A New Kid on the Block

The Internet today is a giant web, a hilarious copy machine, interlaced into more and more aspects of our lives. What started as a network of equal nodes, has since transformed the layer above the open, decentralized hypertext protocol, and begun to move it towards greater centralization and power in the hands of few large platforms. Social networks are an important benchmark for this trend. Social networks are an important tool for private, commercial and political use. Technological sovereignty can be decisive for political struggles, regardless of whether we talk about elections or revolutions. Privacy gains importance when the Internet becomes interconnected with more and more parts of our lives. The launch of Diaspora in 2010, a crowdfunded free-to-use social network based on free software, was clearly born from these debates. While the appeal of a federated system of social contacts is same in centralized and decentralized networks, they are worlds apart regarding their technical infrastructure, their power structures and their options for business models. Much scientific work has been carried out on the technical challenges that decentralized social networks face. But the underlying economic mechanisms that drive the market towards concentration, promote the dominance of few actors and build high barriers for market entry, have so far been rarely addressed in the context of social networks. The dominance of one network is deeply rooted in the code of the market structure troubled with network effects, lock-in and proprietary de facto standards. Furthermore, privacy restraints through the operator derive from the very core of the business model of multi-sided markets as a bottleneck between users and advertisers. Lock-in and switching costs, make it difficult for users to leave their social network, thereby weakening competition. Such a structure enforces asymmetric power relations between users and providers systematically. Here’s the thesis: Whoever wants to challenge the incumbent’s position needs to address these findings since this structure poses high barriers for market entry. Centralization of infrastructure on the market for social networks can not be reversed with technology alone. Decentralized social networks need foremost to consider how to breathe life into their provided infrastructure, since it is the user content and the interconnection between users that adds value and meaning to a social network. Projects that want to reintroduce technological sovereignty need good technology combined with a straightforward strategy for market entry. Some of these strategies differ substantially from standard strategies, since non-commercialized decentralized community driven projects based on the idea of free/ libre open source software differ in many aspects from companies. The fact that Diaspora built an alliance with other decentralized social networks of the Federation based on shared open standards is an important development and can be regarded as a good move towards joining forces against a paramount incumbent. It will be shown that although decentralized social networks face tough conditions entering the market for social networks, there are promising strategies that have not yet been exhausted. The controversies which arose around the centralization in the market for social networks are now more pressing than ever. This talk shall present an overview of the impact of social networks and the driving economic forces of this market. The status quo of the Diaspora network and the Federation as the most prominent representative of free and open source non-commercial decentralized alternatives will be analyzed. Next, the economic analysis of the relevant market structures will be used to derive fresh perspectives on how this “new kid on the block” could develop a strategy for a successful market entry. The findings are supported by expert interviews with authorities in relevant fields and data from Diaspora and connected networks.