This is where the classical definition of a “network effect” is wrong. I redefine it so that it’s not one singular effect, but rather, three distinct, underlying forces: the Acquisition Effect, which lets products tap into the network to drive low-cost, highly efficient user acquisition via viral growth; the Engagement Effect, which increases interaction between users as networks fill in; and finally, the Economic Effect, which improves monetization levels and conversion rates as the network grows.
