Business Foundationsadvanced
Network Effect
Definition
When a product or service becomes more valuable as more people use it. Each new user makes it better for all existing users.
Why it matters
Network effects are one of the most powerful competitive moats in business. They create winner-take-all dynamics, the leading platform becomes nearly impossible to displace.
Example
WhatsApp is only useful if others use it. Etsy gets more valuable for buyers as more sellers join. An online community becomes more valuable as more members join and contribute.
Related terms
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