Does Real Identity Matter for Networks? The Future of Substack

Does Real Identity Matter for Networks? The Future of Substack

In the world of network businesses, one of the key choices that Founders must make is how much to tie user profiles to real identity. This decision can greatly impact the success and longevity of a network. Profiles on a network can range from purposefully anonymous to using real-names. While there may be benefits to both approaches, we have observed a strong correlation between tying profiles to real identity and a higher probability that a network endures and becomes a valuable business.

Using real identity in user profiles is not the easiest path when starting out. It requires more commitment from users and introduces greater risk, making the barrier to activation higher. This is evident in the slow growth of LinkedIn during its early years. However, using real names increases user engagement, leading to larger and more active networks. The more active and committed the nodes on the network, the more powerful the network effects become.

On the other hand, networks that allow for more anonymity may experience easier growth initially due to the lower commitment required. However, in the long term, these networks tend to burn out and produce less value on average. Facebook provides an interesting case study in how they got people to use their real names when it wasn't yet common practice. They launched in a constrained environment of perceived safety: college. By starting within the college niche, where it made sense to show real names, Facebook was able to establish a strong connection between online profiles and personal identity in real life.

However, Facebook faced vulnerability because their network effects were not as closely tied to users' real identities. This made it easier for competitors to come along and steal their users, which eventually happened. Networks like Twitter, Reddit, and Snapchat also have usernames that differ from real names but have managed to survive. This is because their user identities are persistent over time and partially tied to real-world identities. Users have a persistent online identity to which they commit, even if it is semi-virtual.

While these semi-pseudonymous networks are successful as businesses, they are not as successful as real-identity networks. However, what truly matters is the amount of usage and engagement. Network effects occur when more users equal more value for existing users. Therefore, a dense, highly active network will outperform a larger but less active one every time. In the competition between network effects companies, those with more powerful network effects will ultimately win. Just having network effects is not enough; it is the strength of those effects that truly matters, which stems from network size, density, and engagement.

A prime example of a network that struggled with real names is Friendster. They launched a general social network with real names and experienced rapid growth initially. However, they never achieved stability in technology or product experience. The founder of Friendster, Jonathan Abrams, cited heavy criticism for focusing on real names and acknowledged epic mismanagement as contributing factors to their downfall.

In conclusion, the question of whether real identity matters for networks is complex. While networks tied to real identities tend to have stronger network effects and higher longevity, there are exceptions. Semi-pseudonymous networks can succeed as businesses but may not reach the same level of success as real-identity networks. Ultimately, it is the level of usage and engagement that determines the strength of network effects.

Three actionable advice for network business founders:

1. Consider the balance between anonymity and real identity in user profiles. Find a middle ground that allows for some level of persistence and connection to real-world identities.
2. Prioritize user engagement and activity. A highly active network, even if smaller in size, can outperform a larger but less active one.
3. Continuously evaluate and evolve your network's technology and product experience. Avoid the pitfalls of mismanagement and learn from the mistakes of other networks.

As the future of networks continues to evolve, the interplay between real identity and anonymity will remain a critical factor. Understanding the dynamics of network effects and leveraging them to build powerful, engaged communities will be key to success in the network business landscape.