do you use facebook because it is the best platform available or just because all your friends are already on it? what about whatsapp versus telegram/signal/wechat? do you really have an option in choosing what platform you’ll use?

these kinds of services are subject to what economists call network effects. from wikipedia:

a network effect (also called network externality or demand-side economies of scale) is the effect that one user of a good or service has on the value of that product to other people. When a network effect is present, the value of a product or service is dependent on the number of others using it.

so what? well, this means that a service like facebook can acquire value intrinsic to its wide adoption, not to its quality. in plain terms, it means that you (and everyone) may be stuck with a worse service simply because the cost of coordinating everyone to change from bad-but-widely-adopted service A to better-but-not-widely-adopted service B can be too high.

this network effect is a market failure if there ever was one, and this needs to change. it hurts both personal and market freedom, and disincentives innovation, giving the companies that developed these services undue market power.

these kinds of services should be behave more like email: they should all be based on an open format/protocol that allows other people or other companies to develop products/services that can interact with the original service. this would reduce these services’ market power by allowing for true competition (i.e., one that is not hindered by the service’s network effect) to take place.

can you imagine if email were like facebook or whatsapp? we would all have to be using the same provider and the same apps. you would not be able to choose between the thousands of different providers (like gmail, hotmail, and lesser known paid-only services), between the thousands of email clients (webapps, outlook, thunderbird, sendmail, etc.). you’d have to use EmailCorp©’s app and service. of course, you could create your own email-like service. but everyone already uses EmailCorp©’s product. why would they change to yours if they wouldn’t be able to talk to their friends/partners/clients/bosses/colleagues before getting them all to change services too? maybe this could work if EmailCorp©’s email really sucked, but what if it were just kind of bad? you wouldn’t be able to get most people to change, and you’d not be able to compete in equal terms with EmailCorp©. this doesn’t happen with pizza (or most other products, either). if this pizza place is only kind of good, you don’t have to stick with it. you deserve the best fucking pizza in the world. just like you deserve the best messaging platform or the best social network platform.

let’s make it happen.

but how?

one way is to enforce governmental regulation whenever a service surpasses critical mass and acquires too much market power. the government can then force the company responsible to open its service to equally standing competitors. in the case of whatsapp, this would mean making its messaging protocol open in such a way that could message someone on whatsapp using another messaging app such as telegram. once the precendent has been set, startup companies will be incentived to develop open platforms from the start, so that they won’t have to change all their backend software if/when they reach network critical mass.

another way out is to people actively deny consumption of services or products that are not open. companies routinely do this in order to prevent buyer lock-in: if your company grows reliant on a closed platform from another company, your supplier acquires market power over you. it can then raise its prices for no reason other than the fact that you are dependent on them. take the example of Microsoft. in the year you found your first company it might offer you a huge discount on an Office package. when your staff becomes a little too realiant on Excel or Word, it can then raise its prices up to point where it is not worth for you to pay the price of getting your employees used to other software. in order to prevent this, if a company has a choice, it will prefer products/services which are open, so that if a supplier loses competitiveness, they can switch seamlessly to another one. this is precisely how customers should behave. if a service offers you no way out of it, you should search for better alternatives.


if you support this idea, or if you have any comments, let’s talk! if you have a catchy/marketable name for this kind of company, please tell me, so that we can spread the word.


faq

how can this hurt my freedom if I’m free to leave the service and pick another want?

in a literal sense, you’re right. you’re still free to leave any service. but we’re not dealing in absolutes here. you still have a yes or no choice, but what about the other possibilities I presented above? why can’t you use the platform you want and your friend the one she wants and so on? the fact is that your freedom is reduced, even if it is not removed completely.

how can these companies have market power if their services are provided for free?

these companies do make money. facebook (which is also the owner of whatsapp) has quite an impressive revenue. the catch is just that they are not selling anything to facebook users, but to their advertisers instead. and they only have the ability to keep on doing this for such a profit is because they don’t face competition on equal terms.

these companies are in this position because they developed critical mass, and they could only do so because they were better/innovative, therefore they deserve their market power. right?

no. because time goes on, the market changes, and companies can fall out of the cutting edge or stop providing a quality service. but because of their market power, they don’t suffer as much as a company in a truly competitive market would (as in my pizzeria example).