that society as a whole shouldn’t be too bothered. Traditionally, the main issue with monopoly has been about suppressing competition and innovation, not about prices. Price analysis was at most an afterthought. Here's e.g. Woodrow Wilson [1] campaigning against monopoly in 1913 (he later created the FTC and signed the Clayton Act): "Our purpose is the restoration of freedom. We purpose to prevent private monopoly by law, to see to it that the methods by which monopolies have been built up are legally made impossible. We design that the limitations on private enterprise shall be removed, so that the next generation of youngsters, as they come along, will not have to become proteges of benevolent trusts, but will be free to go about making their own lives what they will" "Monopoly means the atrophy of enterprise. If monopoly persists, monopoly will always sit at the helm of the government. I do not expect to see monopoly restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it" [1] https://archive.org/details/newfreedomcallfo00wils https://archive.org/details/newfreedomcallfo00wils
- bigbugbag 10y ago
  >Facebook may have a monopoly in social networking Last time I checked social networking was still overwhelming done in actual AFK social interaction across the world. In the online digital realm the king of social networking was still email by a significant margin. A good clue being that facebook ask for your email while email doesn't ask for your facebook. So please don't fall for this language manipulation trick.
coffeymug 10y ago
If you look at Linkedin, Twitter and Google+ you don't find the same features that are available with Facebook. What I think has kept the social network so attached to our psyches is the same psychological principle as to why the Japanese love romanticizing high school in anime over and over again. Facebook was created as a utility to connect together alumni within a university. It plays on our tribalism and need for cliques. Just like this post mentions it also is moving towards more visual feedback. The sensationalist adds, the lude pictures and facebook videos aren't enough. There must be more sensory feedback even if it requires a VR headset to get it. Take the example of the IRC chat. There are no avatars and the names are user created. Just like with radio in contrast to television you get less stimulation. It doesn't engorge the senses. I don't know the current state of things with Facebook as of right now, but I think at some point there is going to be a movement that begins to build and build and it will come from a deep revilement for the sensationalized news, the abundance of ads, the platform that promotes arguing, the too-slick ease of doing virtually everything in a virtual format. At the core of it is the fact that long ago people sought to break away from illusory things. Think Buddhism and Gnosticism. Now, instead, we are willingly and eagerly enshrouding ourselves in something that looks glossier and more fabulous than real life and it seems like we've forgotten to remember the signs along the road in case we want to turn back.
NOSHSHNACKERS 10y ago
This article doesnt make any sense. Its like he is high or something.

304 points by germinalphrase 10y ago

I'm not so sure if the neoclassical general equilbrium theory applies so aptly to social constructs. Interesting approach, and I guess it gets the author's point across..

HenryBemis 10y ago
Dynamics are not the same (as they were in the 80s). Although the principles of supply/demand tend to be the same, we are talking about product/service that sucks in the "naive" users that fail to see the end-game and only see the cat photos. Addiction plays a huge role and Facebook is playing its cards very well. "Tipping point" speed is x100 nowadays.
trendia 10y ago
I'm kinda suspicious of how it's used here, too. What exactly is the "price" that consumers pay when they use Facebook? Their time? Their generation of content? What exactly is the product that's offered? Connections to their friends? News articles? It seems that Facebook simultaneously acts as a supplier (of connections to people / news) and a consumer (of connections to people / news). So, it's not really clear what the 'price' and 'quantity' axes really represent in reality.
- marcosdumay 10y ago
  The article is exactly about this.
  - trendia 10y ago
    The article talks a lot about how the price changes, but doesn't explicitly say what the price represents.
    - marcosdumay 10y ago
      It's quite literal about price for advertisers, and not so literal on revenue sharing for publishers. It explains what it is talking about both times, and also explains that talking about price for readers is nonsense.
- r00fus 10y ago
  not Time but Attention and their capacity to consume, disseminate and promote ads. Your complaint would probably also apply equally well to Google as both are tech ad networks at their financial core.

brilliantcode 10y ago

What does Facebook have monopoly on? Last time I checked, Google still dominated online ad spend.

