by James Currier, Managing Partner, NFX
(nfx.com | @JamesCurrier)
We don’t think most people really understand Facebook yet.
The recent round of negative press seems to indicate a surface-level understanding of the company. It’s important to look beneath the surface and examine the underlying laws of nature and physics that make Facebook tick.
In short, Facebook stands alone in the depth and variety of network effects they’ve built, even though most go undetected. As a result, their defensibility is unparalleled.
The network effect visible to most is many-to-many personal direct nfx. This is the core of what enabled Facebook to build a completely new type of media company. However, there’s more to it than meets the eye.
To date, we’ve actually identified that Facebook has built no less than six of the thirteen known network effects to create defensibility and value, like a castle with six concentric layers of walls. Facebook’s walls grow higher all the time, and on top of them Facebook has fortified itself with all three of the other known defensibilities in the internet age: brand, scale, and embedding.
Facebook represents a completely new type of media company. All media companies that came before — newspaper, radio, and television companies — were one-to-many, two-sided marketplaces with much weaker network effects. They were also less capable of building more network effects and other forms of defensibility on top of their existing products.
Simply put, we don’t believe the world has ever seen a network effect media company that equals Facebook’s defensibility and size. And it’s clear that both Facebook leadership and the rest of the world are just beginning to grapple with what that might mean for society.
This essay was originally posted on nfx.com. This is just a sample. Click here for the full essay.
James Currier is one of Silicon Valley’s foremost experts in growth and network effects and a four-time serial entrepreneur. He is also a pioneer of user-generated models, viral marketing, A/B testing, crowdsourcing, and myriad other growth techniques now followed by nearly all technology companies. He has previously invested in some of today’s most iconic companies, including Lyft, DoorDash, Poshmark, and Houzz. Today, he is a Managing Partner at NFX. Follow James on Twitter here.
About NFX: NFX is a seed-stage venture firm based in San Francisco. Founded by entrepreneurs who built 10 companies with more than $10 billion in exits across multiple industries and geographies, NFX is transforming how true innovators are funded. Follow us on Twitter.
