Published on December 16th, 2019 | by Sunit Nandi

The Network Effect in Technology

he network effect is the phenomenon that gives a positive impact on a product or service when more people use it. This is also to say (in most cases), that the product or service is both useless and redundant without a user base.

The phrase comes from economic terminology, as it comes under demand-side economies of scale. This essentially means that additional users create additional importance for the service/product, giving it huge scaling potential. The product can become significant if a critical mass of users uses it. In addition, this will result in a positive feedback loop.

This is evident in the results seen at Microsoft Windows in the ’90s and Apple’s iTunes store over the last decade. In addition, more recently, Uber and Airbnb are examples of some of the most popular companies that benefit from the network effects when new technologies arise.

The network effect should also apply to gaming and this application will happen to those who can utilize the use of technology. In recent years, there is a new technology called blockchain and a real blockchain platform is about distributed ledger that is open, decentralized, and having an emphasis on a strategic focus.

The Network Effect in iGaming

Online platforms in iGaming are perhaps the biggest beneficiary of the network effect. One reason would be that an online casino needs users in order for it to be valuable to those users. This is because many online casino games are multiplayer with other users, not just the casino. Even games that have single-player gameplay, other players can still be part of it, meaning there is an interactive and social element.

Games such as poker literally depend on other users to play with too. The more players, the wider variety and higher amount of tournaments are held. Casinos that have very few co-playing options will likely dwindle into insignificance, as users will look to ones that are more popular.

On a side note, the iGaming industry is following the development of cryptocurrencies. However, the creation of bitcoin and other cryptocurrencies is only the beginning. Beyond bitcoin, products like CryptoKitties, Etherbot are new creatures of crypto assets. They became popular because of smart contracts alongside the maturing of blockchain technology.

The Network Effect with Blockchain

In other words, bitcoin has his use in casinos too, which also benefit from the network effect. The gaming industry has a demand for innovation, which drives a new force to unlock the potential use of new blockchain cases. One example of such case is the data sharing among parties in order to increase efficiency. Because of blockchain, a distributed computing platform is enabled where game providers and players are able to interact with each other closer than before.

Albert Einstein said, “The true sign of intelligence is not knowledge but imagination”. However, the blockchain technology is still in its early stages and the use of it in the gaming industry is still at experimental level. The next anticipated milestone of technological advancements is a second layer technology and the ability to connect multiple blockchains synergistically. Once the associated blockchain technology becomes accessible to game developers, the creation of quality games will be next. In addition, a new chain of gaming ecosystem will form.

Whoever can see this future, will be the first mover to have an advantage to a new wave of network effects. Blockchain is a technology that means to re-write the communication layers of all industries, from inside out. Blockchain developers will continue to share their research in technology innovations hoping to give inspirations for the industry and to work together for a better future.

Social media

The value of social media websites has grown exponentially due to their rising user base. For example, Facebook is all about keeping in contact with old friends. What use is it if only 10% of your friends are on it? In a sense, the website you choose to use entirely depends on what your friends are using. If they move over to a new one, so would you, just like how no one is using MySpace anymore.

For this reason, it’s possible to put forward the argument that Facebook is now too big to fail. Whilst it has seen a drop in users from some demographics, it is difficult to see a situation where people will move onto another social media site. In order for a new company to take its user base, it would essentially be very difficult in the early stages when almost everyone in the western world has an account. Not only this, but it’s messaging app is depended upon by most of us, even if the Facebook feed isn’t used much.

The same goes for dating sites too. However, given that they never reach a state of utter dominance over the public at large (except for Tinder), it means that new sites fare much better in picking up users. This is also the case because users gain some extra utility in using multiple sites, whereas with say friends-based social media, this is not the case.

Tags: network effect, technology

About the Author

Sunit Nandi I'm the leader of Techno FAQ. Also an engineering college student with immense interest in science and technology. Other interests include literature, coin collecting, gardening and photography. Always wish to live life like there's no tomorrow.