hazelnut 10y ago
the social graph
Glyptodon 10y ago
Access to consumer's social interactions maybe?
Spooky23 10y ago
Eyeballs. Facebook is like the new TV. There's a ton of interaction with it and most of that content is locked away from Google's reach. They are fundamentally more powerful than Google and are underpricing their ads.
- slackoverflower 10y ago
  > locked away from Google's reach Not completely true when majority of their mobile users access the app through Android and majority of desktop users, Chrome.
- brilliantcode 10y ago
  Youtube & Netflix is the new TV. I don't think lot of people sit on their couch and watch Facebook videos all night. I don't think Facebook can ever reach Google's level. Google is expensive for a reason because it's highly valuable since people are searching to buy. Facebook is cheap because you are really casting a wide net and hoping to catch a fish. This is less efficient than Google's Adword.
  - Spooky23 10y ago
    Maybe not, but they spend an hour a day wandering through the feed. Google is more transactional. Facebook are display ads that are displacing TV.

guelo 10y ago

It is important to Facebook to crush Snap, not only to maintain their dominance of the social graph, but also to send a message to future social networks: you can either be like Instagram and Whatsapp and let us buy you or be like Snapchat and be crushed. Snap's IPO payday of $3 billion is probably less than Facebook would have paid for them.

kamikaz1k 10y ago
$3 billion is what Zuckerberg offered to acquire Snapchat. Given all the cultural cachet and freedom I think they came out ahead. http://mashable.com/2014/01/06/snapchat-facebook-acquisition-2/#YPbz0JAbiiq9 http://mashable.com/2014/01/06/snapchat-facebook-acquisition...
- sgift 10y ago
  Only if they still exist in a few years. They wouldn't be the first company with a great IPO that didn't survive for long.
  - ams6110 10y ago
    The space is hugely fad-driven anyway. Kids don't use Facebook. They use Snap, for now. Who knows in a few years. Twitter and Facebook are what their parents use.
    - adamlett 10y ago
      Facebook has close to 2 billion monthly active users (MAU). Instagram and WhatsApp – both owned by Facebook – each has around half a billion MAU. Your comment reads as "nobody goes there anymore, it's too crowded".
  - stale2002 10y ago
    The people who sold their stock options have already come out ahead. Whether or not the people who bought those shares go under water isn't their problem. AKA, the early investors are going to make way way more money than if they had sold to facebook.

sgift 10y ago

I don't know. The whole post reads to me like it can be summed up as "I like Snapchat, I don't like Facebook" and some padding to disguise that. Saying Snapchat innovated and Facebook stole also reminds me of Apple suing Samsung for using rounded corners on phones i.e. ridiculous in my opinion. As if "hey, let's use the camera some more" was some grand vision that only Snapchat had.

Analemma_ 10y ago
I think it's more that he has a distaste for Facebook's "90's-Microsoft-esque" strategy of watching like a hawk for any potential competitors in the space, and going to them with a "either let us acquire you, or we will crush you" offer, and how successful that strategy has been so far. Most people have a vague sense, if only for aesthetic and "fairness" reasons, that we don't want the world to work like that. Unfortunately, the world doesn't care about our wants.
- spacelizard 10y ago
  Don't be fooled by the showboating, behind every attempt at executing these aggressive strategies is a crumbling organization rife with disharmony and malcontent. They would not be focusing on what other companies were doing nearly this much if they did not feel threatened by it.
  - bigbugbag 10y ago
    Yes, when your success relies on a monopoly or dominant position, your future is at stake if you don't use your dominant position to remove any competition that may chip at your domination. This is exactly why monopoly are hurting everybody but the people profiting from it.
- SerLava 10y ago
  Eh, the aggregate of all our baseless wants and opinions can make shit fly that normally would not fly.
IBM 10y ago

sparkzilla 10y ago

Your company fails when you stop innovating and start copying, and enters a death spiral when smart employees (and investors) leave, because they know that no amount of fancy demos and vaporware will make up for the declining quality of the core product. Eventually the neglected core becomes weaker and weaker to the point where it fails spectacularly. We are saw this with MySpace, are seeing it with Wikipedia, Google Search, and if Facebook continues on the same path, it won't be long before they suffer the same fate.

