Facebook solid because of older demographics

Great article that's being passed around in our office today from the New York Times on why Facebook hasn't gone the way of Friendster and other here today, gone tomorrow sites.

Here's an excerpt from the article:

"More than demographic stability favors Facebook. The site has shrewdly emulated the “network effects” strategy used by another brand that has long held a dominant position in the computer industry: Microsoft Windows.

Economists use the term network effects to refer to the way the value of a product or service increases in tandem with the number of people who use it. If you’re one of only 10 people in the world with an e-mail account, its usefulness is limited; add a billion more, and the practical value of yours increases apace.

A Facebook member enjoys immediate benefits when each friend joins — these are direct network effects. But the average user already has 130 friends, so unless the user is unusually gregarious, the direct effects won’t increase drastically beyond a certain point.

For an individual member, the most powerful network effects may be indirect ones that come from the huge number of unknown other people in the Facebook world. Their mass attracts, in turn, suppliers of complementary products and services."

Full article on nytimes.com here.