Origin Dictionary / OD-060
Network Effects
The best app may lose to the one your friends already use.
01Dictionary Meaning
Network effects occur when a product's value to a user changes as more people use it, including when growth on one side attracts another side.
02What People Think
"The biggest network must have the best product."
03What’s Underneath
A messaging app becomes more useful when the people you want to contact are there. A marketplace can attract buyers because it has sellers, and sellers because it has buyers.
That coordination advantage is distinct from technical quality. Moving alone to a better tool may mean losing access to the people or opportunities that made the old one useful.
Growth is not always beneficial: congestion, spam or too much competition can reduce value. The effect depends on who joins and how participation changes the experience.
04The Game
What makes the next participant useful to existing users, and what would a group need to coordinate in order to leave?
05One Line
Sometimes the strongest product feature is everybody else.
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M4Youth Decentralized Business
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References 1
- Network Effects and Efficiencies in Multisided Markets
OECD Competition Committee