rdruxn 10y ago
How is Wikipedia getting weaker?
- sparkzilla 10y ago
  Number of editors is in decline. Presentation hasn't changed in 15 years. Policies are moribund. No innovation. No leadership. It's just a matter of time.
  - digitalzombie 10y ago
    > Presentation hasn't changed in 15 years Craiglist presentation hasn't changed either. I don't think this point is relevant if the UI is good enough or have been this way for so long that people are used to it. Changing it would be weird. > No innovation. You want to innovate an online encyclopedia? How exactly do you do that? And without sacrificing integrity? > It's just a matter of time. What is this time to event thing that you speak of?
    - sparkzilla 10y ago
      >Craiglist presentation hasn't changed either. I don't think this point is relevant if the UI is good enough or have been this way for so long that people are used to it. Changing it would be weird. There are many problems with Wikipedia's presentation of information [1], but the point is that, even if Wikipedia's UI was the best there was, new media inevitably come along that change the way customers want to access their information. For example, you may think it's 'weird' to change Wikipedia's text-heavy UI, but kids brought up on Snapchat, WhatsApp and Instagram might want a more visual interface for their encyclopedia. >You want to innovate an online encyclopedia? How exactly do you do that? And without sacrificing integrity? Beyond UI, Wikipedia has many problems in its data structure, policies, and integrity, by which I mean the veracity of its information, and its endemic bias. Rather than discuss them here, please read my blog post: Wikipedia's 13 deadly Sins. [1] >What is this time to event thing that you speak of? The rapid collapse of an incumbent site due to its monopoly position and consequent lack of innovation i.e. the point of the original post. Your response appears to confirm that the lack of imagination that goes hand-in-hand with monopoly products is not just confined to their creators. Their customers want the monopoly, until they don't. Wikipedia, Craigslist, Google and Facebook are not unassailable. Everything dies. [1] http://newslines.org/blog/wikipedias-13-deadly-sins/ http://newslines.org/blog/wikipedias-13-deadly-sins/

whatnotests 10y ago

I kept reading the title as "Facebook and the CAST of Monopoly" - needless to say, the article made no sense since I was looking for Uncle Moneybags.

pascalxus 10y ago

I think he's making a good point here about the effect of a Facebook monopoly on the rest of the ecosystem. Facebook stifling other social networks is the least of our worries. The effect on the advertising ecosystem is enormous! and Affects nearly every other internet company in the world that needs to acquire users! In this regard, so far Facebook as enabled countless businesses to exist with it's high value advertisement platform, but this could change as their monopolistic powers increase.

bigbugbag 10y ago
I remember reading a piece on how facebook influence on online advertising had a very significant potential for causing a collapse of the online advertising business model by both driving prices down and pulling advertisers away from other websites, but also by exposing the fact that online advertising is mostly hype and fraud eventually causing the online advertising bubble to burst.

deepnotderp 10y ago

Remember when "innovation" was novel computer architecture or a totally new product category and not "a social network for pictures... that disappear!"? Pepperidge farm remembers.

deleted 10y ago
[deleted]
blowski 10y ago
Pepperidge Farm? What's that?
- xeromal 10y ago
  If that's a genuine question, it's a meme based on a family guy segment.
  - akinalci 10y ago
    If that's a genuine answer, the Family Guy segment is based on a long-running advertising campaign by the Pepperidge Farms brand of baked goods. I guess I'm old.
- habosa 10y ago
  The parent post is referencing this meme: http://knowyourmeme.com/memes/pepperidge-farm-remembers http://knowyourmeme.com/memes/pepperidge-farm-remembers
- bigbugbag 10y ago
  A running gag from the animated TV show family guy.
jimbokun 10y ago
Remember "No wireless. Less space than a nomad. Lame." https://slashdot.org/story/01/10/23/1816257/apple-releases-ipod https://slashdot.org/story/01/10/23/1816257/apple-releases-i... I think Pepperidge farm remembering past innovations as more glorious than current day innovations is not a new phenomenon.

yggda 10y ago

If prices do rise, that's still indirectly bad for Facebook. While in the short term they are going to make more due to the price increase, other ad networks will follow the trend and increase their own pricing/ restrict supply. This would make other content on the web more profitable, and produce better content removing some of that traffic from facebook. If high price ads are better (less clickbait e.g.) then this would be a benefit for consumers.

