network effects

Network effects occur when a product or service becomes more valuable as more people use it. For example, social media platforms become more useful when more friends and family join, allowing for better communication and connection. Similarly, a telephone is only valuable if others have phones to call. Essentially, the utility of certain services grows with their user base, leading to increased popularity and often creating a barrier for new competitors. This phenomenon drives growth and can result in a dominant market position for successful platforms.