In its classic usage, a network effect describes what happens when products get more valuable as more people use them. (Location 564)
In contemporary parlance, the product is typically made of software whereas the network is typically made of people. (Location 589)
The “network” is defined by people who use the product to interact with each other. (Location 615)
The “effect” part of the network effect describes how value increases as more people start using the product. (Location 626)
Tags: blue
Given these definitions, how do you tell if a product has a network effect, and, if yes, how strong is (Location 631)
it? The questions to ask are simple: First, does the product have a network? Does it connect people with each other, whether for commerce, collaboration, communication, or something else at the core of the experience? And second, does the ability to attract new users, or to become stickier, or to monetize, become even stronger as its network grows larger? Does the user face a Cold Start Problem where retention is low when there’s no other users? (Location 632)