Can network effects always be effective?

This week, our topic moves to network effects. The concept of the network effect is that the value of a product or a service increases as the size of the user who uses the product or service increases. However, can network effects always be effective?


(Google Image)

First of all, when the number of nodes in a network is greater, there would be more risks of abuse and more lose. A computer virus is a typical example. Windows system has formed a huge personal computer network, access to a variety of convenience. But, people have to bear the huge losses caused by the virus as well. Many people began to switch from IE to Firefox, not because Firefox is faster or more stable, just because it is very hard to prevent IE from being damaged by viruses.


(Google Image)

Secondly, the size of the network is larger, the greater maintenance cost of the network will be. Taking people’s social networks as an example, of course, to expand the personal social network can bring more potential opportunities, but at the same time, the maintenance of the network also need to spend more energy.


(Google Image)

In addition, in my opinion, different age groups and different occupations may need different social networks. Students usually do not have a wide range of social relationships, and they have a lot of time to consume. As a result, their needs are the almost unlimited expansion of the network. I think this is the key to the success of Facebook and Linkedin.

Happy group of young students studying together in a college lib
(Google Image)

However, for a group of business people, they already have a certain social network. The value of time is often higher than the value of the expansion of the network. So, they usually just want to more effectively manage and maintain the network, rather than let it unrestricted Inflate.


(Google Image)

As the two limitations of network effects talked above, network effects may not be always effective. It needs to be considered in different circumstances when applying network effects theory in the development of digital media.


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