Anti-Network Effects
“The Economic Effect.” Network effects can help improve business models over time, in the form of improved feed algorithms, increased conversion rates, premium pricing, and more.
Andrew Chen • The Cold Start Problem: How to Start and Scale Network Effects
The “effect” part of the network effect describes how value increases as more people start using the product. Sometimes the increasing value manifests as higher engagement, or faster growth.
Andrew Chen • The Cold Start Problem: Using Network Effects to Scale Your Product
Thread: How to measure network effects
Unless you have been living under a rock, you have heard about network effects.
It is not binary rather a spectrum which implies some companies have strong and some have weak network effects.
a16z had a good post on how to measure it.
Status Traps: Learning from Web2 Social Networks - a16z crypto
Andreessen Horowitz (AZ)a16zcrypto.com
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
Future • All about Network Effects
Conceptualizing network effects in this manner helps us understand why the Cold Start Problem exists, from a user’s point of view. If the network is too sparse, the loop is broken—not enough users will see a photo to reply with likes, and not enough buyers will see a listing to purchase a product.