This is when a good or service becomes more valuable and more known as more people use it. The more popular, well known or distributed the service, object or thing being used is, the more valuable it becomes. There are many examples of this which are going to been talked about throughout the presentation. And many of these examples are well known with the generation of today. Network effect is also refereed to as network externality.
Telephones are an early idea of the network effect. This is because telephones make a spider web of connections but for those connections to be possible you have to have more than one user.
Thedore vail was the founder of the bell telephone – the first model of the basic telephone From telephones we have developed into a more technical idea of communication.
Before a prolific expansion in media technology, there were only three fax machines. With the increase in technology, it therefore increases the significance and value of certain networks.
The more people that use these specific networks the more value it becomes to other users. For example, Ebay would have little use if there was no one to consume or compete with the auctions.
The internet increases in value if more people are using it. An example of this is Amazon, which tracks people’s purchases and creates recommendations for future consumptions.
The new generation of web design allows the audience to interact more with the internet instead of it being a static medium of its predecessor 1.0 for example where would facebook be without the input of comments. Not just on the bases for people to comment but on the bases of uploading pictures creating blogs other people status but on the structure of how facebook updates its self.
Facebook is a prime example of network media. Social network sites such as facebook and Twitter rely on mass amounts of users to make the site more useful, therefore the more users it has, the more valuable it will become. At first facebook or ‘facemash, attracted 450 to the site, as more people join, and there friends and family join, the more useful it becomes.
The network effect is often the result of word-of-mouth. For example you may adopt a service initially because someone you know uses it; later, you may adopt a service because &quot;everyone&quot; uses it.. This is common again with facebook, one friend may have an account and persuade you to sign up, therefore generating more people to use the site.
Another example is Torrents. To share a file a peer open a folder
Businesses can expand with increasing members Markets can adapt to meet user’s needs Certain networks allow people to connect, where they can send requests to one another, such as Farmville, increasing the number of people.
One negative of Network effect is network congestion. Congestion occurs when the efficiency of a network decreases as more people use it , causing value of it to reduce to the people already using it.
Domino effect where the medium is created but the more people that use it the more valuable it becomes to the user.