Since 1995, 70% of TOTAL value creation in tech was driven by Network Effects.
Keep reading to understand and leverage them today👇👇👇
Keep reading to understand and leverage them today👇👇👇
1/ Definition: More people using a product, the more valuable it becomes for everyone
Facebook with only 1 user is worthless.
However, as more people join, the platform becomes exponentially more useful.
Facebook with only 1 user is worthless.
However, as more people join, the platform becomes exponentially more useful.
2/ What is a network?
Networks are made of nodes and links.
Nodes = participants = consumers, devices, customers, buyers, sellers
Links = connections between nodes: they vary in strength
Network Size = Total number of nodes
Networks are made of nodes and links.
Nodes = participants = consumers, devices, customers, buyers, sellers
Links = connections between nodes: they vary in strength
Network Size = Total number of nodes
3/ How Strong is Your Network?
Density of network is determined by ratio of links to nodes.
Higher the ratio = Better the network
Bottom line: the more interconnected your users are, the more powerful the network will be
Density of network is determined by ratio of links to nodes.
Higher the ratio = Better the network
Bottom line: the more interconnected your users are, the more powerful the network will be
4/ Clustering?
Nodes are rarely dispersed evenly.
Therefore, clusters form.
Ex: Facebook Messenger where people form subgroups
Bottom line: higher the clustering, the more powerful the network
Nodes are rarely dispersed evenly.
Therefore, clusters form.
Ex: Facebook Messenger where people form subgroups
Bottom line: higher the clustering, the more powerful the network
5/ Critical Mass: Value produced by network exceeds value of product itself
This varies significantly.
Ex: A telephone without connection at the other end of the line is USELESS.
Therefore, a telephone network with 2 users exceeds the value of the single product by itself.
This varies significantly.
Ex: A telephone without connection at the other end of the line is USELESS.
Therefore, a telephone network with 2 users exceeds the value of the single product by itself.
6/ Leveraging Network Effects
"Come for the tool, stay for the network."
@cdixoon
• Attract users with a single player player tool to start
ie: Instagram was ONLY for photo filters. No need for other users at first.
Build momentum to get closer to critical mass.
"Come for the tool, stay for the network."
@cdixoon
• Attract users with a single player player tool to start
ie: Instagram was ONLY for photo filters. No need for other users at first.
Build momentum to get closer to critical mass.
7/ Hope you enjoyed this!
Follow me @chrishlad for 2 threads/week on systems and concepts that help you win.
Follow me @chrishlad for 2 threads/week on systems and concepts that help you win.
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