When Path announced that it will close down its operation, many internet users were shocked as Path was one of the most popular applications few years ago and once reportedly valued at $500 million. This article aims to analyse the phenomenon behind Path withdrawal from business and management lenses and portrays that “competition” is not the only factor that led to Path’s shut down.
The “Last Goodbye” post1 uploaded by Path on September 14, 2018 shocked the internet users or also known as the netizens given that a lot of social media or internet users are familiar or even were users of Path, back when Path was at its peak. Such a news can be linked to the event where another social media, Friendster, decided to pull out from the business2 on May 31, 2011 after standing at the top of social media industry for years. Some key points from analysis on Friendster’s withdrawal from the business deemed relevant to analyse Path’s recent retreat. However, several things are different between the case of Friendster and Path as the latter is more complex.
The one and main key word to explain Friendster’s retreat is “competition”.3 In its peak, Friendster was a single player in social media business (though there were few other players, their power seemed insignificant compared to Friendster). Until Facebook came in 2004 and slowly stole Friendster’s market. Keep in mind that most social media applications use User Generated Content (UGC) system which means that every content on those platforms are made by the users.4 This unique feature makes the number of users become one of the most crucial determinants of the success or failure of an application. The more users a social media outlet has, the more interactions among users exist. In contrary, the less people on a particular social media outlet, the less people who will use that social media network – a snowball effect so to say. This is what happened to Friendster; some of their users shifted to Facebook, other users followed, resulting in reduced significance of Friendster in the internet space.
Marketing management discusses this phenomenon under fad-trend-megatrend concept.5 For those unfamiliar with these terms, “fad” is something that can be gone quickly. An example is the Pokemon Go fever. The game peaked, then daily users and time spent on the app per day declined, until it vanished. “Trend” is more predictable because this happens on a much wider scale and usually it stays a bit longer. Path’s case falls in this category. “Megatrend” has a more massive impact and lasts much longer than trend and fad. Facebook is the best example for this. Since the platform’s launch in 2004, it continues to dominate the internet space and considered as one of the most widely-used social media platform. Its remarkable success can be attributed to its features that allow almost everything, ranging from expanding one’s global network, to promoting events and organisations, to doing trading, and many more.
Back to Path, the resemblance between the cases of Path and Friendster lies on their failure to manage competition. Path’s main competitor, at that time, was the new-entrant Instagram. However, unlike Friendster, competition is not the only problem that led to Path’s closing of its network. On November 14, 2010, the day Path was born, Mike Isaac from Forbes wrote an article6 entitled “New Social Network Path = iPhone + Instagram + Facebook – 499,999,950 Friends” to reflect Path as an exclusive circle for 50 persons only. Path is accordingly not competing vis-à-vis with Facebook, as it is an alternative social media outlet, different from Facebook. With “exclusiveness” as value proposition, Path successfully attracted a significant number of users, boasting 15 million users at one point.
The complex case of Path retreat started in 2011 when Path added their circle limit, from 50 to 150. That decision still sounds reasonable as Path adopted the theory from Emeritus Professor Robin Dunbar of University of Oxforsd who argued that an ideal number of friendship circle ranges from 50–150 persons.7 Then on August 2, 2014, through service.path.com, Path announced that “there is no limit to how many people you can have in your People List’.”8 The main issue behind the new policy is: Path is no longer exclusive. Many analysts criticised such a move by Path. However, Path argued that the decision to relinquish its exclusiveness is the decision to fulfil market demand. The main question that followed Path’s argument is: “which market?”
In early 2014, when Path CEO, Dave Morin visited Indonesia, he said that the demand to expand friendship circle limit mainly came from Path users in Indonesia. At that time, Indonesia is the biggest market base for Path with over four million users.9 Apparently, the decision to prioritise the voice of this majority over their initial value proposition was a big blunder. Path was born and grew in The U.S., where the country has a very thick individualist culture according to Hofstede.10 No wonder Path was well-received by the American people by offering exclusivity that deemed relevant to individualist culture. When Path landed in Indonesia, a collectivist country, the demand to expand the circle limit came up as the 50 friends limit was deemed very tight. Unfortunately, this strategy didn’t come up effective. Path, while trying to further mingle with their loving users in Indonesia, didn’t see that their users have been attracted to a new app in the block with its funny and fresh features – Instagram.
Thus, here we are today, saying Goodbye for the last time, dear Path!
About the Author
Jaya Addin Linando is a management lecturer in Universitas Islam Indonesia. His interests are on topics relating to human resource management and business management. He can be reached at [email protected] or [email protected]