Priceonomics

Topics are now trending on Facebook. 

Last Thursday, Facebook introduced a new feature that will display “a list of topics that have recently spiked in popularity” to the right of users’ News Feed. The goal is to make Facebook more of a place where people share and discuss news. It’s also a copy of Twitter’s Trends feature, which has long provided a sort of in the moment zeitgeist -- from breaking news in Egypt to Miley Cyrus’s performance at the Video Music Awards. 

This is not the first time that Twitter features have appeared on Facebook. The social network replicated Hashtags, Followers, and verified profiles that are core aspects of Twitter. Nor is Twitter’s playbook the only one that Facebook has borrowed from. See Poke, Facebook’s imitation of the disappearing message service Snapchat. 

Zuckerberg’s stealing of new ideas from younger social networks isn’t shocking. In between mocking competitors for stealing Apple’s ideas, Steve Jobs explained to an interviewer:

“Picasso had a saying, ‘Good artists copy, great artists steal.’ We have always been shameless about stealing great ideas.”

But it is a bit perplexing. Take the example of Facebook’s attempt to copy Snapchat with Poke. Commentators generally explained the move as an attempt to stave off the threat of an upstart whose product, which is popular with younger users, could siphon away Facebook users. 

The term network effect describes a situation where the act of using of a product makes it more valuable and effective. If no one reviews restaurants and cafes on Yelp, it’s useless. If thousands of people review establishments on Yelp, it’s useful. And once everyone uses Yelp, it’s nearly impossible to imagine people switching to a competitor. No one is invincible, but network effects make incumbents hard to topple.

So why is Facebook -- a network with more members than just about any network in history -- stealing competitors’ ideas like an over the hill professor desperately pilfering his students’ work?

Out of many, one

When Twitter established itself as the place for in the moment news, or when Snapchat gained popularity for its embrace of more private, ephemeral interactions, Facebook could have ignored them. Zuckerberg and co. could have focused on differentiating Facebook as the network where people connect with friends and curate a permanent presence.

Instead it copied many Twitter features and cloned Snapchat. It bought Instagram, copied Google+ and other apps’ algorithmic creation of friend groups, added a Foursquare-esque location feature, and may roll out a news reader similar to the popular news curation tool Flipboard.

Other social networks are copying each other just as furiously as Facebook. Twitter’s Retweet, Favorite, and Reply buttons seem similar to Liking or Commenting on Facebook. Instagram added a messaging aspect that looks like Snapchat. LinkedIn added Followers and news sharing aspects modelled after Twitter and Facebook. Twitter acquired the short video service Vine, so Facebook-owned Instagram added short videos. And so on.

Instead of going for product differentiation, social networks are following the principle of minimum differentiation. Forget focusing on a niche, every social network is trying to do everything people like to use social networks for. There are distinctions -- social networks for pets, or LinkedIn’s career centrism. Largely though, differentiating aspects get copied by all the rest in what one BuzzFeed writer calls “the fight for the ultimate feed.” 

The constant plagiarism among social networks doesn’t seem like a vote of confidence in their future. Analysts who are bearish on Twitter and Facebook point out that their price to revenue ratio is very high -- twice Google’s ratio in Facebook’s case and nearly three times Google’s in Twitter’s. 

That’s not unusual. Facebook and Twitter are young companies, so growth expectations are priced into their valuation. But it does mean that those expectations are high. As Planet Money wrote at the time of Facebook’s IPO, Facebook was valued at 100 times its annual profits compared to 15x for a “typical, big public company.” 

Facebook and co. may meet those expectations. But it would be more reassuring if they didn’t all act as if the social network space was so small that they had to dominate every type of social interaction to succeed. The way that competition between social networks resembles Survivor should give everyone invested in the prospect of social networks living up to expectations pause.

This post was written by Alex Mayyasi. Follow him on Twitter here or Google PlusTo get occasional notifications when we write blog posts, sign up for our email list.



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