Network Effect narrow our choice and lead to monopoly

If we can date back to a decade or even 15 years before, it seems like the quickest way to make millions of dollars at the moment is to create a successful internet platform. Online companies like Facebook, Twitter, Tencent, Google and Baidu are platforms that have gone from obscurity to internet giants in a matter of years owing to the advantage of two-sided market and network effect.

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What is network effects? To be simply, there are some products and services that become more valuable if more people are using them, at the same time, more inseparable from them, because most of your online relationships are build on them, and you are relying on them, it is a terrible experience. I still remember about 8 years ago, the time when I started using mobile QQ, an instant message app from Tencent, most of my friends were using SMS and a lot of folks in my social circle even didn’t own a smartphone. At that time, there are three or four similar IM apps compete with QQ, but after few years, other apps were all died out and everyone started to use mobile QQ and suffering from advertising and promotion information, that is what Chinese companies did after monopoly.

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I knew I was not the only one who want to delete my QQ account but didn’t because of it so easy to reach everyone you know online, even though you need to bear unlimited advertising and take the risk of personal privacy disclosure, that is the charm of the network effect. People hate you but people have to use you. When there are multiple companies offering a product that has network effects, you can quite easily show that everyone benefits the most if they all use the same product.

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In my opinion, network effect narrows our choice and lead to monopoly which not conducive to the healthy development of the industry. QQ has now taken place by Wechat (Although they all belongs to Tencent), but the monopoly due to the network effect has continued.

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