The Network Effect

The network effect is where the increase in consumers and users adds more value to the service. The network effect is something we have all experienced firsthand as well. An example would be the internet. When the internet first came about, there were very few users and information available. As new users were able to gain access it made the internet larger and more popular. These users were then able to publish more information and it added significant value to the internet. Now whenever you have a question, the odds are in your favor to find the answer you need on the internet. The network effect is big in social media platforms like Instagram, TikTok, and Facebook. The network effect is important to businesses, especially for social media apps, because it allows companies to make larger profits as well as lower their operations costs. It allows other companies to market their products as well. It can be applied to stocks as well. The varying price of stocks is due to supply and demand. As the price of stocks is low, more people begin to invest and the benefits of that particular stock increase as well.