Network Effects in SaaS : A Desired Moat (Part 1 of 3)

Networks become more valuable as more people use them, but potential users first need to learn how to use them. By rewarding users to go through the process of becoming informed, the networks get user acquisition, which enhances value, while the users learn a new skill and earn ownership in the protocol for doing so. It’s a win-win for both parties... See more

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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