This week, we have learnt about network effects. Network Effects is “the effect that one user of a good or service has on the value of that product to other people. When a network effect is present, the value of a product or service is dependent on the number of others using it.”
Waze, a map app acquired by Google can be seen as a good case to reflect network effects. Waze is a user-generated map, users of Waze know about the traffic situation through Waze, and they also provide real-time data of traffic situation to Waze.
Smart Waze Guided Tour
by . Smart Communication, Inc.
An anonymous netizen shared that “Waze is benefits from both direct and indirect network effects.” On the one hand, the network effect is direct for users of Waze. They can increase the value of Waze via join in Waze or invite more people join in this platform. More users may bring more traffic information and expand the coverage of the map. And more useful real-time traffic information may attract more users and make them feel happy to recommend their family members and friends join in this platform. On the other hand, users and advertisers on Waze platform can cause indirect network effect. More users can increase the value of advertising on Waze. Also, more adverting may provide more useful local-based information or discount via Waze, it is convenient and beneficial to users of Waze.