Fighting for the Web Supremacy: How Will Google Wave Suffer From Switching Costs and Lock-in Against Facebook?

Facebook and Google are probably the two hottest companies that come to anyone’s mind when chit-chatting about the Internet. Thus, according to Quantcast statistics, Google is the website that is the most visited by Americans while Facebook comes fourth. However, when it comes to social networking (SNs) websites, anyone will tell you that Facebook is the best one by far with 87.7 million unique users in the United States as of July 2009, up 14% compared to the previous month.

Furthermore, some may think that the recent acquisition of Friendfeed by Facebook for $50 millions (for more details see comments on Mashable) coupled with the beta launch of Facebook Lite sooner this week would be enough to solidify Facebook’s position as the leader in SNs. Most experts would say “yes, but for how long”? For many, the launch this Wednesday of iGoogle social gadgets, and the eventual launch of Google Caffeine and Google Wave are only the beginning of a longer battle between these two companies. Talking of Google Wave, many experts think that it would be the social network of the future, the most advanced in terms of success. But having the best product in terms of features, in this case the best social network, is not a guarantee for success. Concepts such as: (1) first-mover advantage, (2) switching costs, and (3) lock-in effects, are all important to take in consideration. This is why in this post, I will expose the current situation and then discuss the impact of these three interrelated concepts on Google Wave race against Facebook in their battle for web supremacy.

Google Wave
1. The Situation

The Internet is build out of technological infrastructure. Thus, the most important question to answer is: What is needed to dominate the Internet? What will it take to bring all the masses together in a single social network? In other words, what will be the social network of the future? According to my actual experience, the social network of the future will include the following features:
1. The space for a complete profile
2. The space for showing complete affiliations
3. The possibility to search for timely information (microblogging)
4. The possibility to search across the web for websites and useful detailed information
5. The possibility to follow non-followers and vice-versa
6. Private instant messaging features
7. Public messaging
8. Public video sharing
9. The possibility to send an e-mail to anyone
10. The possibility to group most popular posts in specific categories
11. The possibility to follow bloggers via feeds
12. The possibility of implementing social gaming features
13. The possibility to import friends from other social sites

But how will Google Wave perform against Facebook on these features? An overview of the answers to this question is presented on the table below.

# Features Google Wave Facebook
1 The space for a complete profile X X
2 The space for showing complete affiliations X X
3 The possibility to search for timely information (microblogging) X X
4 The possibility to search across the web for websites and useful detailed information X
5 The possibility to follow non-followers and vice-versa ?
6 Complete private instant messaging features X
7 Public messaging X X
8 Public video sharing X X
9 The possibility to send an e-mail to anyone X X
10 The possibility to group most popular posts in specific categories X
11 The possibility to follow bloggers via feeds X
12 The possibility of implementing social gaming features X X
13 The possibility to import friends from other social sites ? X


According to this short analysis, it seems like Google Wave outperforms Facebook for most features, the most important ones being: (1) search across the web, (2) complete private instant messaging (It is still impossible to send a document via Facebook private chat), (3) social bookmarking features and (4) usage of feeds. However, even though Google Wave seems ahead in terms of overall features, it is way behind in terms of unique users, since it hasn’t been launched yet. So, will users join Google Wave because it has more advanced features? Not necessarily.

2. First Mover Advantage

Google was founded in 1996, while Facebook was founded in January 2004 and went public in September 2006, which gives Google a first mover advantage in terms of Internet presence. However, as Facebook is a social network since it was launched, it has a first mover advantage against Google Wave. One important fact to mention is that after going public, it took Facebook 32 months (since May 2009), to dethrone MySpace as the number one Social Network in the United States. Thus, Google Wave is facing the same situation against Facebook. Some guesses?

3. Three Types of Costs in a Social Network

Before analyzing how much time could it take Google Wave to reach a number of users similar to Facebook, one of the most important concepts to consider is the types of costs associated with a social network, which can be divided into three categories:

Learning costs: how much time have you spent to learn how the social network works?
Searching costs: how much time have you spent to find your friends?
Social costs: how much time have you spent to socialize with others?

4. Switching Costs and Lock-in

The main problem that Google Wave faces is that Facebook users like to exchange information on this social network, they have invested their time in learning how it works (learning costs), they have invested their time in searching their friends (searching costs), and they have had plenty of fun socializing with others (social costs). Why should they switch to Google Wave? Why should they switch to Google Wave even if they know its better? What is the benefit of switching away from Facebook or simply investing time in Google Wave? Are they locked-in? The answer to this question is crucial and still hard to predict. Would that inspire a research paper written by Google Chief Economist Hal Varian who is also Professor of economics at the University of California at Berkeley, and who has published papers on switching costs and lock-in?

Conclusion & Discussion

To conclude, it is no surprise that according to my analysis, Facebook is ahead in this race for the Internet supremacy against Google Wave even though the latter has the best technology. However, one sure thing is that the race is not over and the next fall will be interesting in terms of social innovations (i.e. Google Wave) and potential acquisitions. Who do you think is going to win the race? Any other thoughts? Any bids?

Jean-Francois Belisle

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2 thoughts on “Fighting for the Web Supremacy: How Will Google Wave Suffer From Switching Costs and Lock-in Against Facebook?”

  1. Jean-Francois – thank you for your thoughts, which I found through Facebook’s new search function! Over the last week, I have really come to see that Google and Facebook truly are facing off in what will probably be the major battle on the internet for the next several years. At the center of this battle is the battle for trust. I use the word trust in this context to mean the infrastructure of trust with which humans generally have built so many institutions that we come to think of as part of our civilization, eg markets, news-organizations, borrowing-lending, political elections etc. All these things are built on trust – we buy more, believe more, give more and vote more for those we trust. Over the last ten years the internet has allowed us to do things but we often did them with certain leaps of faith and we never went beyond a certain level of engagement because of the absence of a system of trust – eg peer-to-peer lending is still in its infancy. Facebook’s great value is that it has created an analog of our real-world trust relations and taken that into the Internet. As crowd-sourcing gather pace as a process (eg getting our news via Twitter) filtering the quality of that information (see Iran government disinformation campaign this year) becomes a huge asset. Trust can do that and Facebook’s got that in our social graphs. Those social graphs can be used to place greater weight on one report of a bomb-blast than another. I am really seeing now the scale of the horizon where using the social graph to filter crowd-sourced results can give birth to new institutions. Google is going to have a very hard time pulling users away from the magnestism of those establish trust-bonds. I feel that’s the major switching cost.

  2. @Arasmus. Thanks for your useful thoughts. I totally agree that costs related to trust are switching costs that need to be added to my analysis. I was looking for a more psychological cost, but only have cognitive costs in mind, which I don’t consider as important switching costs in this specific situation. However, as a matter of fact, I don’t think costs related to trust should be considered at the same level of abstraction as the other three costs, but more as an outcome of the three switching costs I enumerated. Trust in this context should also be divided in two: (1) trust toward the social network and (2) trust towards your connections (friends), which are two different concepts. Moreover, I would add a precision to your analysis by adding that mainly trust toward the social network should be considered as a switching cost, trust toward your connections (friends) should not directly influence your decision to switch or not. However, it is more the number of your trustworthy Facebook connections or social graph that will switch to Google Wave that will sure have an impact, since this is a switching incentive that could be easily related to Metcalfe Law was it implies that the attraction of a network grows as its population grows.

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