Network Effect 🕸️

Network Effect comes into play when each additional user brings value to the existing user-base.

It is no secret that businesses with Network Effect always win in the market. They create Natural Monopolies, leading to exponential growth and insane customer retention rate.

“Value of a network is proportional to the square of the nodes present in the network” — Metcalfe’s Law

Stage-1: Initial users come to a platform when they get some value in return, from the platform itself.

Stage-2: After those initial users, more users come to the platform when they get value from the platform AND from the existing user-base.

Stage-3: Now users come not because they want to get value from the platform, but from everyone else on the platform. They want to be the part of the herd.