Email’s value grew through network effects as adoption spread

Evidence

But the networks had also uncorked something that they did not themselves fully understand—the effect that in later jargon would be called “social.” The strategy of using people to gain the attention of other people was in retrospect inspired, even if arrived at more or less by accident. — Tim Wu, The Attention Merchants, 719 (#expands, via linked claim)

With network effects, a tendency towards monopolisation is built into the DNA of platforms: the more numerous the users who interact on a platform, the more valuable the entire platform becomes for each one of them. Network effects, moreover, tend to mean that early advantages become solidified as permanent positions of industry leadership. Platforms also have a unique ability to link together and consolidate multiple network effects. Uber, for instance, benefits from the network effects of more and more drivers as well as from the network effects of more and more riders. Leading platforms tend consciously to perpetuate themselves in other ways as well. Advantages in data collection mean that the more activities a firm has access to, the more data it can extract and the more value it can generate from those data, and therefore the more activities it can gain access to. Equally, access to a multitude of data from different areas of our life makes prediction more useful, and this stimulates the centralisation of data within one platform. We give Google access to our email, our calendars, our video histories, our search histories, our locations – and, with each aspect provided to Google, we get better predictive services as a result. Likewise, platforms aim to facilitate complementary products: useful software built for Android leads more users to use Android, which leads more developers to develop for Android, and so on, in a virtuous circle. Platforms also seek to build up ecosystems of goods and services that close off competitors: apps that only work with Android, services that require Facebook logins. All these dynamics turn platforms into monopolies with centralised control over increasingly vast numbers of users and the data they generate. We can get a sense of how significant these monopolies already are by looking at how they consolidate ad revenue: in 2016 Facebook, Google, and Alibaba alone will take half of the world’s digital advertising. In the United States, Facebook and Google receive 76 per cent of online advertising revenue and are taking 85 per cent of every new advertising dollar. — Nick Srnicek, Platform Capitalism, 80 (#expands, via linked claim)

Categorization

• XREF: connects to: Online networks accidentally discovered that users recruit other users’ attention — Tim Wu, The Attention Merchants, 719; Network effects embed monopoly tendencies directly into platform structure — Nick Srnicek, Platform Capitalism, 80

Broader Connections

• Online networks accidentally discovered that users recruit other users’ attention #expands (0.78) — Tim Wu, The Attention Merchants, 719
• Network effects embed monopoly tendencies directly into platform structure #expands (0.75) — Nick Srnicek, Platform Capitalism, 80