Network Effects

Also called Network Effect

When a product gets more valuable to each user as more people use it, phones, marketplaces, social networks. Growth makes the product better, which drives more growth.

Why it matters

Network effects are among the strongest moats in business: once established, they are very hard for rivals to break. Whether your product can build them, and how to reach critical mass, is a defining strategic question.

For example

WhatsApp gets more useful with every friend who joins, which is why once a country's group chats moved there, rivals could not pull people away.

Worth your time

The Dynamics of Network Effects Andreessen Horowitz · article How network effects actually build, tip, and defend a market, beyond the hand-wavy way the term usually gets used. Open a16z.com →

All About Network Effects Andreessen Horowitz · article A practical taxonomy of the different kinds of network effects and how strong each really is, useful for judging your own. Open a16z.com →

Related terms

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