Võrgutugevustest

Võrgutugevustest, also known as network effects, describes a phenomenon where the value or utility of a good or service increases as more people use it. This concept is central to understanding the growth and success of many platforms and technologies, particularly in the digital realm.

There are several types of network effects. Direct network effects occur when the value of a product or service for a user increases with the number of other users of the same product or service. Examples include social media platforms, where more users mean more potential connections, and communication tools like telephones, where the usefulness grows with the number of people who can be reached.

Indirect network effects, also called two-sided network effects, arise when the value for one group of users increases with the number of users in a different, complementary group. Online marketplaces like eBay or Amazon exhibit this; more sellers attract more buyers due to a wider selection, and more buyers attract more sellers due to a larger customer base. Game consoles are another example, where a larger user base can encourage more game developers to create titles, which in turn attracts more users.

Cross-side network effects are essentially the same as indirect network effects, with the terms often used interchangeably. Same-side network effects are another term for direct network effects, emphasizing the value increase within the same group of users.

The presence of strong network effects can lead to a "winner-take-all" or "winner-take-most" market dynamic. Once a platform achieves critical mass, it becomes significantly more attractive than competing platforms with fewer users, making it difficult for new entrants to gain traction. This can lead to the dominance of a few large players in certain industries. Understanding network effects is crucial for businesses developing platform-based strategies and for users evaluating the long-term viability and value of services.