What is Network Effect?
A network effect is a phenomenon that occurs when the value of a product or service increases as more people use it. For example, email is more useful to you if other people have email addresses, and Facebook is more fun if your friends are on it. A positive network effect can lead to exponential growth of users and value for the product or service.
How Network Effects are Handled:
The more users that join a network, the more valuable the service becomes for everyone using it. To engineer network effects into your product or service, you need two elements: people and platforms.
How Twitter Utilize Network Effects:
Twitter, like other social networks and messaging apps, has network effects, which means that each individual user provides value to the platform by connecting with more followers. It also shows personalized ads to target its potential users. This way it adds quality and value to its platform.
Twitter is used by politicians, governments, forces, and bureaucrats which helps to share current issues in an instant of time. Most accounts are officially verified. This creates a level of trust and security to its potential users.
How Businesses could use Network Effects:
Setting up network effects is like building a community. Nowadays, businesses could use network effects to strengthen their community which leads to boosting sales.
Businesses can take advantage of network effects by offering products or services that encourage users to spread the word about the company, essentially creating an environment in which everyone benefits from each other’s participation.
Verified account profiles could be used to increase confidence in the business community. Bots, spam messages and fake accounts could be eliminated by using Artificial Intelligence Filtering techniques, which will also save time.