Network Effect


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Presentation given by Jammy at the Social Media & Blog camp - 7th June'08

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Network Effect

  1. 1. How to kill time at Social Media & BlogCamp Presented by: Mike Symbian, Bill Gates’ right hand’s little finger, Microsoft, Redmond
  2. 2. Business on Internet Riding on other’s success Jamshed V Rajan, 165 cms tall, builds communities for, blogs at
  3. 4. If a company comes up with an Instant Messenger now, (or a Social Networking site)…..what are the chances that it will succeed?
  4. 5. Network Effect <ul><li>Network effect is that small increase in value of the network because of the addition of one more node/person. </li></ul>And because of the clutter, adding this Network Effect is becoming difficult
  5. 6. Where do you see Network Effect? <ul><li>A mobile phone sold adds value to the Network of all mobile owners – they all can call him/her or vice-versa </li></ul><ul><li>A TV sold doesn’t add value to the Network of all TV owners </li></ul><ul><li>Same holds true for 99% of other products/services </li></ul>In the Social Media business, every user adds value
  6. 7. Network Effect – why is it needed? <ul><li>Amazon – Recommendation engine </li></ul><ul><li>eBay – Competitive auctions </li></ul><ul><li>Wikipedia – Editors to create good Content </li></ul><ul><li>Google Adsense – More publishers/more advertisers </li></ul>
  7. 8. But each additional individual will not add value to your business if you don't reach your threshold. To do that…
  8. 9. Identify that unsuspecting sucker <ul><li>June 26, 2000: A relatively unknown search engine called Google decides to power the search needs of World’s best internet portal – </li></ul><ul><li>February 17, 2004 : Yahoo dumps Google’s search engine and goes live with its own </li></ul><ul><li>Yahoo created its own Monster? </li></ul>
  9. 10. <ul><li>1981 : Microsoft is thrilled to be associated with IBM. Microsoft to provide OS for IBM Systems. </li></ul><ul><li>1993 : Microsoft is thrilled to part ways with IBM. </li></ul><ul><li>Did IBM create its own Monster? </li></ul>Identify that unsuspecting sucker
  10. 11. Become somebody’s Monster! Ride on somebody else’s success
  11. 12. Successes that are riding on others <ul><li>Yahoo Answers (On Google Search) </li></ul><ul><li>Wikipedia (On Google Search) </li></ul><ul><li>Meebo – on the success of IMs like Yahoo’s, Google’s, MSN’s etc </li></ul><ul><li>Twitter – on the success of Wordpress, Blogger etc </li></ul><ul><li>Recently, Zoho made it possible for users to log in with their Google or Yahoo accounts </li></ul>
  12. 13. Identifying that unsuspecting sucker Do you know who is the “India’s funniest writer”? Live Search Google Search Yahoo Search
  13. 14. Thanks! And I bet you liked this slide the best
  14. 15. What do you think came first? Shampoos? Or conditioners? So you think you know all answers?
  15. 16. <ul><li>Most successful business </li></ul><ul><ul><li>Facilitate stealing (Google caches your data without your permission, shows to a third party & shows ads as well) </li></ul></ul><ul><ul><li>save money (Skype, helps you make free calls) </li></ul></ul><ul><ul><li>make money (Google Adsense, </li></ul></ul><ul><ul><li>– . Napster. </li></ul></ul><ul><li>Isn’t it like that guy who stole all information abt people in a neighborhood…so that he could direct visitors to the right house? </li></ul>
  16. 17. Online Examples of Network Effect <ul><li>Recommendation engines…more people shop at Amazon, the better their recommendation engine gets…which, in turn, helps people buy more stuff at Amazon. </li></ul><ul><li>eBay would not be a particularly useful site if auctions were not competitive. Each individual makes the auctions grow more competitive, pushing up the prices of bids on items….thus more people come </li></ul><ul><li>On Wikipedia as the number of editors grows, the quality of information on the website improves, encouraging more users to turn to it as a source of information. Some of the new users in turn become editors, continuing the process. </li></ul><ul><li>Google Adsense: The more blogs Google AdSense can reach, the more advertisers it will attract, making it the most attractive option for more blogs, and so on, making the network more valuable for all participants. </li></ul>