Editor's Note: From the business point of view, the use of their own network advantage, the smaller competitor function copy is the best strategy. But this time not only copy the function of Facebook Snapchat, and even Snap vision also copied, so technology blogger Ben Thompson very angry. He does not think that Peter Thiel thinks monopoly is conducive to innovation, but rather uses the supply and demand curveDescription, So go on will only cause unnecessary losses to the community, and finally only Facebook a winner.
This shameless is amazing.
After talking about a few jokes, summed up his declaration and confirmed Cleveland's so-called "Facebook killer" victim after Facebook's founder and CEO Zuckerberg started the company's F8 developer Conference Keynote Speech:
You may have noticed that we recently launched some cameras in our own app. This is the first act. In terms of how to share, photos and videos are becoming more central than text. So the camera needs more center than the text box in all of our app locations. Today we are going to talk about the second act, talking about where we are going from here, and this is a broader technical trend that we discussed earlier: the reality of reinforcement is linked.
Is it sounds a bit familiar? That's because that's itExplain Like I & rsquo; m FiveSummary of the Snap prospectus:
Just as the flashing cursor becomes the starting point for most of the desktop computers, we think the camera screen will be the starting point for most products on smartphones. This is because the image created by the smartphone camera contains more context and richer information than other forms of input, such as the text entered by the keyboard. This means that we are willing to take risks to try to create innovative and different camera products that can better reflect and improve our life experience.
Snap may have announced that he is a camera company, but Zuckerberg as this is the first act "and dismissive, clearly that Facebook is not simply using Snapchat headlines, but also includes it The whole vision.
Facebook and Microsoft
Snap prospectus introduced soon, I am in the "Snap Apple StrategyUnfortunately, the apple I am referring to is not what we know today is the world of the iPhone that makes the world, but the house that makes the Macintosh machine can not help but be squeezed by Apple, Facebook Is in this context into our line of sight.
And now, if the Snap compared to Apple's words, that Facebook is Microsoft. Just as Microsoft's success is not because of the superiority of the product but the opportunity brought about by the IBM PC, relying on the blue giant to dominate the ecological system, Facebook's success is not only because of product features but also includes the line relationship Digitize the use of each place to communicate with friends and family of desire. And like Microsoft and Apple's contrast, Facebook also has a good copy of shameless.
I write"Good shameful"The background is Instagram's introduction of Instagram Stories; it's wonderful that Facebook does not try to re-invent the wheels. Instagram Stories, and now Facebook Stories, WhatsApp Stories and Messenger Day are naked to copy Snapchat Stories, which is not only a problem, and in fact it is their best strategy: Instagram is almost no function, but its network The By making Instagram Stories exactly the same as Snapchat Stories, Facebook has weakened the competition to see who is stronger in the future.
Microsoft and monopoly
Microsoft is certainly considered a monopoly, as I wrote a few months ago "Zuckerberg's Declaration with Facebook's Monopoly"So, not to Facebook as the previous Microsoft has become increasingly difficult to see. But that's what you expect from the aggregator. From "Antitrust and aggregation":
The first critical significance of the theory of aggregation to antitrust is that it is precisely because of these virtuous loops, so large will become bigger and bigger; indeed, no accident, the market in line with the theory of the final equilibrium state Is a monopoly: that is, a aggregator Shoulong finished all the consumers and suppliers.
But this monopoly is different from the monopoly of the past: the aggregator does not rely on the control supply (such as oil) or distribution (such as railways) or infrastructure (such as telephone lines) to limit the choice of consumers; on the contrary, consumers are voluntary To the platform of the aggregator, because their platform experience better. This is not a violation of the US antitrust law, because the latter's judgment is based on whether it is a significant harm to consumers (mainly through higher pricing, but also to reduce competition), and this is the FTC refused to sue Google The reason for the search practice.
This self-choice, especially the choice of "free" and the platform, makes it difficult to calculate the cost of Facebook's seemingly monopoly to society. Here we can use simple economic principles to explain why the monopoly is a problem:
In a perfectly competitive market environment, commodity prices are set at the intersection of supply and demand, while the latter (supply) is determined by the cost of production (the higher the marginal cost of a company will be squeezed out of the market, If the lower will temporarily rule the market until the new competitors to enter, of course, all this is the theory).
