The Platform Business Navigator

The flywheel of network effects

Direct and indirect network effects

Network effects are a key prerequisite for the success of platform companies, and platforms cannot thrive without them.20 In essence, the more platform users there are, the greater the value of the platform to all users. This is in contrast to traditional products and services, which have a stand-alone value that is independent of the number of users. Hence, to become a successful platform, you have to be able to identify network effects and systematically nurture and manage them. Direct and indirect network effects can be distinguished (see Figure 1.1.2). Indirect (or cross-side) network effects refer to network effects between different market sides of a platform. In the case ...