Apple’s Powerful Usage of Network Effects
A Business Insider article by Pascal-Emmanuel Gobry titled “How Strong Are Network Effects, Really?”, states that network effects are often suggested to be the, “the holy grail of online business.” Network effects have the ability to evaluate one’s value of product or service in relation with what others value of that same product or service. The Business Insider article discussed Microsoft Windows use of network effects.
Gobry suggests that Microsoft products are popular because other software or products are at time catered only to Windows products, almost forcing users to only buy Windows products. He calls the process through-which companies develop products specifically for Windows products a “virtuous circle.”
When reflecting, this “virtuous circle”can be seen in a number of other companies. For example, Apple recently came out with the new iPhone 7. Unlike its iPhone processors and even some Android or Samsung phones, the iPhone 7 does not have a headphone jack. It is the first iPhone to have wireless headphones called Airpods. Because these Airpods are the first of their kind, purchasers of the popular iPhone 7 have very few options in the event the lose the Airpods. In an attempt to counter this cycle, companies like Bose have created their own version of Airpods. However; these are a relatively steep price as well. This illustrates a “virtuous circle” made by Apple as a result of network effects.
URL: http://www.businessinsider.com/network-effects-2011-5