Definition
When a product becomes more valuable as more people use it, creating a virtuous cycle of growth. It's the holy grail of startups because it creates defensibility that's hard to compete against.
Example Usage
Facebook's network effect made it nearly impossible for competitors to win—everyone had to be where their friends were.
Origin
Economics and telecommunications terminology, formalized by Metcalfe's Law
Fun Fact
Negative network effects exist too (e.g., Uber becoming more crowded and slower), which is why network effect isn't a guaranteed moat
Source: Economics Standards, venture capital strategy
Related Terms
Translate This Term
See “Networking Effect (Network Effect)” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
Try the Translator