One force can explain the dominance of Microsoft, Intel, eBay, Facebook, PayPal, Skype, and so many other efforts – the concept of network effects. In all of these efforts, the product or service becomes more valuable as more users adopt them. But where does this value come from? Students learn how network effects are created and reinforced, and why it’s so difficult to compete with firms that have a lead in network effects markets. The lecture ends with a summary of strategies that can be employed when competing in the presence of network effects. The last part of class begins our discussion of social media, peer production, and Web 2.0 – efforts behind seven of the world’s top ten most popular websites. Chapters for both of these lectures can be found at http://www.gallaugher.com/chapters. Find this podcast interesting? Please e-mail the author at john.gallaugher@bc.edu.
