The Power of Defaults

Take social networks, for example. Friendster‘s network effects weren’t strong enough to fend off MySpace. And MySpace – which many feared would dominate the internet forever – was quickly replaced by Facebook.

In contrast to Google and Apple, Facebook doesn’t own an operating system and, thus, doesn’t enjoy the defensibility of a pre-installed default. But because Facebook is the de-facto online identity layer for so many people, it is almost guaranteed to secure some of that limited pixel real estate on the user’s home screen.

Becoming the default browser homepage became Google’s actual moat. There can only be one homepage (no multihoming) and users are typically too lazy to change it (friction = switching costs).

There is a similar pattern for chat apps: WhatsApp, iMessage, Telegram, Facebook Messenger and Snapchat all have at least 100 million users. Why doesn’t the market tip in favor of one or two of them as the literature suggests?

If you think about it, it’s kind of amazing that the largest operating system humanity has ever seen only exists to protect an advertising business two layers further up the stack.

The base layer is the final interface between the stack and the end user – which is typically an operating system tied to a piece of hardware. This is why atom-based network effects are so powerful: They help companies gain control of the most powerful layer of the stack.

Apple realized that it owns some of the most valuable pixel real estate in tech: The home screen. And the best way to monetize that real estate is by occupying as much as possible of it yourself.

What’s so striking about these examples is the discrepancy between market cap and NPS score. It would be amazing if we lived in a world where companies with terrible UX did badly in the stock market, but that is clearly not the case. The fact that you can build a successful business without a truly great product is a real testament to how strong of... See more

This essay isn’t about network effects per se. It’s about the end state that they can enable: Defaults.

Today, Facebook is seen as the prime example for the power of network effects – and yet, one wonders where Facebook would be had it not acquired Instagram back in 2012. People also seem to forget about all the other social apps which Facebook has bought and subsequently shut down over the years. Why would a company that has supposedly “won the mark... See more