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
- Direct Network Effects: Value increases directly with user numbers (e.g., social networks).
- Indirect Network Effects: Complementary services enhance value (e.g., app ecosystems).
- 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.