Why are Facebook, Uber, Twitter and Microsoft some of the most successful companies in the world? What is behind their success?
They all share one property: network effects
- Network effects is one of four remaining defensibilities, the others being brand, embedding, and scale.
- 70 percent of value in tech is driven by network effects, and there have been 13 distinct types of network effects identified so far.
These 13 network effect types can be grouped into five broader categories:
Direct Network Effects
- Personal Utility
- Market Networks
2-Sided Network Effects
- Asymptotic Marketplace
Data Network Effects, Tech Performance Effects, "Social" Network Effects