network effects

Syllable breakdown

Dictionary meaning

the phenomenon whereby a product or service becomes more valuable to each user as the total number of users increases; direct network effects occur when additional users directly benefit existing users, as with telephone networks or social media platforms; indirect network effects arise when platform growth attracts complementary products or services, as when a larger user base attracts more app developers to a mobile operating system; network effects are the primary driver of winner-take-all dynamics in digital platform markets, creating self-reinforcing advantages that make established platforms extremely difficult to dislodge and raising important questions for competition policy about how to regulate markets dominated by network effects