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How apple’s ecosystem creates network effects

This article talks about Networks effects, a topic well covered in this class. It explains what network effects are and how companies use them.  The article gives an overview of what network effects with this simple quote: “A product displays positive network effects when more usage of the product by any user increases the product’s value for other users (and sometimes all users).” We can see this relate to a lot of the platforms or technologies we use. For example, the article talks about how Facebook is only so valuable because of the number of people on it. Every new user adds value to the platform and adds incentives for their friends to get on the platform. In class, we talked about cascades and this is exactly the result of network effects as stated by the author.

One of the more interesting topics this article covers is how Apple uses ecosystem (IOS and MAC) to not make it easy for those who are not using Apple products to use technologies alongside Apple’s. One great example this article brings up is how people will come to buy an apple product just so they can use iMessage.  This is network effects because they just added more value to Apple’s ecosystem of products. The article further explains that because Apple doesn’t allow much non-Apple devises to work smoothly, the new adopted user will be likely to buy future Apple products.

The article highlights that this is one of the great befits of network effects: they are truly valuable to the product and in terms of sales. Not only do they bring in more users by locking their product line, but they also bring in other sources that make the ecosystem even stronger. For example, more developers may favor a platform that has more users, thus making the platform even more desirable.  In all, network effects are at the heart of large companies such as Apple.

 

Network Effects: How Google & Apple Dominate Mobile

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