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Facebook, App Platforms, and Game Theory

Posted on | November 22, 2010 | 1 Comment

Diversity improves adaptation and survival

In this post, I explore how Facebook manages viral channels and how a little game theory might be applied to better manage their platform for developers and end users.

Viral channels on Facebook drove enormous growth for Facebook and for app developers.

For a while, it was possible to acquire millions of unique users in a couple of days with a simple Facebook app. A few of those applications grew into giant businesses with hundreds of millions of users and huge revenue. Zynga, for example, appears to dominate Facebook with about 50% of platform market share based on recent usage data. Whole investment funds launched to fund Facebook app developers, Stanford announced a Facebook app class, and thousands of apps were launched in just a few months.

Today, developers worry that it’s no longer possible to achieve historical growth levels on Facebook as an app developer.

Facebook was forced to clamp down on apps, because the spam was impacting the Facebook user experience and app quality was somtimes poor. As someone who has questioned the sanity of close friends after receiving my 20th request to be a slave on their virtual farm, I commend Facebook’s careful tuning of app viral channels. I no longer receive app notifications prompting me to dig a trench or build a castle, and my user experience on Facebook is much better.

Early Facebook app developers have advantages over new entrants

The app developers who were able to acquire large numbers of users before the reduction of viral channels are still able to launch new apps and drive millions of users to them in just a few days. New developers can’t do this:  they can’t tap an existing user base to reach critical mass, nor do they have the large marketing budget necessary to acquire millions of users from other sources. Obviously, this frustrates new developers. That’s life, right? But is this a good thing for Facebook or end users?

Premature evolutionary stability

There is a possible problem with the current situation: the app ecosystem might be trapped at a primitive evolutionary stable state.

“An ESS or evolutionarily stable strategy is a strategy such that, if all the members of a population adopt it, no mutant strategy can invade.” –Maynard Smith (1982).

Let me explain using an example from nature:

Imagine there is a fertile grassland inhabited by a few happy rodents. They don’t have a great strategy for survival, but living is easy and they grow in population until there are millions of rodents.

One day family of chimps invades the grassland, but are unable to fight off the rodents for food and space. There just aren’t enough chimps to defeat the rodents, and in any case there isn’t much food to go around. The chimps flee the grassland nursing their wounds. The chimps don’t have the critical mass: they can’t win against the rodents despite their intelligence and survival skills.

If the situation were reversed, millions of chimps would have no problem fighting off the rodents for food. The chimps are more sophisticated and have a better strategy for survival than the rodents… if only the competition were not so lopsided. A whole array of diverse animals might be able to eke out a living in the grassland, forming a more diverse ecosystem that reacts more flexibly to environmental or other changes.

Brining this back to the Facebook app ecosystem, it becomes easy to see how the combination of network effects and reduced viral channels block new applications from gaining traction even if they are superior applications. New applications lack easy access to food (virality) and struggle to defeat the incumbents who already have millions of users (network effects).

Are there benefits to Facebook or it’s users for leveling the playing field a little?

Yup. The benefit to Facebook, and it’s users, is  faster evolution of apps and more diversity. This has several benefits:

  1. Resistance to outside attacks (e.g. new experiences on other platforms)
  2. Ecosystem health (more app developers, less monoculture)

The benefits to users are:

  1. More diverse kinds of apps
  2. Better apps

A strategy to maximize the rate of evolution

One way to jump start evolution might be to give new entrants access to enhanced viral channels, initially. Then test engagement with limited pools of users. Think of this as Thunderdome for apps. App virality is easy to manage on a per-app basis, once it is clear which apps are actually most engaging. And the whole system could be implemented gradually, providing only varying levels of advantages to new entrants as needed.

Other Ramifications

Other app platforms, such as a the Apple iPhone App Store, also struggle to balance popular applications against new entrants. Achieving balance is a hard problem, and the measure of a “Good” application remains a subjective matter. It is ironic that some of the controls platform managers make to reduce the growth of “spammy” apps have the unintended consequence of penalizing new entrants, slowing the evolution of newer apps and enhancing the advantage of incumbents.

In summary, I do think some ideas from evolution game theory can be applied to app platform management to promote the creation of more, and better, applications.

Comments

One Response to “Facebook, App Platforms, and Game Theory”

  1. dmarks007
    November 23rd, 2010 @ 4:36 am

    [New Post] Facebook, App Platforms, and Game Theory – via #twitoaster http://davidmarks.co/2010/11/22/facebook

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