# Network Effects A network effect occurs when a product becomes more valuable as more people use it. The telephone is useless with one user, valuable with millions. Metcalfe's Law: network value grows with the square of users (n²). This creates winner-take-all dynamics, lock-in, and barriers to entry—explaining why social platforms, messaging apps, and marketplaces tend toward monopoly. Network effects can be direct (more users = more value, like phones) or indirect (more users attract complementary goods, like app developers for iOS). They power the [[Attention Economy]] and [[Persuasive Technology]]: platforms invest in growth because each user makes the network more valuable. Breaking network effects requires critical mass or interoperability. ## Types | Type | Example | |------|---------| | Direct | Phone network, social media | | Indirect | App stores, payment systems | | Two-sided | Uber (drivers + riders) | ## References - https://en.wikipedia.org/wiki/Network_effect ## Related - [[Attention Economy]]