joshjkim 10y ago

surprised there's not more focus about network effects (a nod and link to "aggregation theory", which is more about distribution), and the fact that any social network's value, is tied to that in a big way, and therefore (at least in theory) most social products or features's value is also tied to the size of the network. so FB's argument could be that the value/benefit of its copying features/products (both to itself and users) should take into account the scale of its network. having tried to open a formatted Pages doc with MS word, I can see MS making a similar argument. Don't even get me started on excel vs. numbers (though excel and google spreadsheets is not TOO bad actually...) One thing I've found super interesting/impressive about Snap is that it didn't try to outcompete FB in terms of sheer network size for its usage stickiness, and instead turned smaller, tighter and more private networks into a differentiator, while at the same time providing advertisers/brands with a competitively massive audience - not an easy thing to identify, much less execute on. TBD if that differentiator is enough to keep them alive vs. FB's more traditional network-effect-driven advantage, which will be hard to beat on its own terms. I think Snap's success will depend a lot on its ability to avoid being tempted to play that game (see: Twitter!). Relatedly, I think there could be a lot more thought given to how we should think about monopolies in the context of markets where networks effects are crucial to the business value (aka. Facebook and Google most obviously, arguably Amazon, Apple), because one logical conclusion is that in a market where network effects are a major factor, the biggest network should be best positioned to provide the most value and therefore (assuming it doesn't actively eff things up on other fronts) should continue to grow until it dominates the market...which seems to pretty much be what happened, and it makes pretty good sense for the most part. in these cases, it actually seems BAD to break these networks apart, since their scale is arguably one of its primary values to the customer - this doesn't mean of course that they can't abuse their monopoly powers (I think they probably do to some degree and will continue to), but interesting to think that the traditional "break up monopolies" impulse doesn't make as much sense. this leads me to think it will just be more consumer-protection-related regulation (under the banner of consumer privacy, or maybe even public health, given all the "social media addiction" thought pieces out there these days ha). random other thought: this all also reminds me that Mark Zuckerberg has not made a peep about wanting FB to be thought of as a "utility" in a long time (or maybe he has and I just missed it...but couldn't find any recent mentions), probably in part because they are now a lot more at risk than ever before of being regulated like one (see this talk from 2013: https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be-cool/ https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be...). Also kind of funny to hear him talk about "we don't want FB to be cool" too, because now it seems like FB very much wants to be cool again now that Snap has become cool and has threatening user counts.)

shostack 10y ago

A meta-question for those who follow Stratechery or the Exponent Podcast and are perhaps more deeply engrained in some of these companies being discussed... Do you find the analysis to typically be pretty thorough and accurate? I love the podcast and I think I've listened to every single one at this point, and they always talk through their reasoning at length in a logical, (mostly) structured manner, which I love. However in the back of my mind there's this little voice that says "they used to be management consultants and still do consulting, so of course they are good at making their arguments sound convincing--but how sound are they really from a strategic standpoint?" Some of it we'll never know because it is in the realm of "what-ifs" but just curious for others' thoughts on the signal-to-noise ratio of their content.

deleted 10y ago
[deleted]
mkeeter 10y ago
I have the same meta-question, and would love to hear what other folks think – I enjoy Exponent a lot, but feel like it veers into just-so stories [1], and the theories / models could be interpreted to argue for any particular outcome In particular, Episode 101 left me feeling skeptical [2]. Aggregation theory / unbundling somehow predicts both Netflix winning and Spotify losing, but I was left with the impression that – had things gone the other way – an equally persuasive argument could have been made. [1] https://en.wikipedia.org/wiki/Just-so_story https://en.wikipedia.org/wiki/Just-so_story [2] http://exponent.fm/episode-101-tv-is-the-oak-tree/ http://exponent.fm/episode-101-tv-is-the-oak-tree/
dilemma 10y ago
Stratechery is generally very high quality but there's a lot of storytelling and a lot of ideology in there. I'd even call it magical thinking; something to make business analysis exciting for a wider audience than just executives. "The arrival of artificial intelligence" is an example, because AI hasn't arrived and it won't.
- pixl97 10y ago

slackoverflower 10y ago

A lot of people underestimate that Snapchat has already captured a whole generation and formed their network graph on their platform. Another thing to remember is that this new 'format' that Facebook is ripping off is very much a cultural adjustment. I do not expect Facebook's most active users right now (30-60 years old) to be pulling out their phones out every 5 minutes, opening the Facebook app and taking pictures of themselves and what is around them. Snapchat has captured the audience that does do this, and it only happens on their app.

