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Unformatted text preview: d services subject to network effects. Net work ef f ect s are so metimes ref erred to as “Metcalf e’s Law” o r “netwo rk externalities.” But
do n’t let the dull names f o o l yo u—this co ncept is ro cket f uel f o r techno lo gy f irms. Bill Gates leveraged netwo rk ef f ects to turn Windo ws and Of f ice into virtual mo no po lies and in the pro cess
became the wealthiest man in America. Mark Zuckerberg o f Facebo o k, Sergey Brin and Larry P age
o f Go o gle, P ierre Omidyar o f eBay, Andrew Maso n o f Gro upo n, Evan Williams and Biz Sto ne o f
Twitter, Nik Zennströ m and Janus Friis o f Skype, Steve Chen and Chad Hurley o f Yo uTube, all
these entrepreneurs have built massive user bases by leveraging the co ncept. When netwo rk ef f ects
are present, the v alue o f a pro duct o r serv ice increases as the number o f users gro w s. Simply,
mo re users = mo re value. Of co urse, mo st pro ducts aren’t subject to netwo rk ef f ects—yo u pro bably
do n’t care if so meo ne wears the same so cks, uses the same pancake syru...
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- Winter '14