Your platform will fail without strong network effects!
Updated: Feb 10
In my last post, I wrote about the five key drivers of Network Effects which can make or break any Platform's success. The first and the most important driver of all is the strength of the network effects. You can read the post with the link below
Network Effects in a platform can be same sided or cross sided. Take Facebook as an example, the more of your friends on Facebook, the more you would want to join. The more the content posted by the users, more people join Facebook. This is an example of same side network effects. Take example of a Video Game Platform. The more the games on a platform, the more number of gamers would join the platform. The more number of gamers, more game developers have the incentive to develop new games. This is an example of cross side network effects. Platform companies should design their platform to strengthen the network effects. Amazon did this very well to trigger both same side and cross side network effects. The more the users started posting reviews, the more the buyers started buying based on these reviews triggering same side network effects. To trigger cross side network effects, it onboarded more and more 3rd party suppliers. The more the suppliers, more buyers could access more products and buy them. The more the buyers, more suppliers got drawn to the marketplace. Not all network effects are positive. Take for example, newspapers and advertisers. The more the news readers, the more the advertisers. But if more advertisements from advertisers doesn't necessarily mean more news readers and they might not subscribe to the newspapers because of increase in advertisements. So, platforms who can create strong network effects will have greater chances of success!