Question
A startup can use the concept of direct network effects by creating a product or service that increases in value as more people use it. This can be achieved by building a platform that encourages user interaction and engagement, like social media platforms such as Facebook and WhatsApp. For indirect network effects, a startup can create a product that encourages the use of complementary products. For example, creating an operating system that encourages third-party app developers to build apps that boost the value of the operating system. Marketplaces like eBay are examples of two-sided networks where increased use by one set of users (sellers) boosts the value to a complementary set (buyers).
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There are direct network effects, where increases in usage lead to direct increases in value (e.g., Facebook and WhatsApp); and indirect effects, where increases in usage prompt consumption of complementary products that in turn increase the value of the original product (e.g., iOS encouraging third-party app developers whose products boost the value of the operating system). Marketplaces such as eBay are two-sided networks where increased use by one set of users boosts the value to a complementary set.
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