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Network Effect in the Gaming Industry

The gaming industry is one of the fastest growing industries in the world. People of all ages game on various platforms, regardless of where they are. One of the key factors for the growing popularity of gaming is social platform. In an article by Pocket Gamer, the founder of Gamee (a social gaming platform) discussed the importance of the network effect. Unlike most game developers that focus on game development, Gamee chose to focus on the social aspect of the game. As a result, the platform saw significant growth. In a study of 300,000 users done by Gamee, they looked at the number of friends an average person has on the platform and the corresponding retention rate and engagement. The data showed that Gameeā€™s retention rate went from 53% to 68%, and the engagement rate went from 14.5% to 20.5%. The founder of Gamee then talks about the effect of influencers. Influencers in the gaming platform are usually people who have reached a high level on the platform. Those people are really good at the games and would often have followers tracking their progress and vice versa. Another study showed that influencers also influence others to play the game much longer. To increase the network effect, Gamee launched time-limited tournaments led by the influencers. In the long run, the influencers gained more followers as the game gained more users.

From ECON 2040, we learned about the network effect. It is interesting to see it applied to the spread of a gaming platform. As a few influential people in a friend group start to use the new gaming platform, more people of the group will start to use it. Eventually, it will spread outside the group, and that is what happened with Gamee. Such a phenomenal is very common in the gaming network. When a new game comes out, it either spread rapidly or it just dies out. For example, games such as Fortnite are able to quickly gain popularity and beat out other competitors. However, Fortnite will eventually get replaced and the cycle continues.

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November 2018