This document discusses network effects, which refers to the phenomenon where the value of a product or service increases as more people use it. There are several types of network effects including direct, indirect, two-sided, and social network effects. Examples given include how telephones and social networks like Facebook become more valuable as more people use them. A bandwagon effect and positive feedback loop can also occur within network effects. Both positive and negative network effects are explored.

1. Network Effects
Aisha, Shari, Luz & Nabila

2. • What is Network Effect
• Examples
• Types of network effect
• Direct
• Indirect
• Two sided

3. • Social network effect
• Bandwagon effect
• Positive feedback loop
• Positive network effects
• Negative network effect
• Websites

4. Network Effects?
In its simplest form
it refers to an
environment where
an increase in
adoption and/or
usage creates more
value for all
participants in a
social community or
network.
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581

5. Examples
A classic
example is the
telephone. The
more people
that own
telephones, the
more valuable
the telephone is
to each owner.
Online social
networks work
in the same way,
with websites
like Twitter and
Facebook.
http://en.wikipedia.org/wiki/Network_effect

6. Types...
There are several types of
network effects, these
are:
• Direct
• Indirect
• Social
• Two-sided
Direct effect
Indirect effect

7. Direct Network Effects
Occurs when the
product or service value
increases the more
people use it.
For example Microsoft
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581

8. Indirect Network Effects
Occurs when increases in the use
of a product or service creates
increased value for
complimentary products resulting
in added value for the original
product or service.
For example Google
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581

9. Two Sided Network Effects
Occurs when an increase in use
by one group of users increases
the value of a complementary
product or service in a
completely different set of users.
For example the relationship
between gaming platform
releases and the sale of gaming
software.
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581

10. Social Network Effects
Occurs when groups of
people come together
in the online world
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581

11. Bandwagon effect
Is the idea that people often do and
believe things merely because many
other people do and believe the
same things.
The general rule is that conduct or
beliefs spread among people, as fads
and trends clearly do, with "the
probability of any individual adopting
it increasing with the proportion who
have already done so". As more
people come to believe in something,
others also "hop on the bandwagon"
regardless of evidence.
http://en.wikipedia.org/wiki/Bandwagon_effect

12. Positive Feedback Loop
This is the idea that ‘A produces
more of B, which in turn
produces more of A’.

13. Positive Network Effects
• More people means
more interaction

14. Negative Network effects
• Negative network
effects result from
resource limits

15. Websites
• Websites also feature a
network effect •