Professional Documents
Culture Documents
• Adapted from notes by Prof. John Gallagher, Boston College and from
• http://ezinearticles.com/?Network-Effects-in-the-Web-2.0-Economy&id=1505581
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Web 2.0 foundation attributes
These two attributes frame the economic
model of Web 2.0 services. They allow services
to scale efficiently to accommodate many
customers
Scale ‐ doing things more efficiently with
increasing size of operation
Supply side
Demand side – network effect
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Network Effect - Definition
The network effect is the effect one
user of a good or service has on the
value of that product to other
people
The value of a product or service
increases as the number of users
grows. More users = more value
They’re among the most important
reasons people pick one product or
service over another
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Examples
99% of products/services do not have network effect but the above products/services do
4
Network Structure – One sided market
Derive their value from a single class of
users
For example, WeChat/Facebook users
attracting more WeChat/Facebook users
5
Network Structure – Two-sided market
Derived value from two distinct categories
of network participants
buyers
Drivers
Passengers
sellers
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Sources of Network Effect
Person-to-person communication feature
• eBay, Uber/Airbnb
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Long tail - Chris Anderson
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Pareto
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What is Long Tail ?
Products that are low demand or have low sales volume can
collectively make up a market share that rivals or exceeds the
relatively few current best sellers and block busters, if the
store or distribution channel is large enough.
http://slymarketing.com/great-example-long-tail-marketing
Long Tail and Web 2.0
Democratize the tools of Democratize the tools of
Connect supply and demand
production distribution
source : The long Tail source : The long Tail source : The long Tail
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Examples: Democratize the tools of production
The Wikipedia : Peer production – mass volunteerism
and amateurism
Apple GarageBand App ‐ digital audio workstations for
macOS and iOS that allows users to create music or
podcasts
12
Examples: Democratize the tools of distribution
Lulu.com : DIY publisher
Not for the money, but for distributing your message. Use it for
reputation.
The traditional line between producers and consumers has blurred
Amazon. com : Inventory on Demand
Virtually connect centralized supply with scattered demand
Print‐on‐demand : The idealized form books staying as digital files until
customers are purchase Near‐zero inventory cost
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Examples : Connect Supply and Demand
*combining infinite shelf space with real‐time information
about buying trends and public opinion gives rising
demand of an obscure book
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