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