Network Effects Need a Loop, Not a Logo
Distinguish a real network effect from ordinary virality or community activity.
More users is not a moat unless more users make the product better. The teach Network effects happen when additional usage increases value for other users. In a direct network, more reachable nodes can make the network itself more useful. In a two-sided marketplace, more supply can attract demand and more demand can attract supply. The business-model question is whether that added value is captured in the product. If buyers and sellers meet once and immediately leave, the marketplace may have acquisition, not defensibility. If each transaction improves search, trust, reputation, workflow, or liquidity, the model can compound. Common trap…
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