What is Network effects?

Network effects happen when something becomes more useful as more people use it, just like a game that gets more fun when more friends join in.

Imagine you have a toy phone, and you can only call your best friend with it. That’s not very exciting, is it? But if everyone in class has the same kind of toy phone, suddenly you can talk to everyone! The more people who use it, the better it gets, that's network effects at work.

When one person uses a service, like a messaging app or a social media site, it’s just okay. But when others join in, things get interesting. You can send messages to more friends, share pictures with classmates, and even find new games to play together. The more people use the same thing, the more valuable it becomes for everyone.

Think of a playground. At first, only a few kids are playing on the swings. But when more kids join in, there’s more laughter, more fun games, and even more friends to play with! The network effect is like that, the more people who use something, the better it gets for all of them.