The Power of Network Effect in Business
The network effect occurs when a product or service becomes more valuable as more people use it. Platforms like WhatsApp and Zomato thrive on this, with growing user bases creating self-sustaining growth. For startups, leveraging the network effect can accelerate growth and increase customer retention.
The Power of Network Effect in Business
Ever noticed how certain platforms like Instagram, WhatsApp, or Zomato become indispensable the more people use them? That’s the Network Effect in action!
What is network effect?
The network effect occurs when a product or service becomes more valuable as more people use it. The larger the user base, the higher the value of the platform.
Example:
WhatsApp: If only 10 people used it, it wouldn’t make sense. But since billions use it today, its value has skyrocketed.
Zomato: More restaurants = More users = More restaurant sign-ups. It’s a self-growing loop!
Why Is It Important for Startups?
For startups, building a product that benefits from a network effect can accelerate growth, increase customer retention, and make it harder for competitors to catch up.
Pro Tip: If your product can trigger a network effect, your business will scale itself over time.
