Network effects
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Transcript of Network effects
![Page 1: Network effects](https://reader034.fdocuments.us/reader034/viewer/2022051400/54c4b9134a79594e168b4588/html5/thumbnails/1.jpg)
Network Effects
Aisha, Shari, Luz & Nabila
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• What is Network Effect• Examples• Types of network effect
• Direct • Indirect• Two sided
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• Social network effect• Bandwagon effect• Positive feedback loop
• Positive network effects• Negative network effect• Websites
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Network Effects?
In its simplest form it refers to an
environment where an increase in
adoption and/or usage creates more
value for all participants in a
social community or network.
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581
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Examples
A classic example is the telephone. The
more people that own
telephones, the more valuable
the telephone is to each owner.
Online social networks work
in the same way, with websites
like Twitter and Facebook.
http://en.wikipedia.org/wiki/Network_effect
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Types...
There are several types of network effects, these are:
• Direct• Indirect• Social• Two-sided
Direct effect
Indirect effect
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Direct Network Effects
Occurs when the product or service value increases the more people use it.
For example Microsoft
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581
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Indirect Network EffectsOccurs when increases in the use of a product or service creates increased value for complimentary products resulting in added value for the original product or service.
For example Google
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581
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Two Sided Network Effects
Occurs when an increase in use by one group of users increases the value of a complementary product or service in a completely different set of users.
For example the relationship between gaming platform releases and the sale of gaming software.
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581
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Social Network Effects
Occurs when groups of people come together in the online world
http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581
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Bandwagon effectIs the idea that people often do and believe things merely because many other people do and believe the same things. The general rule is that conduct or beliefs spread among people, as fads and trends clearly do, with "the probability of any individual adopting it increasing with the proportion who have already done so". As more people come to believe in something, others also "hop on the bandwagon" regardless of evidence.
http://en.wikipedia.org/wiki/Bandwagon_effect
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Positive Feedback LoopThis is the idea that ‘A produces more of B, which in turn produces more of A’.
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Positive Network Effects
• More people means more interaction
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Negative Network effects
• Negative network effects result from resource limits
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Websites• Websites also feature a
network effect •