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Mathieu PlourdeNetwork effects become significant after a certain subscription percentage has been achieved, called critical mass. At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service.
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Negative network externalities can also occur, where more users make a product less valuable, but are more commonly referred to as "congestion" (as in traffic congestion or network congestion).
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At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service.
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Network effect is a term used narrowly to describe business phenomena, or more broadly to describe non-business phenomena.
In the narrow usage, a network effect is a characteristic that causes a good or service to have a value to a potential customer which depends on the number of other customers who own the good or are users of the service. In other words, the number of prior adopters is a term in the value available to the next adopter.
One consequence of a network effect is that the purchase of a good by one individual indirectly benefits others who own the good — for example by purchasing a telephone a person makes other telephones more useful. This type of side-effect in a transaction is known as an externality in economics, and externalities arising from network effects are known as network externalities. The resulting bandwagon effect is an example of a positive feedback loop.
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Network effects were more recently popularized by Robert Metcalfe, the founder of Ethernet.
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Adriana Lukasrelevant to the Mine! user adoption model - make it useful to individual first, early adopters, who make it more valuable for broader user base. e.g. delicious.
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mohamad al afghaniThere are two kinds of economic value to be concerned about when thinking of network effects: Inherent - my value from my using the product Network - my value from your using the product Network value itself can be direct or indirect. Direct network value
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