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What Are Network Effects?

Network effects are spoken about increasingly in modern tech circles, but popular examples of network effects were seen in early inventions such as the telephone. At its core, network effects are a phenomenon where a product or service’s value increases as the number of users increases. Examples of this include phones and social media; the more people that use these services, the more valuable they become. If very few people used these services, the value of them would diminish. Because everyone has a phone and is connected on that network, phones have risen in personal and commercial value. This is, in a simplified sense, the concept behind network effects.

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