I’ve been reading a lot about network effects lately. I attribute this to the large number of Bill Gates retrospectives that describe how Microsoft dominated the PC area. Also there’s Steve Lohr’s story in the New York Times this Monday which describes how the principle applies to Google.
The network effect seems to perfectly describe the value of social networks. However, I can’t help wondering: what happens as the Web becomes more open, more semantic? Doesn’t increased data portability, by definition, undermine the effect as it applies to social networking companies?
Social networking has helped individuals (and the groups they belong to) benefit from the network effect in new ways. That’s not going to go away. But is it possible that continued innovation will eradicate the ability of the host networks themselves to benefit?
What’s to stop social networks from ending up as widgets easily added or subtracted from a fully-customizable, personalized and interactive home page (iGoogle or myYahoo)? How can they stop it from happening?
I’m genuinely curious. Anyone have any ideas?