Network Effects

EconomicsTechnologyStrategy

Network Effects occur when the value of a product or service increases as more people use it.

Introduction

Network Effects occur when the value of a product or service increases as more people use it.

Core Types

  1. Direct Network Effects: Value increases directly with user numbers (e.g., social networks).
  2. Indirect Network Effects: Complementary services enhance value (e.g., app ecosystems).
  3. Critical Mass: A threshold where growth becomes self-sustaining.

Applications

  • Technology platforms for scaling user bases.
  • Business strategy for building network-dependent products.

Related Resources

  • Book: "Platform Revolution" by Geoffrey Parker.
  • Tools: Network growth analysis frameworks.

Related Topics

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