network effect
According to Luther (2015), the network effect is an idea that an increased number of people improves the value of a good or service. An excellent example of the network effect is the internet (Luther, 2015). Notably, when the internet was started, a few people used it; however, after some time, more and more people began utilizing the internet in various ways. Also, as more people began using the internet, they developed more content, information, and services (Luther, 2015). In like manner, the development of websites attracted more participants. The interned increased and experienced more traffic, and as a result, it offered more value and hence leading to the network effect. The network effect can influence the fate of a given technology in numerous ways. For instance, it can lead to improved experiences as more and more people participate as well as it can encourage new participants as they look to benefit from the network.
One of the significant negative influences that come with network effect is congestion (Zhang, Guo, Hu & Liu, 2017). For instance, if too many individuals use a given service, congestion is bound to happen. In the case of the internet, many users can slow internet processes; Therefore decreasing the benefit for the users. Also, this can be seen in an instance, such as the use of social media. At the same time, the network effect can add value to a product or a service (Gandal & Halaburda, 2016). An excellent example of such a case is the telephone, where a higher number of users increases the profit. Social media is another example. As many people engage and use a particular social media, they tend to create content and information. Notably, it is usually the information shared and built on social media that keeps people attracted.