Network Effect

The network effect occurs when the value of a service or product increases as more people use it. For example, a social media platform becomes more valuable as more friends join, making it more enjoyable and useful to connect and share. This positive feedback loop encourages more users to join, further increasing the platform's value. Essentially, the utility of the network depends on its size—more users typically lead to more opportunities, content, and interactions, reinforcing growth and dominance in its market.