All about Network Effects

Platform: network of users and developers; multi-sided feedback loop between those users, developers, and platform itself creates flywheel effect increasing value for each of those groups. Network that can be programmed, customized, and extended by outside users. (often meets needs and creates niches not defined by original developers at the outset... See more

Marketplace: network where money/transactions flow between two or more sides with distinct groups of users on each side; successful marketplace where supply and demand are attracted to the same place

Network: group of interconnected people or system of things

Network effect: occurs when a product or service becomes more valuable to users as more people use it (also known as: demand-side economies of scale)

• create barriers to exit for existing users and barriers to entry for new companies


• protect software companies from competitors eating away at their margins


• can help create or tip winner-take-all marke

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