Creating a network effect is one of the hardest online tactics to accomplish. It only happens when any user that uses the product increases the products value for other users. (Sometimes all users.)
When social media was just getting started, finding network effects was relatively easy. There naturally could be a network effect for friends to communicate ergo Facebook. (which was stolen from Friendster anyway...)
One would then ponder that a network effect could exist between companies and try and create a startup to hone in on that market ergo Linkedin.
But today, there are 10 companies that already have massive network effects and there is not much room for more. Each network covers an aspect of our daily internet usage and capitalizes on that usage to inform other users.
For example, Youtube is a natural network effect where uploading a video on learning how to do algebra enhances the product's value for all users searching for algebra help.
But two create a network effect you need a two sided marketplace which is even HARDER than finding a network effect. For two reasons.
- You need to convince the person sharing to share on your network, not a social media network they are currently using.
- You need to convince their friends or followers to also join YOUR network to view the shared post because it is exclusive to said network.
A two sided marketplace also requires that you are selling a product. A product can range from content, to images, to time. But the product of the user must be valuable enough for a visitor to "buy" what your selling.
Facebook Product is the user itself. It assumes that each person can sell their offline life online and other users will find that valuable enough to subscribe hence increasing the network effect.
But wait wait, what about Clubhouse! They are new, they are innovative and they are a new network effect that was created in Fall 2019. Why can't I just be like Clubhouse?
Oh, so you were a VP of a company acquired by google, then founded a company that got acquired by Pinterest and one of your first users is Austin Allard who you can just send an SMS too?
Then you can have the top VC in Silicone Valley have a bidding war to be our top investor. So you have an idea AND that type of klout?
I do believe that new social networks will be created over time but there will only be two methods in which a social media will make it to the masses.
- VC Funding to a superhero founder.
- VC Funding to invest in ads.
Clubhouse is a pure example that a jockey was instrumental in creating a social media network where he was already well connected with the VC in which to fund it. The novel idea utilized the exclusivity of the famous Silicon Valley execs to harness bragging rights of who is "in" or "out"
If your not connected yet to a VC and you have a social media app idea, you have no idea how much advertising money is needed to get both sides of the marketplace into your app. Searching some failed apps will leave you with a hilarious story about Fling.
This guy 👆 got his dad to give him £5 Million to start a social media app. He then convinced Raffaele Costa and other investors to pony up £21 Million for a social media app that allowed people to send photos and videos to strangers around the world.
The CEO was able to attract 4 million users and 50 billion messages by August 2015. Not too bad, except that no one new he was spending £9 Million / year in advertising and development.
So of course, you can build any social media network effect you want with Millions in advertising money and in 2021 if you want to make a social media app - you probably need to. Why?
The top 10 Social Media apps have an entire team thinking about "new ways people connect online" and are constantly secretly testing these ideas with millions of users.
Ever heard of Itunes Ping? Apple had 1 million users in 2010 trying to launch a service that allowed users to follow artists and get updates from friends about music. Ya me either, It closed in 2012.
Oh and our friend Marco Nardone from Fling? It shut down with debts of £880,997, including a £120,268 debt with Twitter and a £45,068 debt with Google because it turned into a Chat Roulette with dick pics. Apple pulled the app from the store and Nardone hucked a Pret a Manger baguette at his dad for not giving him more money.
So if your just pitching your Social Media app idea, don't. Go back to the drawing board and find a product that will help humanity because at the end of the day your "idea" is not original. Social media has constraints around how humans communicate.