Friday 30 September 2016

Finding the Network Effect Tipping Point

In Germany and the Netherlands, the Last Local Champions Fall

Even as Facebook established dominance across most of Europe, local favourites managed to hold out in two neighboring countries. The staying power of StudiVZ in Germany and Hyves in the Netherlands impressed observers (like me) and served as intriguing examples of the potential power of the network effect to keep users in a social network, even after a potentially more attractive alternative came along.

No more.

According to data from comScore, in Germany there were 360 million monthly visits to StudiVZ in October 2010. This number has collapsed by 53% to 189.2 million in April 2011. Meanwhile, visits to Facebook have increased 59% over the same period and 295% over the past 12 months.

For those who don’t favor the total visits metric, the decline in monthly unique visitors tells the same tale. StudiVZ uniques are down 77% since October and 74% over the last 12 months to 12.3 million, while Facebook uniques have increased 97.3% over the last year to 34 million as of April.

The decline for Hyves in the Netherlands has been nearly as dramatic. Monthly visits from Dutch users to Hyves declined 31% to 162 million in April since peaking at 235 million in December 2010 and are down 19% over the past 12 months. Meanwhile, visits to Facebook are up 154% over the last 12 months and 32% since December and now stand at 120 million.

It’s only a matter of time before Facebook overtakes Hyves. Indeed, in April, Facebook and Hyves nearly reached parity in unique visitors for the first time, with 7.4 million uniques for Hyves and 6.6 million for Facebook.

But where was the tipping point? Understanding the answer to this question is crucial for assessing the power of the network effect and forecasting user migration from today’s hot platform to tomorrows.

According to comScore, the recent declines of both StudiVZ and Hyves began within a month of Facebook reaching about 48% penetration in each market.

Facebook attained 48.4% penetration in Germany in September 2010, the same month that before StudiVZ reached its final peak. In the Netherlands, Facebook reached 48% penetration in December, the same month that Hyves achieved its final peak.

While there isn’t enough data to firmly establish a causal relationship between the two, the correlation is intriguing, and might be instructive.

Currently, Facebook penetration in Russia stands at 24% of Internet users, and Facebook’s user base is growing rapidly at the expense of local competitors. Will we see a crash in usage for Klassniki and Vkontakte when Facebook reaches 50%? Will it come sooner?

But most importantly of all, does this help us understand the tipping point where the network effect loses, and users migrate en masse to a new platform?

For my money, it’s definitely a topic worthy of greater attention. I wonder if there’s a PhD candidate somewhere that wants to have a go.

 

Image credit: marc_smith

Article source: http://feedproxy.google.com/~r/EdelmanDigital/~3/7WVDYziCwdM/