Unpacking the 10 metrics and key questions for founders to evaluate the network effect strength of their marketplaces.

1. 10 Metrics to Measure
Network Effect Strength
for Your Marketplace

2. a phenomenon whereby a
product or service becomes
more valuable when more
people use it
What is Network Effect?
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4. Different Types of Network Effects
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ü Direct network effects
ü Indirect network effects
ü Same-side network effects
ü Cross-side network effects

5. Are your users affected by how
many other users also sell or buy
the same product or service?
1
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8. Does demand view your suppliers
as diversified or as equivalent?
2
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11. As additional users join your
marketplace, how fast does the
value for users decrease?
3
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14. How hard is for your users to
switch to and transact on
similar other marketplaces?
4
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17. How hard is it for your users to
take their transaction off the
marketplace?
5
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20. Is your network effect global or
local?
6
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23. Is the matching of demand and
supply on your marketplace
synchronous or asynchronous?
7
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26. Does your network effect
produce positive or negative
externalities?
8
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29. Can there be overlaps between
your supply and demand?
9
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32. As your marketplace scales,
how feasible is to expand into
adjacent markets?
10
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35. Strategies for Building Network Effects
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ü Define your critical mass injection point
ü Create engagement triggers
ü Leverage network irregularities
ü Attract the harder side of the marketplace first
ü Ensure long-term user retention
ü Provide a standalone tool to one or both sides
ü Vertically integrate when supply is uncertain

36. Uber Network Effect
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Sketched on a napkin in a restaurant by Travis Kalanick (Founder), while he was waiting for a taxi …

37. Marco Torregrossa
marco.torregrossa@euro-freelancers.eu
about.me/marcotorregrossa
@MarcoTorreg