My perspective on wework is that the network effect is related to the more sites it operates, the more flexibility it provides to its members. They can use it for a temporary meeting, instant office, printing, etc, without needing to go back to their own office.
I've also thought about the network effects on the member sides, questions like, what are the benefits of an additional member on wework network to the rest of member? And this seems very little. Existing members are less likely to benefit from the network effects of any additional member coming into the network.
However, wework additional members will provide a great network effect to other business, like tax consultants, lawyers, brands and any business that are intended to do business with members in wework network.
It also posts value/network effects to the landlord's side. Meaning, the more member it is working in wework locations, the more valuable it is for the landlord to choose wework brands. And vice versa, the more landlord works with wework, the more locations options it can offer to its members.
I don't think the first thing you are describing is a network effect. That's just higher quality of service due to operating more sites. Please see definition of network effects in the post.
As for the third part (the landlord's perspective): I don't understand why the landlords would care about how many members WeWork has. All they care about is the rent that is being paid to them by WeWork. So I don't think that's a network effect either.
I've probably spent hundreds of hours reading about network effects, platforms, marketplaces, ecosystems, long tail distributions, and other related subjects -- in my quest to reconcile conflicting writings and fully understand the nuances of the relationships between them.
This article and several others by Andrei and Julian (e.g., the later ones, since I seem to be working backwards from 2021) are like a breath of fresh air. I can't wait to read the rest of them, because they all seem to apply directly to my rather complex problem space. I'm anxiously awaiting the rest of the multi-part series that launched this month (https://platformchronicles.substack.com/p/product-to-platforms-part-i).
People use GoPro because of the videos that it produces. Other snowboarders enjoy watching the videos. The more snowboarders share their exploits on the GoPro channel, upload using Quicklink, the more valuable the “product” is. Aren’t these network effects?
As far as I can tell, anyone can access/subscribe to the GoPro channel (on YouTube or Xbox or Roku, etc.), i.e. it is not restricted to GoPro camera owners. If that's the case, then it's a great marketing channel for GoPro and certainly helps with virality, but it's not a network effect. Indeed, I don't need to buy GoPro in order to enjoy the GoPro channel content. And a GoPro camera owner considering posting content to the channel doesn't care about how many other people have GoPro cameras, since that's not what determines the audience of the channel.
If, however, they restricted access to the channel to GoPro camera owners, then that would become a network effect. One might still argue it would not be a very strong network effect, but it would be one nonetheless.
And just to add, while Andrei's point implies there are no direct network effects from the GoPro device itself (one doesn't get more value from a GoPro just because more others also own a GoPro), there are network effects around the GoPro channel. The more creators post their content there, the more value for channel subscribers, and the more subscribers, the more creators may value posting their content there. If GoPro is able to restrict posting to the GoPro channel to only those who own GoPro devices, this can potentially create an indirect network effect from the GoPro device. When more people own a GoPro, there will be more content posted on the GoPro channel, which will bring in more subscribers, which can benefit each GoPro owner. But with more people posting similar content, it may also be harder for each individual's content to attract viewers, so this effect may or may not lead to a lasting positive indirect network effect.
My perspective on wework is that the network effect is related to the more sites it operates, the more flexibility it provides to its members. They can use it for a temporary meeting, instant office, printing, etc, without needing to go back to their own office.
I've also thought about the network effects on the member sides, questions like, what are the benefits of an additional member on wework network to the rest of member? And this seems very little. Existing members are less likely to benefit from the network effects of any additional member coming into the network.
However, wework additional members will provide a great network effect to other business, like tax consultants, lawyers, brands and any business that are intended to do business with members in wework network.
It also posts value/network effects to the landlord's side. Meaning, the more member it is working in wework locations, the more valuable it is for the landlord to choose wework brands. And vice versa, the more landlord works with wework, the more locations options it can offer to its members.
I hope to receive your comment on the above.
Than you.
Yichao
Hi Yichao,
I don't think the first thing you are describing is a network effect. That's just higher quality of service due to operating more sites. Please see definition of network effects in the post.
The second part (3rd party service providers doing business with WeWork members) is definitely a possible network effect that WeWork can create. We describe that in our post about how to turn WeWork into a platform: https://platformchronicles.substack.com/p/product-to-platform-part-vi-wework
As for the third part (the landlord's perspective): I don't understand why the landlords would care about how many members WeWork has. All they care about is the rent that is being paid to them by WeWork. So I don't think that's a network effect either.
Best,
Andrei.
I've probably spent hundreds of hours reading about network effects, platforms, marketplaces, ecosystems, long tail distributions, and other related subjects -- in my quest to reconcile conflicting writings and fully understand the nuances of the relationships between them.
This article and several others by Andrei and Julian (e.g., the later ones, since I seem to be working backwards from 2021) are like a breath of fresh air. I can't wait to read the rest of them, because they all seem to apply directly to my rather complex problem space. I'm anxiously awaiting the rest of the multi-part series that launched this month (https://platformchronicles.substack.com/p/product-to-platforms-part-i).
Dave Duchesneau, CTO
Scrutiny, Inc.
Thank you very much for the kind words, Dave. We really appreciate it - good to know our pieces resonate with our audience.
People use GoPro because of the videos that it produces. Other snowboarders enjoy watching the videos. The more snowboarders share their exploits on the GoPro channel, upload using Quicklink, the more valuable the “product” is. Aren’t these network effects?
As far as I can tell, anyone can access/subscribe to the GoPro channel (on YouTube or Xbox or Roku, etc.), i.e. it is not restricted to GoPro camera owners. If that's the case, then it's a great marketing channel for GoPro and certainly helps with virality, but it's not a network effect. Indeed, I don't need to buy GoPro in order to enjoy the GoPro channel content. And a GoPro camera owner considering posting content to the channel doesn't care about how many other people have GoPro cameras, since that's not what determines the audience of the channel.
If, however, they restricted access to the channel to GoPro camera owners, then that would become a network effect. One might still argue it would not be a very strong network effect, but it would be one nonetheless.
And just to add, while Andrei's point implies there are no direct network effects from the GoPro device itself (one doesn't get more value from a GoPro just because more others also own a GoPro), there are network effects around the GoPro channel. The more creators post their content there, the more value for channel subscribers, and the more subscribers, the more creators may value posting their content there. If GoPro is able to restrict posting to the GoPro channel to only those who own GoPro devices, this can potentially create an indirect network effect from the GoPro device. When more people own a GoPro, there will be more content posted on the GoPro channel, which will bring in more subscribers, which can benefit each GoPro owner. But with more people posting similar content, it may also be harder for each individual's content to attract viewers, so this effect may or may not lead to a lasting positive indirect network effect.