What are Network Effects?
- Network effects are products whose value to an individual user increases as more people use them.
How Do I Remember It?
- Think of network effects as the “snowball effect” for products. Just like a snowball grows larger and gains momentum as it rolls down a hill, a product with network effects becomes more valuable and attracts more users as it becomes more widely adopted.
Real World Example
- Social media platforms like Facebook and Instagram exhibit network effects. The more people join these platforms, the more valuable they become to each user, as there are more connections to interact with and more content to consume.
- Similarly, messaging apps like WhatsApp and WeChat become more useful as more people join, as there are more contacts to communicate with.
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