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Network effects - The power of the platform, G2 (IBS3 Cathy, DFLL4 Evelyn,…
Network effects - The power of the platform
Network effect
The number of the users on the platform
Creating value for every user
Positive effects
Large, well-managed
platform
:smiley:
Produce
significant value for every users
Negative effects
Growing in user numbers, poorly-managed
platform
:cry:
Reduce
the value for every users
Demand economies of scale
Internet era :computer:
Driven by
Efficiencies in social media
Demand aggregation
App development
Fundamental source of
Positive network effects
The most important differentiating factor
Two-side network effect
Suppliers and demand sides attract each other
Uber
Rider and drivers
Android
App developers and consumers
Upwork
Job listings and freelancers
PayPal
Sellers and buyers
Airbnb
Hosts and guests
Attract two-sided network effects with positive feedback
Network effect and other tools
Price effects and brand effects
The misunderstanding cause the
dot-com boom
and
bust
💥
During the 2000 dot-com boom
Discounting and couponing
Created price effects
To keep the market share
Brand effects are more stickier
Difficult to sustain
Network effects
Create the virtuous cycle
build a longlasting network of users
lock-in
🔒
Increasing value among people on-platform
Virality
To attract people notice and join
Four kinds of network effect
Two-sided network effect
(Producers & Customers)
Same-side effects
One side users 👉 other same side users
Producers 👉 others producers
Customers 👉 others customers
Same side users ⬆️
Positive
Create positive effect
EX: Xbox MMOG
1 more item...
Negative
Appear downside
EX: Covisint
2 more items...
Cross-side effects
One side users 👉 other side users
Producers 👉 customers
Customers 👉 producers
Other side users ⬆️
Positive
Benefit from other side
EX: Visa
2 more items...
Negative
complexity & expense⬆️
Customers
2 more items...
Structural change
Most internet era giants
Demand-side economics
EX: Uber, FB, Google
Create value by participate in platform
Main economic activity
1.Asset builders
Develop physical assets they use to deliver physical goods
EX: Ford,Walmart
2.Service producers
Employ workers who provide services to customers
EX: Untied Healthcare, Accenture
3.Technology creators
Develop and sell forms of intellectual property
EX: Microsoft, Amgen
4.Network orchestrators
Develop networks create value between people and companies
The most efficient value creators
Scaling
Network effects depend on the size of the network
Google V.S. Yahoo
Human-edited Database
Not so well
Using web links
Frictionless Entry is the key
Threadless
No marketing
Designers contact their friends
No forecast sales
Customers have already announced the numbers
Minimize the inventory costs
By outsourcing
Important
Need both sides of the market grow
If one side is larger, no market growth
Side switching
Uber & Airbnb
Find porducer from current consumer
Negative
Bad Influence
Easy come easy go
Naked Hairy Men
Abandon the network
Fix
G2
IBS3 Cathy
DFLL4 Evelyn
IBSM2 Brianna
SDEI M2 Antony
Controls, and limits the connections with other users
Compatible Interests
Comparative A's Attractiveness
Filter undesirable images
Too much matches
Hard to find the best match
A never likes B