Network effects refer to the phenomenon where the value or utility of a product, service, or platform increases as the number of users or participants in the network grows. This can create a self-reinforcing cycle, where more users attract even more users, leading to exponential growth and increased value for all participants.
Network effects can be seen in various types of networks, including social networks, communication platforms, marketplaces, and more. For example, a social media platform becomes more valuable to each user as more of their friends and acquaintances join, because they can connect with a larger number of people. Similarly, a ridesharing platform becomes more useful to users as more drivers join, because it increases the likelihood of finding a ride quickly.