added by Bryant Wu · updated 2y ago
Breaking Down Network Effects
This is where the classical definition of a “network effect” is wrong. I redefine it so that it’s not one singular effect, but rather, three distinct, underlying forces: the Acquisition Effect, which lets products tap into the network to drive low-cost, highly efficient user acquisition via viral growth; the Engagement Effect, which increases inter
... See morefrom The Cold Start Problem: How to Start and Scale Network Effects by Andrew Chen
redefine it so that it’s not one singular effect, but rather, three distinct, underlying forces: the Acquisition Effect, which lets products tap into the network to drive low-cost, highly efficient user acquisition via viral growth; the Engagement Effect, which increases interaction between users as networks fill in; and finally, the Economic Effec
... See morefrom The Cold Start Problem: How to Start and Scale Network Effects by Andrew Chen
I redefine it so that it’s not one singular effect, but rather, three distinct, underlying forces: the Acquisition Effect, which lets products tap into the network to drive low-cost, highly efficient user acquisition via viral growth; the Engagement Effect, which increases interaction between users as networks fill in; and finally, the Economic Eff
... See morefrom The Cold Start Problem: How to Start and Scale Network Effects by Andrew Chen
- One important lesson here is that engagement matters to network effects. A first level understanding of network effects is that they occur when more users = more value for existing users. That’s true, but go one level deeper, and you realize it’s actually the amount of usage that matters.
from Does Real Identity Matter for Networks? by James Currier
Sixian added
To make it concrete enough for product teams to act upon, I argue that there are a trio of network effects: Engagement, Acquisition, and Economics.
from The Cold Start Problem: How to Start and Scale Network Effects by Andrew Chen
“The Engagement Effect” is what happens when a product gets stickier, and more engaging, as more users join. This is the closest to the classic definition of the network effect, as defined by Theodore Vail of AT&T.
from The Cold Start Problem: How to Start and Scale Network Effects by Andrew Chen
One important insight is that the Acquisition Effect can exist independently of the Engagement or Economic effect. In other words, you can acquire a lot of customers but still have a network that ultimately isn’t sticky.
from The Cold Start Problem: How to Start and Scale Network Effects by Andrew Chen
- Network effects are defined as when the value of a company’s product or service increases as usage increases.That means the more users you have, the happier they are, and the cheaper it is to acquire new ones, which means your growth accelerates. Accelerating growth means exponential growth. You want to invest in and work at businesses that grow ex... See more
from Platforms and Aggregators by Uncharted Territories
Darren LI added