Wharton MBA for Executives

In my MGEC reading, I read about game theory and being a first mover as well as network externalities, etc.  The conclusion is basicaly that sometimes it’s important to be first in a market especially if there are network effects.  This includes a company like eBay where they came first in the US for auctions so they got all of the users and they are still most popular in the US simply because everyone else is there.  If I want to sell something via auction, I sell on eBay because that’s where I get the highest sales price.  By the way, I actually am an ebay user and I have a rating of 272 (which is pretty high for an individual seller like me) and have been active since August 1999.  Another example is Microsoft Windows.  It may not be the best operating system out there but since most other people use it, chances are you use it.

But there are examples of companies that do very well being second or third or fourth, etc.  It’s great to be second because you can observe the mistakes that the first company makes and make improvements.  This is especially true on the internet where there is very little customer loyalty.  I used to buy CDs a long time ago on cdnow.com but quickly left to buy CDs on buy.com or amazon.com when they became a few cents cheaper.  CDNow went out of business many years ago.

One example of being second is MySpace.  MySpace is huge with over 100 million users (yeah, they aren’t all real users but they still have a lot of users).  They came after Friendster and learned from some of the mistakes that Friendster made.  Today, we have Facebook and Facebook is growing much faster than MySpace.  So with that long introduction, I start my quick analysis of social networking.

To start my analysis, let’s take a quick history lesson.  When I first got onto the internet, it was in 1991 when I went to college.  The internet primarily consisted of email (99% of what people were doing), bulletin board systems, usenet, MUD (multi-user dungeon…or text based fantasy worlds similar to SecondLife or Everquest), NetTrek (predecessor to World of Warcraft…kinda), and IRC (chat).  However, most people were using the internet for email.  The internet was about communication between people who are on email.  I used it to communicate with friends in other universities since we all had email addresses as well as communicating with professors and TAs.  Among friends, it was better than writing letters and cheaper than making phone calls.  It was also nice because I emailed many friends at once rather than get on group phone calls or something like that.

The internet really took off in the mid 90s when the world wide web (www) really got popular.  I remember back in 1994 when I first got onto the www, there really weren’t many web sites out there.  I created one of my own just for fun and professors would create one for their class where you could download the syllabus, etc.  Netscape then released their browser and it was much better than Mosaic so it made the www much more friendly to non-techs.  Then sites like ESPN came out (they were actually espn.sportszone.com back then).  Search engines like yahoo, altavista, excite, etc. all came out around this time.  Then I noticed one of my classmates doing a web search on “hash table algorithms” and at that point I realized that the www was really about accessing information.  Al Gore soon made the internet == www.

So now the internet was about access to information.  I still think this is where the internet excels.  The information isn’t always correct but there is certainly a plethora of it.  A few days ago I heard that a friend won a brand new car in a contest.  I had heard that you have to pay taxes on prize winnings but I wasn’t sure.  20 years ago, you’d have to do some research in a library or call up a CPA or something.  Now, I just did a quick web search and found the answer and more info that I every wanted within minutes.

So back to MySpace.  Friendster and MySpace were about meeting new people.  Web 2.0 was largely about meeting new people.  This is why dating sites became so popular as well as social networking sites.  Instead of meeting people at a bar or random gathering, the internet became a place to find and meet new friends.

However, for most people (myself included), I don’t actually care to meet random new people.  I enjoy meeting my new classmates at Wharton because we all have something in common…school.  But in general, I really have no desire to make new friends or meet new people and I think many people also feel this way.

So I think the next progression is in sites like Facebook where access is more restricted.  Facebook is not about meeting new people (although you certainly do meet new people there sometimes).  It’s really about finding and keeping in touch with the people you already know.  Facebook is great for keeping in touch with your close friends as well as those friends who were close but simply lost touch.  For many of us, our best friends in High School and College were relationships that we treasured yet as the years went by, we lost touch with many of them.  Or we are still in touch but it’s not much more than a few phone calls and a Christmas card each year.  I really do want to keep in touch with these people but simply don’t have the time or effort to maintain all of these relationships.  Facebook allows me to do this and this by controlling who has access to my Facebook page.  Facebook isn’t about becoming the next Tila Tequila with millions of friends, it’s about a hundred or so friends that you actually do know and want to keep in touch with.  This is why Facebook is so much better than MySpace.  The apps on Facebook also give it a dimension of being an end-all destination where you can do pretty much everything within Facebook.  Facebook is good at giving you really no reason to leave.  I play poker, instant message with friends, write message (basically email), update my status, etc….all without ever leaving Facebook.

So where does that leave the future?  I really believe that the next phase of progression is mobile.  This is why I started a mobile wireless software company in this space.  I believe that online social networking is here to stay so there is no way that I am going to compete against the Facebooks and MySpaces of the world.  However, I believe that being tied down to a computer is not where social networking fits best.  Social networking makes the most sense when it is mobile and with you 24/7 wherever you are.  Social networking is most relevant when you are out living your life, not when you are sitting in front of a computer at the end of the day.  This is why my company and our mobile software product is really about our own mobile social network but just as important, it is about connecting your mobile phone and your life with your existing online social networks.  Also, the online social networks do change as we saw with Friendster, Myspace, and now Facebook.  My goal is to continue to integrate with the leaders and continue to integrate the mobile phone to whoever is the online social networking leader.

Social networking is the current stage in our progression of internet technology.  I believe that mobile technology is the next stage where we are no longer bound by home computers.  Our class at Wharton communicates via Facebook and for many students, this is the first time they are experiencing social networking on the internet.  I think many of them signed up simply because they wanted to stay in touch with our Wharton class but they are finding many long lost friends.  Sometimes this is not so good (remember the people you used to avoid in High School) but when all is said and done, I think social networking is valuable and fun.