In most markets, there are typically a handful of market leaders and many smaller, but more specialized companies, all finding their own space operating in broader market place. In today’s world of Internet and social media, things appear to work differently.
In social media such as Facebook and Twitter, people wants to use applications that everyone else is using. The value of a social media application is the size of its membership. The larger its membership, the more valuable it become to users. Because of this unique social characteristic of social media app, a leading company can out grow its competitors, and very quickly dominate the market place and force out weaker competitors. It’s hard to identify the second market leaders for applications such as Facebook and Twitters. They are all effectively monopolies.
Google is a search engine, but it uses its user search data to make its search engine work even better. More people use the search engine, the better it works. Like social media apps, once Google attained a leadership position, it uses its larger volume of search data to further distant itself from the next competitor, and entrench itself as the dominant player; effectively a monopoly.
Amazon is another Internet company and it dominates online shopping. It not only accumulate a wealth of consumer data on shopping behavior, but it also use its size to negotiate better deals on goods and shipping costs. More people shop on Amazon, the better deal it gets on shipping and goods. In a very short time, Amazon dominates on-line shopping in ways not seen anywhere, except on the Internet.
In the near term, these companies are innovative and serve their customers very well. But there is a price to pay in the longer term, when these powerful monopolies are able to raise prices and profits without competition, and stifle new ideas and innovations.
I really like this post because the more I read I realized I hadn't looked at the social media and internet industry this way. I believe now that the way social media was created will lead to it always being a monopoly or an oligopoly. You explained it very clearly that the value of a social media company is the size of its membership, and because social media is the platform we use to connect with our friends, we all want to be on the app that everyone else is on. Almost like natural selection, eventually only a few companies will be left that actually have a substantial number of members. So, to answer the question in your title, yes I do agree that social media is inherently monopolistic.
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