By helping products gain traction quickly, network effects can help companies build formidable business moats — or strong competitive advantages that set them apart.
Amazon posted $96B in revenue in Q3’20, a 37% increase over the same period last year. Google also saw a jump in revenue — 14% over Q3’19 — as it maintains its hold on over 85% of the search engine market. Meanwhile, Facebook has grown from 100M monthly active users in 2008 to over 2.7B in 2020.
What sets these companies apart?
Their business moats — or key competitive advantages.
Amazon, Google, and Facebook have used the power of network effects in particular to gain wide utility fast.
Below, we take a look at what network effects are and some of the companies that have built moats with them successfully.
For more on business moats, check out CB Insights’ report: 19 Business Moats That Helped Shape The World’s Most Massive Companies.
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
- Earnings Transcripts Search Engine & Analytics to get an information edge on competitors’ and incumbents’ strategies
- Patent Analytics to see where innovation is happening next
- Company Mosaic Scores to evaluate startup health, based on our National Science Foundation-backed algorithm
- Business Relationships to quickly see a company’s competitors, partners, and more
- Market Sizing Tools to visualize market growth and spot the next big opportunity