Network Effect

The network effect refers to the positive feedback loop created by the mass adoption of a service or platform. For example, let’s say your friends are on Facebook, inviting each other to parties and complementing one another on their exciting lives and accomplishments.

Naturally, you want to be invited to parties and be validated as a human, too. So you create a Facebook account. Now other people who want to go to parties with you and receive signals of your approval have a greater incentive to join Facebook as well. On and on it goes, until the perceived cost of not being on Facebook is higher than the perceived downsides of joining the platform.

The network effect explains why so many of us use some technologies, like Facebook, so resentfully. Even while we are fully aware of the privacy and equity issues of social media, the phenomenal scale of Facebook market penetration means we feel like we need it to be connected to it. So, while many of us claim to ‘hate Facebook’ in no uncertain terms, we voluntarily continue to utilize it.

The network effect is like a kind of tyranny all to its own. It makes platforms like Facebook seem like nonnegotiable requirements for living and communicating in the modern world.


Cite this page:
Shelley, James. (2020). 'Network Effect' (in System Thinker Notebook). Originally published on August 5, 2020. Accessed on September 25, 2020. Licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. Permalink: https://jamesshelley.com?p=17211
Additional reference and meta data:
This page a subsection of 'Positive (Self-reinforcing) Feedback Loops' in the System Thinker Notebook manuscript.