JetSpiegel 10y ago
> A lot of people underestimate that Snapchat has already captured a whole generation So did Hi5 back in the day, and it still went the way of the dodo. If you cater to attention-deficient people, they will leave in droves as soon as the next fad comes along.
- bigbugbag 10y ago
  So did facebook and it will follow the same path sooner or later, hopefully sooner.
dmihal 10y ago
I keep seeing posts about how great Facebook's DAUs are for their Snapchat clones. This may be an anecdote, but my Instagram stories are mostly older people and brands. Snapchat is still where I go to catch up on what my friends are doing, and it's even more popular with younger generations.

jimbokun 10y ago

Peter Thiel: "Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT&T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers." Um, he managed to pick the THREE OF THE MOST FAMOUS EXAMPLES OF GOVERNMENT ANTITRUST ACTIONS, while trying to argue monopolies do not harm innovation. Doesn't the fact all three of the previously dominant monopolies faced anti-trust decisions against them, before major new competing technologies sprang up, make it clear how important anti-trust actions are for encouraging innovation?

aylmao 10y ago
+1 +1 +1 +1
kjhughes 10y ago
Thiel is challenging you to consider that the government's antitrust actions were unnecessary and counterproductive: Unnecessary because eventually upstarts find a way to leverage new technology to open new markets where monopolists' advantages no longer apply. Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition. You may disagree, but to refute his argument effectively you'll have to do better than merely reassert conventional wisdom about monopolies.
- eggie 10y ago
  > Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition. If you have enough resources, it's often it's cheaper to quash-and-copy the competition than innovate. You may start labs to grab up smart minds, but this practice seems to be as much about suppressing competition as culturing innovation. And it seems to more to support the former than the latter. I would love some good examples of how this isn't the case.
- dragonwriter 10y ago

panabee 10y ago

no analysis feels complete unless it factors both benefits and costs. this post seems lopsided on the cost-side. the author persuasively portrays the negative effects of a facebook monopoly, but does not objectively delve into the benefits. consider the subsequent disruptions spawned by AT&T research, for example. even though AT&T itself did not commercialize most of these products (e.g., the semi-conductor), can anyone credibly argue AT&T did not foster innovation? similarly, google's search monopoly produced cheaper smartphones, free worldwide communication, and self-driving cars. facebook's monopoly lets it advance research on AI, drones, VR, internet access, and human-to-human communication. it's far too early to judge if facebook harms or helps innovation. perhaps there is enough data to assess google, however. one of google's victims is yelp. if yelp is worth $20B instead of $3B, but we don't have all the benefits of google's massive cash flow, is society better off? if we repeat the process for every google competitor, we can start to engage in an unbiased evaluation of google as a monopolist. to clarify, i'm neither advocating for nor disparaging monopolies. the author is very sharp and one of the best tech analysts today. i'm simply hoping for fair and balanced analyses so we can reach informed conclusions.

RangerScience 10y ago

This is a neat article, but I'm distracted by a thought only tangentially related: What does it mean that Facebook has a monopoly through the network effect? So - Diamonds. Classic monopoly. Physical good, limited natural supply captured completely by a single business entity. (Notably, AFAIK, the same is true for Areva and nuclear fuel). Microsoft. Monopoly. Software goods. Their monopoly was achieved (AFAIK) through business deals and a quality-enough+ product. Has nothing to do with available supply. Facebook. Network-powered monopoly. Achieved through a good product, maintained by good-enough+ and the network effect (and their adaptability). The number one hurdle for any FB "killer" (as opposed to unbundlers - arguably, Instagram, as an example) is competing with FB's network effect. There's zero supply that FB has controlled to maintain it's monopoly. I'm not sure where this thought wants to go, but I'm trying to think up other categories or interesting things that fall into these categories. Thoughts?

