Question

Hello,

can you assist with the below?

1. What is the main benefit of network effects to users? What is the main benefit to a network owner? Describe how the social network LinkedIn provides 3 advantages to users based on network effects.

Answer 1

Network Effect- A phenomenon where increased network of individuals enhances quality of a product or service.

Eg- Wikipedia has huge user base who enrich the data on daily basis.

Network effect has benefit for both the users and network owners.

Benefits to the users

• Users may find variety of products and services at a single platform, which enable them to select the product as per their need.
• User may interact with the fellow users to get feedback about a particular product or service.
• Huge user-base helps in resolving any difficulty encountered during usage of the product.

Benefits to the network owner

• Network owner gets access to huge database of users which help them in cross selling other products and services.
• Sometimes network owner gets consent of the users to sell their information to third parties, which generates huge revenue for the owner.

LinkedIn provides below mentioned advantages to the users based on Network Effect-

• LinkedIn enables job-seekers to get connected with the recruiters as per their preference.
• LinkedIn offers database of potential candidates to the recruiters and job consultancy firms.
• This is a good platform for market research professionals who can get connected to the key stakeholders and senior management of the companies to conduct their survey.