Network effects

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Network effects

  1. 1. Network Effects Aisha, Shari, Luz & Nabila
  2. 2. • What is Network Effect • Examples • Types of network effect • Direct • Indirect • Two sided
  3. 3. • Social network effect • Bandwagon effect • Positive feedback loop • Positive network effects • Negative network effect • Websites
  4. 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. 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. 6. Types... There are several types of network effects, these are: • Direct • Indirect • Social • Two-sided Direct effect Indirect effect
  7. 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. 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. 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. 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. 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. 12. Positive Feedback Loop This is the idea that ‘A produces more of B, which in turn produces more of A’.
  13. 13. Positive Network Effects • More people means more interaction
  14. 14. Negative Network effects • Negative network effects result from resource limits
  15. 15. Websites • Websites also feature a network effect •

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