Archive of posts with tag 'Network Effects'
The Network Effects Manual →
September 16, 2020 • #Seems like every company claims to be harnessing some type of network effect in their business model.
This post goes in-depth at defining and comparing different forms of network effects, diagramming them in a radial pattern — from more to less defensible as you move outward. A helpful reference guide.
Most companies’ advantages aren’t cleanly put in a single bucket, the total picture of the business has factors in multiple boxes. This guide is a useful companion to Advantage Flywheels in describing business models.
Status as a Service →
March 20, 2019 • #This post from Eugene Wei has been making the rounds in tech. It’s a lengthy article dissecting how status is really the secret currency of success for social products — not individual utility or entertainment. He draws some interesting parallels between social networks (as status-building entities) and cryptocurrency ecosystems. Just like with crypto exchanges, “proof of work” is an essential prerequisite for success on a social network:
Why does proof of work matter for a social network? If people want to maximize social capital, why not make that as easy as possible?
As with cryptocurrency, if it were so easy, it wouldn’t be worth anything. Value is tied to scarcity, and scarcity on social networks derives from proof of work. Status isn’t worth much if there’s no skill and effort required to mine it. It’s not that a social network that makes it easy for lots of users to perform well can’t be a useful one, but competition for relative status still motivates humans. Recall our first tenet: humans are status-seeking monkeys. Status is a relative ladder. By definition, if everyone can achieve a certain type of status, it’s no status at all, it’s a participation trophy.
It’s an apt metaphor to think about social capital, its build-up, transference, and investment like that of financial capital:
I can still remember posting the same photos to Flickr and Instagram for a while and seeing how quickly the latter passed the former in feedback. If I were an investor or even an employee, I might have something like a representative basket of content that I’d post from various test accounts on different social media networks just to track social capital interest rates and liquidity among the various services.
Tweet “liquidity” is a great way to think about it:
In an effort to increase engagement, Twitter has, over the years, become more and more aggressive to increase the liquidity of tweets. It now displays tweets that were liked by people you follow, even if they didn’t retweet them, and it has populated its search tab with Moments, which, like Instagram’s Discover Tab, guesses at other content you might like and provides an endless scroll filled with it.
It’s a very long breakdown, but overall one of the best comprehensive pieces on what makes social networks tick and how network effects work.