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The Value of Network Effects

Networks create opportunities for businesses to exponentially grow their customer base. It's no secret that there is serious ROI powering this initiative.

In this fantastic guide, Eric Jorgenson dives deep into what is and isn't a network effect, and how to create them today.

The value of these network effects is real. Eric shows us a graphic created by Ray Stern when he was training employees as CMO of Intuit:

The Value of Networks
"The cost of maintaining the network does not grow as fast as the value of the network. The value increases as the size of the network increases."

In my opinion, I believe that creating quality content can forge these network effects at scale.

There is a contrast between 'Content Networks' and 'Connection Networks' which Jorgenson describes and both are solutions to the problem of creating a network.

Twitter, Facebook, and Linkedin adopted the connection first model.

Pinterest, Instagram, and Dribble have adopted the content first model.

We're moving towards the idea that content builds connections. Accessibility through technology enables people to build connections through content. Platforms are at the centre, and whether you're sharing content on Instagram, Facebook, or Twitter, the content you share can trigger conversations that build into network effects.

There's that saying:

'Come for The Tool, Stay for The Network'

The networks in today's tools have reached critical mass. New tools are finding it difficult to host large networks that are already plugged into multiple platforms.

To yield a competitive advantage, we need to move to:

Come for The Content, Stay for The Network

Relevant content of high quality is what today's user is yearning for. Existing platforms are churning out so much noise that people are in need of a breath of fresh air.

Platforms need to host quality content. Whether that content is original, curated, or user generated is entirely up to them. This content will build network effects and eventually host a large audience.

Instagram was the first mover in this space, as Sangeet Paul Choudary describes:

"The single-user utility should allow creation of content that will ultimately form the core of the network. The core of Instagram is pictures. Discussions are centered around pictures. Hence, the single-user tool needs to allow creation of pictures. This is an extension of the OpenTablemodel, where a restaurant first manages its real-time seating inventory on a single-user tool, before that very inventory is exposed to consumers on a network, to allow them to reserve tables. Curation-as-creation products like ScoopIt and Storify also use this model to curate content which will serve as the core for network interactions."

In Instagram's case, their content was user generated, and once they had a high volume of content, networks began to form.

An open platform that invites every type of content can do the same today.


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