The FINANCIAL -- The social media network holds an almost unshakeable position in a tech industry.
Facebook remains one of the world’s biggest tech companies, despite a US$120 billion (£92 million) drop in value caused by the social media network’s share price plummeting 20% in late July, according to LBS.
The fall came after Facebook published its second quarter results for 2018, which while still positive, dropped below investor expectations.
The company announced that its user growth rose at its slowest rate in two years. It also warned that billions in spending to improve privacy and track advertisers would outweigh revenue gains.
Recent woes aside, Facebook still has an almost unshakeable reputation as one of the tech sector’s dominating forces – alongside Google, Apple, Amazon and Microsoft.
“Nine mutually reinforcing factors drive these companies’ market dominance,” said Patrick Barwise, Emeritus Professor of Management and Marketing at London Business School, in his article on why such businesses dominate the tech industry.
The nine factors behind Facebook's and other tech leaders’ dominance are:
Traditional economies of scale, scope and learning
Direct (within market) network effects
Indirect (cross market) network effects – or “platform economics”
Big data and machine learning
Strong user brands and habitual usage
Switching costs and lock-in
Attractiveness to talent
Powerful founders and hard-driving corporate culture
Geography – or “cluster economics”.
Tech companies that establish themselves as market leaders are almost impossible to displace because of mutually reinforcing factors.