Pop Quiz (Part 1)• If you don’t own an iPad, what factors would

influence you to buy one vs competition?• If you do own an iPad, what factors are involved

such that you don’t switch?

iPad

KindleFire

Samsung

Google Nexus

Why iPad?

Lens #1 – Intrinsic / Extrinsic Factors

• Intrinsic – Property of the item itself– Usable– Apple logo on it (means you are cool)– Product hype / marketing / Steve Jobs reality distortion field– Support for lots of formats

• Extrinsic – Property of the item relative to others– Accessories– App market, lots of choice– Everyone has one, popular, “good brand” / knows how to use– iTunes Music Store / Beatles / selection– Music collection / incompatibility– Developers

Externalities

• Alice's adoption or production decisions have direct or indirect effects on Bob's adoption or production decisions• Alice's decisions create costs and benefits external to her

• e.g., Size of telephone, email, and fax networks• e.g., Complementary products—hardware & software• e.g., Second hand smoke & other pollution

Externalities

• Positive externalities—benefits to all users increase with the number of users• e.g., Potential communication partners increases with the

number of network users• e.g., Likelihood of getting repair services, complementary

software, or advice increase with number of users

• Negative externalities—benefits to all users decrease with the number of users• e.g., Network congestion, traffic congestion• e.g., Privacy intrusion, spam & information overload

• Probability of a song appearing on Napster increased with the number of users, at a declining rate

Positive Externalities in Napster

• Measures of congestion in Napster increased with the number of users, at an increasing rate

Negative Externalities in Napster

Network Externalities in Intent to Continue Facebook Use in Taiwan

• Survey among 402 Facebook users in Taiwan

• Correlations among constructs

Number of membersNumber of peers

Perceived ComplementarityUsefulnessEnjoyment

Intent to use

Lin, K.-Y., & Lu, H.-P. (2011). Why people use social networking sites: An empirical study integrating network externalities and motivation theory. Computers in Human Behavior, 27(3), 1152-1161.

Path model

• Network externalities (perceived # members & peers) influences intent to use Facebook via usefulness & fun

• Perceived peers has both direct & indirect effects

Implications of Positive Network Externalities

• Winner-take-all competition between networks• Need for critical mass

– minimum number of users that makes others want to join (or not quit)

http://news.netcraft.com/

Positive Externalities can Lead to Tipping

Externality Strategy

• Given this, what are the obvious strategies to pursue?

• How can you attract early members?

Join Now or Wait?

utility(join now) = participation_benefitstage1

- joining_cost + success_probability * (participation_benefitstage2 +

early_adopter_benefit)

utility(wait) = success_probability * (participation_benefitstage2 – joining_cost)

• Early members especially important• A simple model provides some insights into attracting

them

• Join now if utility(join_now) > utility(wait)

Algebra to combine modelsutility(join now) - utility(wait) =

participation_benefitstage1 – startup_cost * (1 – success_probability) + (early_adopter_benefit *

success_probability)

Implications: Where to Look for Solutions

• 1)  The current value that early adopters get from the community.

utility(join now) - utility(wait) = participation_benefitstage1

Implications: Where to Look for Solutions

• 1)  The net current value that early adopters get from the community

• 2)   The cost or effort that they will incur in order to join or participate in the community.

utility(join now) - utility(wait) = participation_benefitstage1 – startup_cost * (1 – success_probability)

Implications: Where to Look for Solutions

• 1)  The net current value that early adopters get from the community.

• 2)   The cost or effort that they will incur in order to join or participate in the community.

• 3)  The future value of they will get from the community (or their perceptions)

utility(join now) - utility(wait) = participation_benefitstage1 – startup_cost * (1 – success_probability) + (early_adopter_benefit *

success_probability)

Strategy 1 - Increase the initial value of the community

• Offer services that add value to the single user regardless of the existence of the community. – E.g., Flickr offers picture storage and management, services that are useful to the

user even if nobody else is using Flickr.

• Target early adopters with special needs. – E.g., Minitel targeted men seeking porn.

• Use data from a third-party source. – E.g., Many Wordpress blogs use a plugin to generate comments from tweets. In

other words, tweets linking to a post as treated as comments.

• Get paid staff or bots to participate. – Google is doing that by getting its employees to answer questions related to its

APIs in various Google groups.

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Using staff to create content

  Resnick, Paul, Janney, Adrienne, Buis, Lorriane R, and Caroline R Richardson, “Adding an online community to an Internet-mediated walking program. Part 2: Strategies for encouraging community participation

”. Journal of Medical Internet Research. 2010. 12(4):e72.

Strategy 2 – Provide early adopter benefits

• Give discounts to the early adopters– E.g., lower rates for life

• Create limited resources that tempt users to join early– E.g., status & recognition with being an early adopter– E.g., users sign up first to claim their username

• Give early adopters privileges– E.g., administrator status

Strategy 3a – Reduce the cost of joining

• Offer subsidized, discounted or free services may tempt users to sign up and participate.– DARPA & NSF subsidized early Internet use

• Use interface design elements that have been used in other popular sites allow the users to “learn” the site faster.– E.g., the Digg rating system is used in various other websites.

• Let users log in using cross-site authentication.– E.g., Facebook Connect

• Inform the users about the scope of the community in a clear and precise way.– E.g., New Tweeters attract more people when initial posts are

more similar to each other & on similar topics

Strategy 3b – Increase perception and expectation setting of future success

• Start with a narrow scope and broaden later on– E.g., Facebook starts at a few Ivy campuses

• Show images of users on the homepage to create a visual perception of the activity.

• Avoid empty spaces due to community inactivity.• Split community spaces by topic only after there is enough content. Otherwise,

empty spaces will be created.• Create a professionally-looking website. • Promote user-generated content on the homepage to show that the

community is active. Twitter is showing “trending topics right now” in its homepage before logging in, for example.

• Promote active spaces by ordering information by date. Keep the latest additions on top of lists.

Bootstrapping: Leverage early joiners

• Attract the users who are likely to create content. • When the community depends on the participation of two

complimentary types of users, attracting one type will probably bring the other type eventually on board as well. – E.g., sixtyone.com brought musican first and then fans followed.

• Attract the users who have bigger effect on others. – E.g., Use network centrality measures to recruit

• Allow actions in the community to be published in other sites. – E.g.,, campusfood.com allows the users to publish a story on their Facebook status

after ordering food from the site.

• Allow users to easily syndicate content. – E.g., Blogs that allow the readers to easily share a post via numerous services like

Twitter, Facebook, Stumbleupon, Digg, etc.

• Provide services that allow the users to invite their own friends easily.– E.g., “invite friends from Gmail, Hotmail, etc” that is used in many social networks.

Google

• What’s determining a decision to switch from Facebook to Google+?

• Lens #1 – Intrinsic / Extrinsic Properties• Lens #2 – Switching costs• Lens #3 – Innovators / Early Adopters / Early

Majority / Late Majority / Laggards• Lens #4 – Relative Advantage / Compatibility /

Complexity / Trialability / Observability