network effects
Definition
Effect that a single person using a good or a service has on the total perceived value of that product or service for others. The more who use the product or service, the higher it's value becomes to the group - examples would include the telephone and social networks. The larger the group of people with access to a telephone, the more valuable the phone itself is to the people who use it; and the more people who join a social network, the more valuable the site is for the people who belong. Also called network externality.
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The Importance of Network Effects
Network effects exist when the value of a network is roughly proportional to the square of the number of users. Network effects are sometimes also called demand-side economies of scale. Most systems d ... Read more
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