You may care very much, for example, if others are part of your social network, if your video game console is popular, and if the Wikipedia article you’re referencing has had prior readers. But when network effects are present they’re among the most important reasons you’ll pick one product or service over another. Of course, most products aren’t subject to network effects-you probably don’t care if someone wears the same socks, uses the same pancake syrup, or buys the same trash bags as you. When network effects are present, the value of a product or service increases as the number of users grows.
Mark Zuckerberg of Facebook, Sergey Brin and Larry Page of Google, Pierre Omidyar of eBay, Andrew Mason of Groupon, Evan Williams and Biz Stone of Twitter, Nik Zennström and Janus Friis of Skype, Steve Chen and Chad Hurley of YouTube, all these entrepreneurs have built massive user bases by leveraging the concept. Bill Gates leveraged network effects to turn Windows and Office into virtual monopolies and in the process became the wealthiest man in America. are sometimes referred to as “Metcalfe’s Law” or “network externalities.” But don’t let the dull names fool you-this concept is rocket fuel for technology firms. When the value of a product or service increases as its number of users expands. Network effects Also known as Metcalfe’s Law, or network externalities. Understand the factors that add value to products and services subject to network effects.Recognize products and services that are subject to network effects.
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