Question

QUESTION 6 Facebook's membership grew from 34 million at the beginning of 2008 to over 600 million by January 2011. The site dominates the online social networking market, out-performing rivals Twitter and My-Space. 1. The growth of Facebook can in part be explained by network externalities 2. Facebook becomes more valuable to each user as the total number of users increases. 3. Facebook will be certain to dominate this market now that it has an entrenched position. Which of the above statements are true: Only 1 is true. Only 2 is true. Both 1 and 2 are true. Both 2 and 3 are true. All three are true.

Answer 1

Growth of facebook can be in part of the externalities of other networking platforms like twitter and my-space. Example - Instagram was not well known at that time but after the rise of facebook , many users also started using Instagram which is due to externalities. Many platform tends to promote other social site.

As the no. of users increases , the valuation for a user increases. As we can now find more friends than before and chat with them then before where many were not using Facebook.

Yes if a platform have entrenched position then it will certainly dominate the market. This is true for any possible market whether it produces phone or cars or clothes.

Answer all three are true