Question Carmen Business & Management

What are three barriers to entry that must be overcome by a new social media app?

What are three barriers to entry that must be overcome by a new social media app?

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Answer Internal Staff

Social media has rapidly grown from non-existence to being a large industry, over a remarkably short space of time. Partly this is because of the simplicity in access that has been afforded by mobile technology and the development of simple and user-friendly ‘apps’.

The rapid success of some of these apps has prompted great interest from entrepreneurs hoping to emulate the astonishingly fast growth of apps such as Facebook, Twitter, Snapchat and Instagram.

However, these successes represent only a small fraction of the companies that have entered the market, many more fail. Even large companies such as Google have struggled to succeed (the initial social media element of Google+ failed to make significant advances).

Three notable barriers can be identified that offer some explanation for this:

Firstly is the ‘network effect’, this is the concept of when certain products gain value from the number of people also using the product. That is, if only one person is using a social media app, then there will be very little value in it.

Established social media apps thus have a significant advantage, which is why dominant early entrants Facebook have been resilient even in the face of criticism and competition. It is difficult for new apps to effectively build a sufficient network of users, and this is perhaps the most important barrier.

This links to the next barrier, attracting users from existing offerings. The large players have significant marketing capability, and also benefit from word-of-mouth marketing. Competing with this is difficult for a company unless it has significant initial financial backing.

The final barrier is the time, cost and expertise required in developing and maintaining the application, and the required infrastructure for growth. For example, to run a network the size of Facebook or Twitter requires hundreds of millions of dollars’ worth of servers (Leber, 2012).

References

Leber, J., 2012, The Biggest Cost of Facebook’s Growth (online), MIT Technology Review, Available: [https://www.technologyreview.com/s/427941/the-biggest-cost-of-facebooks-growth/], Accessed: 07/09/16