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Entrepreneurship & Startups vocabulary · Growth & Traction

Network effect

Meaning in entrepreneurship & startups, with examples

nounCommon term

In entrepreneurship & startups, network effect means: A situation in which a product becomes more valuable to each user as more people use it, as with social networks, payment systems and marketplaces.

In Turkish: ağ etkisi, şebeke etkisi

How it is used

Often used in the plural: strong network effects. A direct network effect connects users of the same kind, as in a messaging app; an indirect or two-sided one connects different groups, such as buyers and sellers. Network effects are seen as one of the strongest moats.

Example sentences

  1. Each new restaurant on the app attracts more diners, which attracts more restaurants: that's our network effect.

  2. Without network effects, a bigger competitor could copy us in six months.

Common collocations

  • strong network effects
  • two-sided network effect
  • benefit from network effects
  • direct network effect
  • marketplaceA platform that connects buyers and sellers, or customers and service providers, and usually earns money by taking a fee or commission on each transaction.
  • moatA long-lasting advantage that protects a business from competitors, like the water-filled ditch around a castle; for example network effects, patents or high switching costs.
  • growth hackingFast, low-cost experiments across marketing, product and data to find creative ways of getting more users and customers.
  • competitive advantageSomething that lets a company serve customers better or more cheaply than its rivals, such as unique technology, data, a strong brand or lower costs.

More terms: Growth & Traction

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