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Originally Published: May 20, 2010

How Facebook rapidly diffuses innovations

Jennifer Van Grove wrote a brief piece for Mashable titled, How Facebook Makes Edgy Concepts Mainstream. Her premise is that emerging services like Foursquare, Gowalla, and Square are slow to be adopted by the mainstream on their own.

However, when these ideas show up on Facebook, they meet widespread acceptance.

Why does Facebook succeed where these other companies fail? Van Grove posits that Facebook’s familiar brand name breeds trust and confidence.

I thought this was interesting. Let’s dive into the theory.

Network effects

Metcalfe’s Law states that the value of a network is proportional to the square of the number of users connected to it. In practical terms, this means that as a system like Facebook grows, the system becomes increasingly valuable and useful to you because more people (including people you know) are users. That’s a network effect.

Want to see a network effect in action? Look at Mount Facebook. If Facebook was a country, it would be the third most populous on the planet.

Network effects can entrench the position of a product. Despite all the grumbling about Facebook’s privacy policy, very few people have left the network. Even if there was a viable and open alternative, users will be reluctant to transition away until they see their friends moving too.

But network effects are only part of what’s going on …

Diffusion of innovations

Ev Rogers wrote a book in 1962 that discussed how innovations move from creation to widespread adoption. Though based on hybrid seed and agriculture, Rogers’ work has been picked up and modeled in other industries.

According to diffusion theory, an innovation starts out in the hands of a tiny group of innovators, moves on to early adopters, then an early majority, a late majority, and finally laggards. Most innovations don’t make it out of the early adopter phase.

Consider the iPhone. Pre-release testers in 2007 can be thought of as innovators, and the folks who camped out on release day became early adopters. The early majority saw early adopters enjoy the product and then jumped on board as soon as Apple/AT&T cut the price. Explosive growth ensued; now the iPhone is mainstream and nearing late majority adoption, the point that another bandwagon of users could jump on now that they can trust the iPhone to benefit them.

So how do services like Foursquare, GoWalla, and Square fit in? Their growth to date is not the kind of eruption that we see with other innovations. They are clearly in the early adopter phase of their existence and need some sort of provocation to hit early majority (when the mainstream begins to take it seriously). The problem here is that these services piggyback on technologies that are themselves still early in the diffusion process. In isolation, these tiny companies have to wait their turn.

Diffusion of innovations theory also considers social structure and the way people communicate ideas. Tiny web startups don’t have an easy way to get people buzzing about their product; they rely on word of mouth, and it can take months to gain serious traction.

Enter Facebook. As Van Grove notes, users feel comfortable with Facebook and already tend to trust what Facebook does. This allows Facebook to introduce new features that, aided by a massive built-in network, leapfrog the diffusion curve.

The ramifications are actually quite frightening for small web companies. Whereas Google might buy you out, Facebook just sits back and watches while you slowly build your network, then replicates what you’re doing. The collective weight of 400 million users can be too much; even for a nimble, venture-funded startup.