If you took a drink every time an economist used "network effects" to explain why Big Tech is so big, you'd get very, very drunk.

To be fair to economists, network effects *are* important to the Big Tech story.

A system is said to have network effects if it gets better when more people use it. That certainly describes Facebook - you join FB because of the friends that are already there, and then someone else joins because you're there.


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But network effects are how FB *gets* big, not how it *stays* big. Because even though you join FB to talk to your friends, the reason you stay there - despite surveillance and FB's many abusive tactics - is that leaving FB will cut you off from those friends.

There's no technical reason you couldn't stay in touch with FB friends without being an FB user. You can switch phone companies or email providers without walking away from the family, community and customers you're connected to.


FB deliberately engineers its system to block "interoperability" - the ability to plug rival services into its network.

Interop would let non-FB users connect with FB users, and make it so FB users don't have to choose between their community and Facebook's abuses.

The economist's term for this is "switching costs."


A "switching cost" is whatever you have to give up to switch between products or services - switching from Audible to a rival platform would cost you all your audiobooks, for example, thanks to Audible's DRM.

Facebook deliberately engineers its products to have high switching costs so that it can impose more pain on its users without losing them. So long as the pain of staying is less than the pain of leaving, Facebook calculates it can maintain its dominance.


Network effects are how Facebook attracts users, but switching costs are how it holds them hostage.

The higher the switching costs, the bigger the shit sandwich Facebook can force you to eat before you leave.

That's why interoperability is such a big deal - because it lowers the switching costs. If you can take your apps or friends or files or media with you when you leave a service, then the service has to treat you better, lest you depart.


Now, I've been accusing FB of deliberately raising its switching costs for years, based on the obvious external evidence of this conduct. But to be honest, I didn't have any proof that this was going on...

...Until now.

In its amended antitrust complaint against Facebook, the FTC draws on the internal communications it compelled Facebook to give up in order to build up a factual record of FB's abuse of switching costs, which go all the way to CEO Mark Zuckerberg.


I published a collection of these for EFF's Deeplinks blog, under the title, "Facebook’s Secret War on Switching Costs."


Here's some highlights:

Para 87: Zuckerberg's M&A chief writes to him to say, "imo, photos (along with comprehensive/smart contacts and unified messaging) is perhaps one of the most important ways we can make switching costs very high for users - if we are where all users’ photos reside because the upoading (mobile/web), editing, organizing, and sharing features are best in class, will be very tough for a user to switch if they can’t take those photos and data/comments with them."


Translation: "I figured out a way to get our users to eat a *very* large shit sandwich indeed. Just take all their family photos hostage!"


Para 187: An exec explains how FB is preventing G+ from succeeding: "[P]eople who are big fans of G+ are having a hard time convincing their friends to participate because...switching costs would be high due to friend density on Facebook."

Translation: Our users would rather be on G+ but we've stopped them because leaving means leaving behind their friends, because we won't interconnect with Google's service.


Para 212: One of Zuck's execs sends him a memo reading, " if we are where all users’ photos reside . . . will be very tough for a user to switch if they can’t take those photos and associated data/comments with them."

There's that shit sandwich again.


I'm so excited to see this stuff in the FTC complaint - not because it vindicates me (it was obvious that this was going on, though having the receipts is nice), but because it suggests that US antitrust enforcers are homing in on switching costs as an anticompetitive force.

The problem with the network effects story is that it's a counsel of despair: "Well, this company has attained scale and now there's no way they can lose."


That's bullshit. You don't search Altavista with your Cray.

Network effects inflate services, but low switching costs let the air out again. Interop is the escape valve that keeps big tech firms from sucking up all the oxygen and asphyxiating their rivals.



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