Survival and competition among social networking websites A research commentary on ‘‘Critical Mass and Willingness to Pay for Social Networks” by J. Christopher Westland Bin Wang College of Business Administration, University of Texas-Pan American, Edinburg, TX 78539, United States article info Article history: Available online 7 August 2009 Keywords: Social network Network effects Critical mass First-mover advantage Competition Survival abstract In this commentary, I discuss the major results and implications of ‘‘Critical mass and willing to pay for social networks” by J. Christopher Westland. I argue that Westland provides a new perspective on understanding and measuring network effects and critical mass on social networks. His research results also suggest that there may be a ‘‘first-to-critical-mass advantage” rather than first-mover advantage among social networking websites. Extensions to his research include considering multiple firms and using theories such as organizational ecology and organizational evolution to examine the survival and competition among social networking websites. Ó 2009 Elsevier B.V. All rights reserved. 1. Introduction Both business practitioners and academic researchers recognize the importance of critical mass and network effects for social net- working websites such as Facebook, MySpace, and Twitter. A thought-provoking message from J. Christopher Westland’s article in this special issue, entitled ‘‘Critical Mass and Willingness to Pay for Social Networks”, comes from the conditions that are laid out un- der which a phase change occurs. Following percolation theory, West- land shows that, above this phase change, a giant cluster of social network participants will emerge. As a result, the social network will reach its critical mass and will become self-sustaining. Below this phase change, however, only small clusters of participants will exist and the network effect associated with their use will be close to nil. How do the results from Westland’s research inform us about the competition among the more than 350 social networking web- sites that have been in operation during the past several years (Sharma 2007)? Since some of them have folded already, what can we learn from those that continue to exist? Similar to the burst of the ‘‘Internet Bubble” in 2000, will we observe the burst of an- other bubble – already dubbed by some as ‘‘Bubble 2.0” – due to the popularity of Web 2.0 (Dvorak 2007; Waters 2007)? In this Research Commentary, I will discuss the implications of Westland’s research on the issues of network effects, first-mover advantage, and competition and survival among social networking websites. Westland points out the importance of examining the average cluster size of social network participants, rather than just the installed base of total users in measuring network effects. In addition, there is more likely to be a first-to-critical-mass advantage rather than a first-mover advantage among these websites, since, before they reach critical mass, there are no network effects that they can leverage. I also will discuss directions for future research, and how theories, such as organizational ecology and organiza- tional evolution, can be used to study the entry and exit dynamics of social networking websites. 2. Network effects The literature on network effects generally focuses on the installed base of total users of a system or technology (Katz and Shapiro 1985). The larger the installed base of users, the higher the network effects will be. Various Internet traffic tracking services such as comScore, Compete.com, and Alexa.com also use the number of unique visitors and the website traffic to rank social networking websites. However, people visit social networking websites to form circles of friends, which are smaller subsets of all users. Westland shows that the aver- age size of these clusters of users and the emergence of a giant cluster are more important in determining network effects and the willing- ness to pay, than the overall number of users. Hence, to reach critical mass and become self-sustaining, social networking websites not only need to attract new users, but also need to encourage interactions among existing users. The effect of more active interactions is equivalent to an increase in the num- ber of acquaintances a member has on the website. This increased number of acquaintances will reduce the threshold participation le- vel, above which a giant cluster will emerge, and the social network will keep expanding without any intervention from the management. 1567-4223/$ - see front matter Ó 2009 Elsevier B.V. All rights reserved. doi:10.1016/j.elerap.2009.08.002 E-mail address: binwang@utpa.edu Electronic Commerce Research and Applications 9 (2010) 20–22 Contents lists available at ScienceDirect Electronic Commerce Research and Applications journal homepage: www.elsevier.com/locate/ecra