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Diffusion and network effects - Essay Example

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Topic: The Diffusion of Facebook and Network Effects. 1. Introduction Facebook, which currently has a user base of over a Billion active users, was founded in 2004 by March Zuckerberg (Fowler, 2012). In 2012, the annual revenue of the organization was $5.1 billion and during the initial public offering which took place in the same year, the organization was valued at $104 billion (Sengupta, 2012 )…
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Download file to see previous pages It starts with Innovators, who are the educated, risk oriented, information seeking people and who like to try new experiences. These roughly comprise of 5% of the population (Davidoff and Kleiner, 1991; Dewett, Whittier and Williams,, 2007). Next, are the early adopters, who are educated young and popular people and may be opinion leaders in their groups (David, 1985). Next are the early majority who are cautious and wait out to see how new products are reviewed by the early adopters. The early majority consist of a large number of people and these are also instrumental in propelling the late majority (who are older, conservative and low on social activity) into adopting the technology. The Laggards are the remaining people who missed out on adoption and may adopt the product toward the maturity of the product (Farrell and Saloner, 1985). Figure 1: Diffusion of Innovation Curve (Source: Rogers, 2003) In the case of Facebook, the adoption process started with ‘‘Innovators’, but these e Innovators were the people who already had adopted older social networking versions like MySpace and Orkut. With the creation of Facebook, these ‘Innovators’ simply converted to Facebook and encouraged the early adopters to choose Facebook when they were ready to embrace the online social-networking concept (Fernandes, 2011). However, the diffusion of Facebook during the initial phases was also constrained by the diffusion of the Internet. Innovators and early adopters were therefore largely confined to the USA, Western Europe, Australia, and parts of India and China. As the Internet penetration increased with the development of broadband technology and liberalisation in other parts of the world, it spread to Middle East and then to the Latin America, Africa and Eastern Europe and Russia (Fowler, 2012). So, while regions like the Middle East, Brazil, South Africa and Russia were now in the ‘Innovators’ and ‘Early Adopters’ phases, at the same time, the USA had and Western Europe had moved on to ‘Late Majority’ and the ‘Laggards’ phase as shown in the following figure. Figure 2: Stage of Adoption (Facebook) Source:, 2010 3. Five Factors that Determine Success or Failure of Adoption Adoption, which is an individual process that depends on several attributes of the innovation like the relative advantage, compatibility, complexity, trialability and observability. Figure 3: Factors Determining Success of Adoption (Facebook) Relative Advantage Relative advantage, as the phrase suggests, is the perceived value added or additional advantage that a person thinks he can derive from adopting the new product (Haggman, 2009). In the context of Facebook, it offered the relative advantage over sites like MySpace and Orkut because of its higher level of security, the ability to limit who views the profile and ease in uploading and managing photographs. The user interface of Facebook is also much more user friendly. Also, the spam prevention mechanism on Facebook is much stronger when compared to other social networking sites such as Orkut. So, users perceive it to be a more secure and private option than the existing ones. Compatibility Compatibility is the level of ‘ ...Download file to see next pagesRead More
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