It's a childish complaint. The new startups simply aren't better, because they don't have the network effects. They may have better looking UI, better text classification, better customer service, or whatever you want.
But as long as they don't have the users, they are not better.
And don't forget that recent history is filled with companies that were "virtually impossible to defeat" until they were beaten, and harshly.
> But as long as they don't have the users, they are not better.
That's a truism. Crazygringo's point assumes that network effects are excluded from the measure of a "better" service. I think that's a fair basis for comparison, since the network effective advantage accrues from an earlier period in the marketplace's history: it's the prize won by being better/smarter than previous competitors. But it says nothing about the dominant service being better than current, newly launched competitors.
If you define "better" as having more users, then that's pretty much ex post facto reasoning and tells us little.
> And don't forget that recent history is filled with companies that were "virtually impossible to defeat" until they were beaten, and harshly.
1. The number of years that a company dominates is the measure of how much that company has won. The fact that a company eventually falls to a competitor doesn't mean that the company didn't profit handsomely for years or decades.
2. The fact that some large companies have fallen doesn't mean that the existing behemoths don't derive most of their advantage from network effects. Maybe we would have seen better, more open social networking startups emerge and win the market by now if Facebook's network effects were somehow nullified.
The ultimate point is that network effects are a very significant barrier to entry, and mitigating them would allow a more dynamic market for startups to compete in, and higher competition in the market (which is better for consumers). Imagine if all social networks were interoperable and people could choose which service they wanted to live on -- then there wouldn't be a tendency for a 1000-ton gorilla to emerge at the top of the heap.
(Funnily, I have nothing against Craigslist, since they're providing a very useful service at virtually no cost. They deserve their position, easily; their market's story is a happy one. Let's hope it happens in more places soon.)
Regarding network effects the point is that they do make the service more useful (read better) for the users, and in a significant way, many times more significant than a new UI. So, Craiglist's still better now, if only because they were better before. Unfair? Maybe so, but complaining won't solve the problem or make it go away. It's just that we've been spoiled about never having big barriers to entry anymore.
Regarding falling companies was just to counter the parent saying that that kind of companies are unassailable, when they clearly aren't. Nothing more, nothing less... profits or their staying alive being due to network effects are irrelevant to my point.
The ultimate point is that just bitterly complaining about how unfair Craiglist is because it's using its competitive advantages to its advantage will not solve the barrier to entry problem, it doesn't even make it clear why is it a problem, nor posits arguments about what to do (if anything) with it.
But as long as they don't have the users, they are not better.
And don't forget that recent history is filled with companies that were "virtually impossible to defeat" until they were beaten, and harshly.