In Class Material: The Network Effect

The Network effect, in one word, is totally cool. The more who have it, the better it is? There's not a lot of that in today's world. In today's world, the more who have it or use it, the less cool it is. But online, the law of physics does not apply, up is down, black is white, the more who use it, the better it is.
In effect, the network effect is the name giving to something that gets better with the more people who use it. Examples of such programs is myspace, skype, facebook, etc. The way it works is best explained using the fax example. A fax, by itself, is useless. However, when someone has another fax, the usefulness of the first fax rises, and continues to rise as the number of fax users rises. Same goes for myspace...the more myspace users, the more useful myspace is.
This is the Network effect.