What are network effects?

A network effect happens when something becomes more useful as more people use it.

Imagine you have a toy telephone, and you call your best friend. It's fun, but only two people are talking. Now imagine everyone in your class has one of these toy telephones. Suddenly, you can talk to so many more friends! The more phones there are, the more interesting and useful it is to have one. That’s a network effect, the value grows as more people join in.

• More users mean more fun: If only two kids have the toy phone, it's just a conversation between them. But if ten kids have it, you can talk to anyone in your class. The phone becomes more valuable to each person because there are more people to chat with.
• It’s like a game: Think of it like playing tag, the more people join, the more exciting the game gets. A network effect is just like that, the more people use something, the better it gets for everyone.

So next time you're on a video call with friends or sending messages to classmates, remember: you’re all helping each other have more fun!