Horizontal axis production, vertical axis price
The consumer's willingness to pay less than the actual payment of the consumer can be expressed in the area of the triangle surrounded by the demand curve, above the price line and the price axis; & ldquo; the producer surplus & rdquo; The price of the producer to sell the product minus the marginal cost of the product can be expressed by the marginal cost / supply curve above the price point below the area:
Green area for the consumer surplus, blue area for the producer surplus
In the case of monopoly, competition does not exist; because monopolistic suppliers make decisions based on profit maximization. This means that monopolized suppliers no longer consider the demand curve, but consider the marginal revenue (the price minus the marginal cost), which can be achieved by selling the extra stuff and then setting the price to the marginal revenue and the marginal cost. However, the key is the price according to the demand curve set:
The higher the price, the lower the yield
The result of monopoly pricing is that the consumer surplus is reduced and the producer surplus increases. Just as we are a society to care about the cause of the dark part: this is a deadweight loss. A certain amount of demand that can be met by a competitive market is ignored, meaning that no type of surplus is produced:
Monopolies monopolies increase prices by limiting production to maximize profits, and meet some of the demands that result in unnecessary losses (brown)
The problem with Facebook for this type of analysis should be obvious: because the marginal cost of Facebook service extra customers is 0! That is to say that picture should look like this:
Facebook's marginal cost is 0
So of course, Facebook may be monopolized in social networking, and although this is a problem for Snap or any other network, Facebook can no doubt argue that because there is no deadweight loss, society as a whole should not be too concerned about it.
Facebook and content providers
The problem is that Facebook is not just a social network: the service is a triangular market & mdash; the three parties are users, content providers and advertisers, although Facebook is the foundation of connecting all those users' network effects, but this The dominance has penetrated into the other two.
Content providers are an obvious example: in 2015, Facebook has gone beyond Google to become the largest traffic driver, by the fall of last year, news sites have been 40% of traffic is driven by Facebook, and even affect the issuer This is still true after the algorithm is overridden.
So, is it also a monopoly in the content provider market? Based on the above monopoly framework, I think so.
Note that we have another situation where there is no clear price: no content provider has to pay for Facebook's link (although it is clear that they can turn the link into an ad). However, Facebook is really making money from this content, at least indirectly to make money: the more attractive to find the content of the user, they are willing to spend more time on Facebook, it means that will see The more ads.
This is also the reason why this idea looks like Facebook Instant Articles: on the one hand, readers can have a better experience of reading content, which in turn allows them to stay longer on Facebook. On the other hand, Facebook helps publishers offer (Facebook raises 30% to help the latter to sell content), not only can support the Facebook three-tier market content providers, they can also be locked in Facebook, because elsewhere Can not get such income. I expect the market should be the following look like this:
Ideally, the publisher benefits from the consumer's surplus, and Facebook benefits from the producer's surplus
However, Instant Articles did not follow my expectations: the benefits of consumers are still, but in the issuer's monetization Facebook completely mistaken. This is not to say that Facebook is not monetized, but the company did not share the motive. Or, in other words, Facebook left most of the rest to himself:
In this case, Facebook does not set a higher price to maximize profits, on the contrary, their approach is less to others income; but this result is the same & mdash; and profit maximization. Remember that this is not possible in a competitive market: Facebook will be forced to share more revenue to the content provider if there is a real competitor in the content to ensure that the above content retains itself On the platform. But in fact, Facebook's dominance is too overwhelming to attract attention, so it simply does not need to do anything for the publisher (and if the publisher leaves the Instant Articles, they can still put it up , And users still can not do without Facebook).
Facebook and advertisers
There may be a similar sign in the advertising - mdash; that is, Facebook can reduce the supply to raise prices and then increase profits. In a perfectly competitive market, the cost of advertising should be as follows:
But Facebook will soon be in the amount above, or at least in terms of growth restrictions. At last November's earnings conference, CFO Dave Wehner said Facebook would stop loading ads in the summer of 2017 (for example, Facebook has been increasing the amount of content relative to content in the News Feed for a long time, but this approach Ready to stop) it is not clear whether this will lead to the rise in the price of the ad (Wehner was in the answer to the question when the flicker).
