Thank you for you post. In my opinion, Skype has network effects without login-effect which might be its downfall. I love Skype and used it regularly but since Facebook/Whatsapp introduce it´s “VoIP-call” function my usage declined rapidly. The low switching costs to another VoIP provider enables Facebook to leverage its existing network, add a new application and might take over market dominance soon – everyone of my friends is on Facebook but only a small percentage of them is on Skype (or I added only a small percentage).
When switching costs are low you might have to compete with quality – but can Skype provide a better experience/connection quality or scale than Facebook and its messaging app everyone has on his phone ? I doubt it and I think that Skype will face hard times in the future.
Thank you for your answers. Jon, interestingly in the beginning Groupon made use of direct network effects on the consumer side: Before a special deal was “active”, 500 customers had to purchase it. This lead people to share this deal with others to get the deal over its “tipping point” – in some way more users increased the customer´s value. I am wondering if they should have sticked to this “deal tipping mechanism”. Nevertheless, I agree that Groupon‘s business model has additional flaws as you’ve mentioned which add to my doubts about its sustainability.
In my opinion, Blockbuster really did make some terrible management mistakes and had wrong judgement about the changes the industry would go through. They did not see that expensive retail stores/distribution are not competitive resources anymore and that creation of value for the customer changes dramatically. In fact, Blockbuster could have adapted to it and e.g. bought Netflix: In early 2000s, Netflix Co-founder Reed Hastings offered Blockbuster to buy Netflix for $50 million dollar – a sum which would have been nothing for Blockbuster at that time.