1 Why is Facebook so powerful? Would you switch to another social network if it had better features even if it was considerably smaller? With over 1.75bn users Facebook is not only the largest social network globally, but they control the second, third and seventh largest networks: WhatsApp (1.5bn), Facebook Messenger (1.3bn) and Instagram (1bn). It seems they are well ahead of everyone else in network effects and have created high switching costs for users to move to another social network. When users have built up a set-up of perhaps hundreds of friends and have archives of their whole life including photos they don’t easily switch to another company and network just because it’s something fresh.

Nevertheless, despite Facebook’s clear lead, history shows it’s far from obvious that any social network incumbent can stay relevant and dominate long term. Friendster pioneered the online community in 2002, three years before Facebook, and gained over three million users within a year;

attracting tens of millions of users at its height. It was, however, soon overtaken by Myspace, which appealed to even more and younger users with their hip features including music and music videos. By 2008 it was the leading US social networking site with over 75m users and consistently ahead of Facebook in traffic. However, soon Facebook started to attract teenagers with their new features with corresponding losses for Myspace. This illustrates that social networks quickly can gain millions of users and huge valuations, but can just as quickly face slowing growth, users leaving in millions and final collapse. Further back in internet history there are several other implosions of those with social network ambitions: BBS, CompuServe, AOL, etc.