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.If you aren’t already a client, sign up for a free trial to learn more about our platform.