Identify the Presence, Nature, and Strength of Network Effects

When we talk about TikTok, the first thing that comes to mind is the massive archive that the application
was able to harness beforehand. Users who have been using the app for a while know for sure that no
TikTok video is made from scratch and having this ability to create for free is the most attractive feature.
This is very close to Facebook’s emergence in 2004 whereby it smashed the competition by simply being
free. What TikTok has leveraged on is direct network effect, again, just like Facebook did, hence placing
itself ahead of the competition and gaining a massive market share. This goes in line with the concept of
using network effect to one’s own advantage, which also points out to the idea that once a company, or
application in this case, is ahead of the competition, its growth will be exponential and unmatched.
Social media platforms primarily benefit from direct network effects because the service's value grows
as a direct result of attracting more users. [ CITATION Sto \l 1033 ]

What TikTok has also made use of, is the content network effect. In other words, the application did not
only create a new way to recontextualize riffs and other audio recordings, but also offered the content
for free, and not just its services. That same armory of usable nuggets has shot into the stratosphere
thanks to various celebrities using the app to create high-end content, such as singer Dua Lipa’s
Levitating music video. Furthermore, this particular application, has boosted its network effect by
integrating AI-driven recommendation engines. The app provides a “Discover” page, with an index of
trending hashtags, and a “For You” feed, which is personalized—if that’s the right word—by a machine-
learning system that analyzes each video and tracks user behavior so that it can serve up a continually
refined, never-ending stream of TikToks optimized to hold your attention.[ CITATION Sta20 \l 1033 ]

TikTok has played major cards in the game against its Chinese competitors and is currently smashing all
other emerging players in the market, such as giant copycats namely Instagram Reels, as well as
YouTube Shorts, which is said to be in development. There might be some threat coming from YouTube
who is well-equipped in terms of high-quality content, but the question remains whether this new
entrant will be able to grasp a market share that is already in the iron grasp of the Chinese remix app?

References
Rise of TikTok Explained in Terms of Network Effects. (2018, November 16). Retrieved from Cornell
University: https://blogs.cornell.edu/info2040/2018/11/16/rise-of-tiktok-explained-in-terms-of-
network-effects/

Staff. (2020). Understanding TikTok – The new rules of China’s BigTech. Retrieved from Platform
Revolution: https://platformthinkinglabs.com/materials/understanding-tiktok-the-new-rules-of-
chinas-bigtech/

Stobierski, T. (n.d.). WHAT ARE NETWORK EFFECTS? Retrieved from Harvard Business School Online:
https://online.hbs.edu/blog/post/what-are-network-effects