There may be two reasons for this cover:
The price will not rise, which for Facebook will be a bad signal: because it means that although Facebook has so much data, but the ads are not differentiated, and spend the money above Facebook actually spend the same elsewhere
The price will rise, it means that Facebook ads have differentiated advantages, so Facebook may be able to limit the supply to increase profits
This second possibility is shown in the following figure:
Note that Facebook has already said that because of this change in revenue growth will slow down; but this is not inconsistent with the monopoly power of the place. Monopolists seek to maximize profits rather than income. In addition, this may also be just because Facebook worries will affect the user experience. It would be interesting to see how the company's financial situation will change with these changes.
Monopoly and Innovation
However, even if Facebook in the content discovery and distribution and digital advertising monopoly power, which for users will be a problem? Maybe even a good thing?
Facebook board member Peter Thiel is of course thinking. In the book "From 0 to 1", Thiel not only made it clear that the monopolies were ideal, but also said that the patterns I used were not useful because they assumed the world to be static.
In a static world, the monopolist is a lessee. If you monopolize the market, you can raise the price of the product; others have no choice but to buy it from you Like a well-known desktop game: the land lease between players in the rotation, but the rules of the game never change, you can not create a better real estate development method to win the game. In the game, the relative value of real estate is fixed, so you can do is try to buy them all. But the world is dynamic, we can create better new things. Creative monopolists create new things and give consumers more choices. Creative monopolies not only have no bad influence on the outside world; on the contrary, they are the better impetus to make the community better.
The vitality of emerging monopolies explains why old monopolies do not resist innovation. Apple's iOS system has led the way, the rise of mobile computing quickly from Microsoft's decades of operating system dominance pushed down. Prior to that, Microsoft's software monopoly replaced the United States IBM's 20th century, 60 to 70 years of hardware monopoly. Almost the whole of the twentieth century, the telephone service industry was monopolized by the US telegraph company, and now everyone can buy a cell phone from a random supplier. If the trend of monopoly is to hinder progress, then we should resist this dangerous business. But the history of progress is in fact a monopoly of the process of continuous upgrading. Monopolies to promote social progress, because several years or even decades of monopoly profits is a powerful innovation motive. Monopolies will also continue to innovate, because profits give them the planning of long-term future capital, so that they have the ability to invest in ambitious research projects, these are trapped in the competition of enterprises want to think.
The question is that Thiel's example is paradoxical: for me, monopolies like AT & amp; T, IBM, and Microsoft for decades are certainly bad things! Admittedly, they will eventually collapse, but not after draining the rent, even more distressing is that suffocating for many years. Look at Microsoft: The company has spent billions of dollars on research and development and demonstrated numerous demonstrations of future technology; but they actually made the most successful products (Kinect) eventually hurt themselves to support the product (here Refers to the Xbox One pricing higher than the PS4 but the specifications are lower than the latter, which is mainly thanks to bundled Kinect given).
Indeed, it's hard to think of what technology is created by both monopolists and free markets. Thiel wrongly confused the driving force of the new company with the new monopoly and the right of the old monopolist to act according to his liking.
This is not only Facebook's ability to steal Snapchat, but even the whole vision is the cause of my nausea, although this is the business is good for the company. Yes, I think the company's use of the monopoly of the network will hurt innovation, the same monopoly graphics can explain the reasons. In the competitive market, the cross between the innovation return and the customer's needs determines how much innovation can be generated and who can get the benefits.
But the monopolist does not need this drive to innovate, or, more precisely, does not need to be profitable by innovation, which leads to lazy politics, who prefers to spend money on engaging in technical demonstrations rather than delivering Product above. After all, the monopolist takes other people's innovations on the line, and the profits they earn are even more than they can earn.
This is the reason why Zuckerberg's keynote is so disappointing. Last year, after Facebook realized that he needed to use his own network to squeeze Snap, Zuckerberg put most of his lecture on a long-term vision, explaining all areas where Facebook wanted to innovate. This year's difference can not be big: the vision is gone, only the Snap on the bulk of the cottage, coupled with a pile of users with Facebook what are too lazy to explain the technical demonstration. This is effective, at least for a while, but do not make mistakes, Facebook is the only winner.
This article comes from:Stratechery.com