Understanding Network Effects

Network effects refer to the concept where a product or service becomes more valuable as more users join. This is exemplified by platforms like Facebook, where increased user participation enhances the experience for existing users through easier connections and content sharing. Virality, on the other hand, pertains to the speed of growth, often driven by word-of-mouth referrals or unpaid marketing due to the product's inherent superiority. An example highlighted the organic spread of Skype through necessary reciprocity in call connections.