As a startup founder, you must have heard about Network effects multiple times. I came across this word a year back.

- What is a network effect?
- Why is the network effect important for your product?
- What are good resources?
- Is it applicable to your product then how?

Before network effects, what is a network?

A network is a collection of connected nodes. (A telephone network, an ethernet network, Social Network like Facebook, Messaging App like WhatsApp.)

Network and Network effects are different.

Now, What is a network effect?

A network effect is a phenomenon by which anyone joining new on the network increases the value of the product for existing nodes.

Is it different than a Viral effect?

Viral effects are where one user refers other users to use your product.

A user sharing his achievements on CricHeroes to his friends and they sign up on the platform.

It talks only about the acquisition.

Network effects are about increasing the value of a product to its existing users as more users join and use the product.

New users joining WhatsApp make WhatsApp more valuable for existing users.

It is about overall value creation and it certainly improves acquisition.

There are 13 types of network effects. Check the attached image.

Not all network effects are the same, understanding the nuances is essential for building network effects of your own into your products.

Watch them at play in Facebook business. https://bit.ly/3veNhMU  by @NFX

Why is it important?

- Many winner-take-all companies in tech were powered by network effects. @Facebook, @Amazon, @Uber, etc.

- It not only helps build better products, but it helps build moats and protect software companies against competitors’ eating away at their margins.

Resources to get started.

- Network Effects Bible - https://bit.ly/3xp33qz  by @nfx
- @anuhariharan on Network Effects- https://bit.ly/3sPtCSa 
- All about network effects - https://bit.ly/3vm8K6P  by @a16z
- 16 ways to measure network effects - https://bit.ly/32OeSsd  by @a16z

Answer a few questions about your product.

This will improve understanding of the network effect in your context.

It will also help you make the right decisions about product design and feature prioritization.

- What are the different nodes of my product?
CricHeroes - Players, Scorers, Sports Shops, Academies, etc.
Facebook - Consumers, Advertizers, etc.

- How they are connected?
CricHeroes - Playing together, Booking Ground, etc.
Facebook - Sharing stories, commerce, etc.

- How to improve connections between nodes?
CricHereos - Recommend followers, Provide options to play a match, Enable team communication and transactions, Enable scorers to find matches to score, etc.
Facebook- Friend Recommendation, Post Tagging etc.

- How does a new user increase value for existing nodes?

CricHeroes - A new player joining helps existing players play with him and analyze his performance.
A new scorer joining increases value for organizers by giving more scorer options.

- How does a new user increase value for existing nodes?

LinkedIn - A notification when someone in your contact joins, would you like to connect?

Google Pay - Someone has joined from your contact gift him 1 Rs. to get started.

Over with the questions, As a last step,

I recommend you fill this checklist to clear out your understanding.

https://bit.ly/3tTqy8T  by @NFX

There are further nuances to this concept.

It is very important to understand this as a founder.

Hope this thread can get you started with it.

Share your questions, ideas about Network Effect. It will help us collectively learn and apply this better.