Market tipping - Rodrigue
Definition
Tipping is the process by which a marginal lead in a market grows into lasting dominance, because each additional consumer makes that leading product more attractive to the next. A market in which this has happened is said to have tipped: one producer or standard holds most of the market, and its position is difficult, though not impossible, to overturn. Shapiro and Varian (1999) illustrated this phenomenon by exclaiming that "Positive feedback makes the strong get stronger and the weak get weaker, leading to extreme outcomes." This ‘positive feedback’ comprises ‘network effects in the modern day.
Messaging is a prime illustration of tipping: the value of a messaging application lies almost entirely in who else uses it. In much of Europe, the market tipped to WhatsApp early. Once enough early adopters had joined, others followed because they wanted to communicate where the people they knew already were, and each new user made the application more attractive to the next. Once tipped, the market proved resilient: the 2021 privacy-policy backlash drove mass downloads of Signal and Telegram, yet users largely remained.
Implications
The main implication of a tipping market is, naturally, its proven ability to create a monopoly. By amassing a considerable user base WhatsApp became the de facto middleman for businesses looking to reach customers via messaging. To date this can only done through its business platform with associated fees and WhatsApp specific terms. For instance, a charge per customer service initiated outbound messages. WhatsApp can throw its weight in this manner because it knows businesses will consider this just a cost of business as they’re not able to take their customers elsewhere immediately if they disagree.
Gaps
Tipping assume narrowly assumes that products in a competing market start on an equal footing. An individual product battles to hold the market where the network effect forms a part of the market as a protocol such as SMTP.