Question
The Cold Start Problem, as described by Andrew Chen, refers to the initial challenge faced by networked products when they launch. These products need users to provide value, but attracting these initial users can be difficult without an existing network or user base. It's a chicken-and-egg problem: the product needs users to be valuable, but it needs to be valuable to attract users.
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The Acquisition Effect is essentially viral growth via organic use—the network effect that powers the acquisition of new customers. PayPal is a good example of this viral effect. Initially, a company that struggled to envision the 'perfect customer', it eventually latched onto eBay, where PayPal was already used by hundreds of sellers (unbeknownst to the PayPal team). PayPal went with this and created its own 'pay with PayPal' badges to place on eBay items.
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