3 ms·
> If Facebook were acting competitively, it would be reducing its price (fewer ads) when it reduces costs. This doesn't track for me. Let's assume there are 2-
by pc86 5y ago
> If Facebook were acting competitively, it would be reducing its price (fewer ads) when it reduces costs.
This doesn't track for me. Let's assume there are 2-3 other competitive social networks that FB has to compete against. FB figures out how to do $thing that reduces its costs by 10%.
Why does it follow that FB is going to show fewer ads now?
- mabbo 5y agoIf prices were in terms of money, then a company should want to undercut its competitors. This would overall be a net-win for it, as customers would move more to use its services than the competition. This would force the competition to ALSO find ways to reduce costs. The end winner is the consumer in such a scenario as prices keep dropping. But here, the price we pay is ads, and it's hard to even evaluate where you saw more ads. People don't pick a social network by the number of ads (short of there being so many it gets in the way), they pick social networks by where their friends already are. The bigger a network is, the more likely someone is to use it. Facebook's economics exploit this network effect. They don't need to make the 'price' better (ads) because that isn't what drives consumers to it.