The more the merrier - Does the launch of Google+ benefit consumers?

With the rapid decline of MySpace, Facebook has quickly acquired a near monopoly position among social networks. Now Google is entering the arena with its new Google+ product, potentially threatening Facebook’s dominant position. Is this a good thing for consumers? The knee-jerk reaction is ‘Yes, competition always benefits the consumer’ but this might be one of those odd cases where it is not necessarily so.

Competition is usually thought of as necessary to force companies to better service their customers and keep prices down. In the case of Facebook this would mean continuous improvements to their product. The recent introduction of the geo-tagging feature Places allowing users to ‘check-in’ to visited locations would be good example of an action to keep the service relevant and competitive. It is also likely the threat of competition that is keeping Facebook a free service and probably more importantly it prevents them from terrorizing the consumer with more and excessively intrusive advertisements.

At the same time Facebook’s dominant position greatly benefits consumers by gathering all their friends and family on to one service. Imagine a system where people owned phones of different colors, red, green, blue and purple - and only a red phone could be used to call another red phone and so on. Requiring users to own multiple phones and keep track of which color phones their friends own. It is hard to see this situation benefiting consumers, it is more likely to drive them mad. Social networks are usually not developed to interact with each other so a situation with several large competing networks would likely look very much like our different colored phone scenario, requiring users to jump between different services depending on who they wish to interact with.

So what conclusion can we draw from this? It would appear to me that the most beneficial situation for consumers would be one where one social network has a near monopoly position, let’s say this company is Facebook. But other services like Google+ are successful enough to keep the dominant network on its toes and force it to stay competitive but not successful enough to challenge its position as most peoples primary social network. Alternatively completely replacing the old giant and taking its monopoly position.

It might be that social network market is a natural monopoly which can’t sustain more than one major player and the market leader can maintain its monopoly only as long as it offers the best alternative for consumers, supposedly both features and user base would be taken in to account when evaluating this. Once it fails to satisfy its customers it is quickly cannibalized by another service which then takes its place as the new dominant service.