Understanding Sunk Costs
Sunk costs are what make customers loyal. The overall concept is that when a consumer has sunk costs, they factor those into future decisions related to competing products. Sunk costs are generally of a monetary nature but more often than not, the sunk cost of time may be the post powerful.
This is a major factor that Facebook uses to their benefit and gives them a huge competitive advantage over any other social network sites. Now over 750 million people are sinking time and energy into putting their lives on Facebook. This is the network they have decided to spend their valuable time on to develop and embrace with their digital lives.
Beyond that, Facebook has nearly double the engagement time MySpace had. The last ComScore numbers I saw reported that, on average, people spend upwards of eight minutes a day on Facebook from a computer; from a mobile device, the average time was 12 minutes per day.
At this point it would be hard to imagine what any service could offer that would get consumers to abandon all the work they did on Facebook and begin it all again at another destination. And it would take a monumental error on Facebook’s part to go the path of MySpace. Of course, anything is possible and if Facebook somehow had a massive security issue that caused them to lose their customers’ trust, they could have a hard time recovering.
So What About Google+?
There are some very compelling things about Google+: things that I think are extremely interesting. Circles for example, where you can organize all those you connect with on Google+ into a designated circle. The value of doing so is that when you decide to share something, you can choose specifically which circle to share it with. This is a problem Facebook has since many consumers private and work lives have collided on the service.
(VIDEO: How Google+ Works)
However, what’s to say that Facebook couldn’t steal this idea from Google and make it very easy for you to separate all your Facebook connections into groups? You would then be able to decide which content you share is appropriate for which group. In reality, only time and engineering resources are needed for Facebook to duplicate this concept since they already have a basic grouping feature in place.
Google+ has a lot of potential. However, they are in the trust-gaining mode, which will take some time to develop. I’m also not convinced Google+ is trying to be a social network or that it is really targeting Facebook at all. In fact, I think Twitter may be more the target than Facebook. Many of Google+’s features are similar to Twitter but add a level of engagement that goes beyond what Twitter offers.
Google+ may be designed to be a social service more than a social network. Google is a services company and Google+ may be designed to integrate and add value to their other services like Gmail, Calendar, and Docs. That could be where the real value kicks in, but it’s still too early to tell.
So can what happened to MySpace happen to Facebook? Of course it could. However, there are currently no signs to say that it will. Facebook has created a very sticky service that is connecting people around the globe, and the company isn’t running out of ideas.
As long as they keep innovating and meeting the needs of their users, I don’t expect anyone to knock them out of their # 1 position in social networks.