Network effect VS platform effect, how to choose the main value engine

introduction: due to the different characteristics of growth environment for the network effect and the platform effects are not the same.

The

network effect is a characteristic that makes the value of a product to a new user affected by the number of users of the product. In other words, the number of adopters is an important consideration for the next adopters. For example, if only a few people to use the fax machine, most people would not consider purchasing. And when more and more friends using WhatsApp / Line / WeChat, will drive more users to join.

The

platform effect, also known as the two-way network, is provided by two different user groups to each other. For example, the greater the number of sellers on the auction site, the greater the value of a single buyer, and vice versa.

network industry entrepreneurs should know these two effects, but I found that most venture CEO did not think about how to use them for their business model to build a longer, lasting value. For today’s article, let’s take a moment to discuss both of them and the case in use.

network effect vs. platform effect

first, the network effect and the platform effect are often mutually exclusive. The representative value of the network effect is provided by the same type of users, while the platform effect represents the value provided by another type of user. Therefore, in order to Network Effect main service in the same type of user is more, the higher the value, and other types of users, it will reduce the value of concentration the more friends with Line, its value is higher, but received another user’s advertising, fraud messages, will let us discount for this service.

relative, in Platform Effect based on the platform, the more users of the same type, it will reduce its value when the auction site has a lot of buyers with our bid the same goods, the price is rising, which makes us feel pain rather than happiness.

suitable for application

Because of the different characteristics of

, these two kinds of effects are also different.

The value of the

network effect is generated by the same type of user, the higher the value of the user, the higher the value of the physical cost, and the low cost of reproduction. For example, to communicate and share text, pictures, photos, videos, the marginal cost of these user behavior in the online world is almost zero, so social services generally use them to generate network effects. Although the physical cost is zero, but the user behavior of the opportunity cost is often very high, and more able to attract users into the high opportunity cost of community service, so the network can produce greater value than the original Instagram general camera App a filter function, the fact is to increase the share of steps and photo opportunity the cost, but the use of filters to produce.

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