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Evaluating Social Networks: The Blindness of Network Effects

The author explores the challenges of evaluating new tech products, particularly those with built-in social and messaging functions. They highlight the "network blindness" that often hinders our ability to grasp the potential value of early-stage social networks.

• Early adopters struggle to assess a product's true value when the network is still small and sparsely populated.
• It's difficult to connect with a social network if it doesn't cater to your specific interests or demographics.
• The typical number of active connections needed to fully appreciate a social network is around 10-20, but achieving that threshold is difficult without organic growth through invitations.
• The value of a social network increases exponentially as its user base grows, making it challenging to comprehend its potential in the early stages.
• The non-network components of a social network, such as the interface or messaging features, often appear trivial compared to the network's underlying potential.

The Importance of Network Density in Product Evaluation

The author uses Twitter as an example to illustrate this point. Initially, Twitter seems pointless without a large network. But, as the network grows, the value of the platform becomes evident for news, communication, and finding information.

• Early adopters struggle to grasp the full potential of a social network because they cannot visualize its future growth and user base.
• The network effect is a crucial factor in the success of social platforms, but it's often difficult to evaluate in the early stages.

Beyond Social Networks: The Network Effect in Other Platforms

The author extends this concept beyond social networks to platforms like eBay and web browsers. The value of these platforms also depends heavily on network effects, with the early stages often failing to reveal their ultimate potential.

• eBay with only beanie babies would not have seemed as promising as it eventually became, demonstrating the importance of network growth beyond niche interests.
• The early web with limited content and users would not have reflected the transformative power of the internet that we know today.

Single-User Products: A Simpler Evaluation

In contrast to social networks, single-user products like Evernote or mobile games offer a more straightforward evaluation process. Their value is evident without relying on network effects.

• Single-user products are easier to demonstrate and evaluate because they offer direct benefits to the individual user, without the complexity of network growth.
• The absence of a network component simplifies the assessment of their value, making it easier to comprehend their utility.

Strategies for Evaluating Social Networks

The author emphasizes the difficulty of predicting the success of social networks due to the unpredictable nature of network effects. However, they suggest focusing on metrics like network density and cross-network interactions as indicators of potential growth.

• Invest in social networks that already have a dedicated user base, even if it's small.
• Analyze network density and cross-network activity to assess the potential for growth and engagement.
• Acknowledge the inherent uncertainty of network effects and be prepared for unexpected outcomes.

Conclusion: The Importance of Recognizing Network Effects

Understanding network effects is crucial for evaluating tech products, especially those with social components. While evaluating early-stage social networks can be challenging, recognizing their potential for growth and engagement is essential for identifying the next big platform. The author encourages readers to consider network density and cross-network interactions as key factors in evaluating social products, acknowledging the significant influence of network effects on their ultimate success.