Network Effects
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What it is
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A property of a product or platform where each additional user increases its value to every other user.
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Intuition
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The more people already on a network, the more useful it is to join — value compounds with adoption instead of staying fixed.
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How it works
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A new user joins a platform.
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Their presence adds value for existing users (more people to interact with, more third-party support).
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Added value attracts further users, producing rapid growth.
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The effect runs in reverse too: as users leave, the platform becomes less valuable to those remaining, which can trigger further departures.
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Example
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Early home computers became more valuable as more people bought the same model, since that created a bigger market for accessories and more developers writing software for that machine — each buyer made the platform better for everyone already on it.
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Contrast with
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Network effects explain platform growth; Switching Costs explain why users stay even after a platform stops serving them well.
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