fiatjaf 10y ago
I was about to write something like this. This is not a monopoly in any normal meaning that word is used. It is the network effect.
bigbugbag 10y ago
> So - Diamonds. Classic monopoly. Physical good, limited natural supply captured completely by a single business entity. You should reconsider using diamonds as examples and analogy: https://priceonomics.com/post/45768546804/diamonds-are-bullshit https://priceonomics.com/post/45768546804/diamonds-are-bulls... It seems to me the reason you don't understand facebook monopoly because you seem to believe it was achieved through a good product which is not at all how it happened, (if the product is any good it's for facebook). They got there through a lot of tricks from the black book of shunned upon dark tricks to control supply (new registered users). They kickstarted by seizing the universities students in ways that got them a lot of flak at the time then grew further by breaking their initial promises and more black book tricks and dark patterns. Once they reached critical mass and user lock-in, the people themselves would recruit new users and further improve network effect. There's also the shadow side that happened behind the scenes and can be pinpointed to around the time of Peter Thiel involvement. So "Facebook has a monopoly through network effect" means that due to the sheer number of people registered it has an effective monopoly. If you peruse the HN comments (or elsewhere) about facebook you will often see people that complains about facebook being a pile of crap that they can't leave because other people they want to stay to stay in touch are all there and some are only there. This is monopoly through network effect.

zeteo 10y ago

>The result of monopoly pricing is that consumer surplus is reduced and producer surplus is increased; the reason we care as a society, though [..] is deadweight loss. >Facebook may have a monopoly in social networking, and while that may be a problem for Snap or any other would be networks, Facebook would surely argue that the lack of deadweight loss means that society as a whole shouldn’t be too bothered. Traditionally, the main issue with monopoly has been about suppressing competition and innovation, not about prices. Price analysis was at most an afterthought. Here's e.g. Woodrow Wilson [1] campaigning against monopoly in 1913 (he later created the FTC and signed the Clayton Act): "Our purpose is the restoration of freedom. We purpose to prevent private monopoly by law, to see to it that the methods by which monopolies have been built up are legally made impossible. We design that the limitations on private enterprise shall be removed, so that the next generation of youngsters, as they come along, will not have to become proteges of benevolent trusts, but will be free to go about making their own lives what they will" "Monopoly means the atrophy of enterprise. If monopoly persists, monopoly will always sit at the helm of the government. I do not expect to see monopoly restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it" [1] https://archive.org/details/newfreedomcallfo00wils https://archive.org/details/newfreedomcallfo00wils

bigbugbag 10y ago
>Facebook may have a monopoly in social networking Last time I checked social networking was still overwhelming done in actual AFK social interaction across the world. In the online digital realm the king of social networking was still email by a significant margin. A good clue being that facebook ask for your email while email doesn't ask for your facebook. So please don't fall for this language manipulation trick.

coffeymug 10y ago

If you look at Linkedin, Twitter and Google+ you don't find the same features that are available with Facebook. What I think has kept the social network so attached to our psyches is the same psychological principle as to why the Japanese love romanticizing high school in anime over and over again. Facebook was created as a utility to connect together alumni within a university. It plays on our tribalism and need for cliques. Just like this post mentions it also is moving towards more visual feedback. The sensationalist adds, the lude pictures and facebook videos aren't enough. There must be more sensory feedback even if it requires a VR headset to get it. Take the example of the IRC chat. There are no avatars and the names are user created. Just like with radio in contrast to television you get less stimulation. It doesn't engorge the senses. I don't know the current state of things with Facebook as of right now, but I think at some point there is going to be a movement that begins to build and build and it will come from a deep revilement for the sensationalized news, the abundance of ads, the platform that promotes arguing, the too-slick ease of doing virtually everything in a virtual format. At the core of it is the fact that long ago people sought to break away from illusory things. Think Buddhism and Gnosticism. Now, instead, we are willingly and eagerly enshrouding ourselves in something that looks glossier and more fabulous than real life and it seems like we've forgotten to remember the signs along the road in case we want to turn back.

NOSHSHNACKERS 10y ago

This article doesnt make any sense. Its like he is high or something.