We have explained before, how walled garden approaches are being replaced by strategies of community building that rely on switching costs.
In a post I had overlooked so far, Scott Karp of Publishing 2.0 makes an important observation about the power dynamics around switching costs. Concerning the Facebook ‘Beacon debacle’, he argues that what happened is that the company thought it had a monopoly, but it hasn’t. Switching costs do not a monopoly make, because users can indeed leave. Switching is therefore the equivalent of forking in peer production projects, it is a crucial part of the checks and balance system.
An excerpt from Scott’s observations:
“The problem is that Facebook isn’t really a monopoly medium — it just has high switching costs, i.e. it’s a pain to get all of your friends to switch to another social network. But you CAN do it. In traditional media, natural monopolies like the local newspaper meant there simply were no other options.
But on the web, there are always other options. Google search isn’t really a natural monopoly either — Google has just managed to maintain the user perception that it’s better.
High switching costs and high brand equity are not the same as natural monopolies.
But Facebook acted as if it had a real monopoly — it treated its users, to user Umair’s term, like “brainless meat for the grinder†— kind of like TV networks did when they force fed us 3-4 for minutes of mind-numbing commercials.
Facebook figured that users would have no choice but to accept Beacon — but they forgot that high switching costs are not a monopoly. And when the backlash started, they came crashing back to reality.
They realized that if their users caught wind of all the negative media coverage about privacy violations, and started to look carefully at what Beacon was actually doing, they might get so annoyed that….they might actually leave.
Sure you could change TV channels, but those annoying commercials would crop up again soon enough. You were stuck in the land of 30-second-spot monetized content.
But not so with social networks — there are hundreds of online social networks that aren’t being driven to extremes by the pressure of a $15 billion valuation, who won’t (at least not yet) try to monetize your every action without your permission.”
I disagree that “on the web, there are always other options.”
While there are sometimes other options, in many cases all of the options are equally bad (or at least deficient in similar ways). There can be many reasons for this, high costs of maintaining a large popular website (like flickr), etc.
What is significant though, is that online there are lower barriers-to-entry than in the old brick and mortar mode, which means that even if there is no other option at present, sufficient dissatisfaction will cause some group of developers to provide one if they see a need. In other words, just because you don’t see a competitor to your service at present, does not mean that one won’t appear overnight. The upshot of this is the omnipresence of a “virtual competitor.”
The lesson: don’t compel your users to create a better alternative.