DIE: Chapter Two Outline: Network Effects: The Power of the Platform

brand effects

arise when people come to associate a particular brand with quality

price effects

disappear the moment the discounts end or another firm offers a better price

same side effects

network effects created by the impact of users from one side of the market on other users from the same side of the market -- the effects that consumers have on other consumers and those that producers have on other producers

cross-side effects

network effects created by the impact of users from one side of the market on users from the other side of the market -- the effects that consumers have on producers and those that producers have on consumers

positive cross-side effects

occur when users benefits from an increase in the number of participants on the other side of the market

negative cross-side effects

occur when users take a loss from an increase in the number of participants on the other side of the market

side switching

occurs when users of one side of the platform join the opposite side

positive network effects

refers to the ability of a large, well-managed platform community to produce significant value for each user of the platform

Network effects

refers to the impact that the number of users of a platform has on the value created for each user

negative network effects

refers to the possibility that growth in numbers of a poorly-managed platform community can reduce the value produced for each user

demand economies of scale

take advantage of technological improvements on the demand side -- the other half of the profit equation from the production side

supply economies of scale

the bigger the business, the cheaper the costs of production, marketing, and distribution -- a positive spiral that helps companies grow steadily larger and more profitable

data-driven network effects

the larger your network grows, the better your curation can become

positive same-side effects

the positive benefits received by users when the number of users of the same kind increase

curation

this is the process by which a platform filters, controls, and limits the access of users to the platform, the activities they participate in, and the connections they form with other users

negative same-side effect

when there is a downside to the numbers growth on one side of a platform

two-sided network effects

when two sides of the market are involved