Social Networking Cartoons Chapter II

I’ve ranted before: people are missing the point of what’s going on in the explosion of the social network web sites.

But wait! There’s something else to be said. This industry, the social networking industry, has another classic pattern.

Markets tend to sort out into a population of players distributed along a power-law curve. Some industries have greater or lesser slopes on those curves. For example: while there are many independent garden centers there are fewer and fewer independent hardware stores. Michael Porter has a list of some of the reasons this happens.

How with the social networking sort out? Lists’ like Porter’s give you hints. They help forecast the future. They tell you what levers to try and pull if you want a particular outcome.

If there are strong forces that push us toward a single huge social networking sites then we are in for a bit of serious competition. If there is only going to be one then that’s a very valuable peice of real estate.

We are seeing a lot of these sites because of the low barrier to entry for creating one. If you can lower that barrier even more then you will get more.

The driver toward a single sites are always scale advantages. It is a huge pain for a person to maintain N such sites. If most of your community of contacts gathers at one site then there are strong network effects for you to settle in there and just ignore the rest of the sites.

This combination of a low barrier to entry and a strong network effect makes for a particularly high stakes game. You can get into the game cheap. The winner may carry off a huge prize.

I certainly hope we don’t end up with one site. That barriers to entry can be made even lower with open source. The network effect can be tempered by with open standards for linking these sites to each other. I certainly hope that happens; because it would be a very weird outcome to discover that almost all the clubs and organizations on the planet start pitching their tent inside one firm’s walled garden.

The forces that push industries toward one outcome or another are not invisible, they are not blind, and they are not inevitable. They are the consequence of the actions taken by the participants in those markets both individually and cooperatively.

Complaining about how autistic the social networking sites are misses the point. The key question is: what shape do you want the market to take?

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