Why Facebook Is a Better Bet Than Google Was

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According to a recent survey, most Facebook users don't trust Facebook to keep their data private.

Can't imagine why! I mean, it's not as if Facebook is a company that would--time and again--get you to share more data than you realize you're sharing. And it's not as if the company is run by a guy who in 2004 used private Facebook login data to hack into the email accounts of Harvard Crimson staffers and read their emails. And it's not as if this same guy would hack into a rival website and change user profiles and user privacy settings.

But you know what? If you're thinking about buying into this week's Facebook IPO, the various transgressions and missteps of Mark Zuckerberg and Facebook don't really matter. Facebook has a magical property that insulates it from user discontent. It's a property that other big tech companies--Microsoft, Google, Apple--don't have nearly as much of. And it's the reason I think Facebook is a better long-term bet for investors than any of these companies.

The magical property is "positive network externalities."

Positive network externalities exist when, the more people who use a product, the more valuable it is. Operating systems, for example, have positive network externalities. Once tons of people use Windows or iOS or Android, there are tons of apps for the operating system, and that makes it more attractive.

But nothing has positive network externalities quite like, well, a network. With a network like Facebook, the whole point of using the product is that other people are using it. So a network with Facebook's level of market penetration is really, really attractive--so attractive that it's almost impossible to imagine an alternative arising.

Go ahead: Try to imagine someone starting a rival to Facebook. Actually, you don't have to imagine it. Google tried that in 2011 when it created Google Plus. Google Plus is in many ways a great product--so great that Facebook copied some of its features. But the one thing Google Plus doesn't have is something Facebook does have: Just about anyone you'd want to network with is already on the network.

And so long as Facebook has this, how could any other network get it? Thanks to positive network externalities, any upstart rival is inherently so unattractive, compared to Facebook, that it can never lure many Facebook users to jump ship and so can never become significantly more attractive. It's a chicken and egg thing, except way more so than just about anything else we say that about.

So for Facebook users, there's really no way out--which is why Zuckerberg and Facebook would have to behave much more atrociously than usual for customer blowback to become a serious problem.

Compare this to Google's situation with search: If people don't like changes in Google's interface, or get queasy about Google's privacy policies, there's nothing to keep them from switching, one by one, to a rival search engine until Google loses its dominance.

I suppose it's possible to imagine established networks that occupy different niches from Facebook's--Twitter, LinkedIn--adding so many dimensions to their platforms that eventually these networks morph into Facebook rivals. But even then, I think they'd have to catch additional lucky breaks--say, Mark Zuckerberg lapsing into a year-long coma, or deciding that, on second thought, world domination isn't nearly as worthwhile as monastic contemplation.

No sign of that happening so far. Here is Zuckerberg's current aspiration: "I think that we're going to reach this point where almost every app that you use is going to be integrated with Facebook in some way. We make decisions at Facebook not optimizing for what is going to happen in the next year, but what's going to set us up for this world where every product experience you have is social, and that's all powered by Facebook."

There is serious talk about Facebook eventually supplanting email and the World Wide Web as the fabric of cyberspace--becoming the basic medium through which most people on the planet reach out and virtually touch other people in increasingly subtle and lifelike ways. When you realize that every year people live more and more of their lives in cyberspace, that prospect starts to seem pretty awesome--or awful, depending on your view of Zuckerberg and of Facebook.

But here's the thing about your view of Zuckerberg and Facebook: Neither Zuckerberg nor Facebook has reason to lose much sleep over it.

Presented by

Robert Wright is the author of The Evolution of God and a finalist for the Pulitzer Prize. He is a former senior editor at The Atlantic.

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