I take a course, development strategy for High Technology, and today professor taught network effects which is interesting and I would like to share with you and talk my opinion about business trend of online social networks.
Network effects are value of a service to a user depends on the number of other service users. The Internet economy has been built on network effect. Investors and entrepreneurs have treated this like Moore's Law. It means that the bigger size of the network, the more users be willing to pay. However, this trend is not unlimited and sometimes there exists reserve network effects: if I have too many people in my social network, I cannot pay enough attention to each of them, and without attention, relationships fade.
There are two distinct types of motivation of joining in network: one is "I want to communicate better with the people I already know and trust" and the other is "I want to increase my visibility so that I can connect with more people." Both have clear limits. The number of people I can really know and trust is limited, because knowing and trusting takes time and attention. Increasing visibility, whether by blogging or tweeting or advertising or PR, is less limited. But when visibility goes beyond a certain number of people, it becomes no more social than broadcast media or spamming. The personal touch is gone. The real community spirit is gone.
Even though facebook now has 175 million users and is growing at a rate of 600,000 per day, it should think of new business model and attractive product to make sure its sustainable revenue and market share.
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