network effect

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The phenomenon whereby a service grows in value as more people use it. For example, services that operate over networks such as e-mail, text messaging, Facebook, and mobile communication rise in value the more people are connected users. This phenomenon is spread early in the growth period through word of mouth, and then later the market expands exponentially as the consumer believes that ‘everyone’ is linked to the network. See also metcalfe's law.

Subjects: Marketing.

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