Whole Society is the Biggest Network Effect

I chatted with Doug on this the other day about the difference between people in China and US. I have written on this topic in many articles:

Why People don’t Use Voice Mail in China

Do You Have a Calendar?

Why Classified is NOT Popular in China, Yet

The Slow Move

You will find that people in US seem to move slower than people in China in all of the cases, just because most of the things are new to Chinese, and people in China can directly by pass voice mail and get to mobile era, by pass calendar and directly do real time planning (via IM and mobile), and no possibility for newspaper based classified in China forever.

The problem then will be, why it is slower to move in a more established market like in US?

My answer is about network effect.

In eBay’s case, in the cases of many SNS site, and in the case of telephone company, we are using the term “network effect” to describe the fact that by adding another point in the network, the whole network get more useful than before the addition.

In the voice mail case, since most of the people are already using voice mail, it is so hard for people to change the behavior to switch to mobile over night, since the voice mail network is so big and so useful to abandon. Think about fax machine! What is the point to print out a document and fax it and throw the paper away? The reason is, so many people are still using it and making the fax technology – the fax protocol still attractive.

When to do the Shift?

When the network effect there, change in a few of the users won’t impact the network. 10% of people don’t use fax machine actually does not take big impact to the whole network.

BUT, one thing can change it. That is some big social movement that changes everyone’s behavior at the same time. Let me give two examples.

1. The earthquake in Taiwan in 2007 that cut the cable between US and China. The week of pause of any service from US actually changed the nature of many Internet business in China – just because people (100%) are switch at the SAME time.

2. Another example is SARS. Since everyone choose to stay at home during May holiday in 2003 at the SAME time, online shopping site Taobao got its best push since a big social event like SARS not only changed the behavior of part of the network, it almost changed everyone, so changed the whole network effect.

The Biggest Network

In that sense, the whole society can be treated as the biggest network effect business. A shift is very slow, and takes long time to happen. The only way to change it is big social events like cut-off of Internet for several days (like the earthquake), or SARS. The recent Sichuan Earthquake, and H1N1 Flu are very likely those pushy event, but we don’t know the impact yet.

2 thoughts on “Whole Society is the Biggest Network Effect

  1. Richard

    “The week of pause of any service from US actually changed the nature of many Internet business in China”

    I’m quite interested in this section but not clear about it. So if any could you list a couple of examples of the nature changes in 2007? Thanks!

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