“Network/Platform effect” has been the hot keyword in the recent decades especially among the Startups, Venture Capitalists, Technology Innovators and Disruptors.
They gave rise to many giant businesses: Facebook, Youtube, Grab, Uber, AirBnB and many others.
Simply, additional Users to the platform, brings more benefit to it.
Facebook: More friends that are on it brings additional friends which in turn brings more friends which attracts developers to build apps like FarmVille (if you had forgotten the crazy hype previously) which brings even more friends in.
Youtube: More Users brings more Content Creators which inturn attracts more users
Uber/Grab: More Riders attracts more Drivers which attracts more riders which attracts additional merchants which attracts more users
Well, you get my point.
Seems simple enough! So from an investment perspective, lets just find businesses that have such network/platform effects!
However, many people are trapped in the mindset from over exposure of such over popularized business that they tend to look at only ONLINE businesses. Businesses that operates or depend on a single Website or App entirely. (AirBnB, Carousell, Netflix perhaps)
Is it possible that OFFLINE business have such network/platform effects too?
The most prominent network effect is the telephone service. As people transition from writing physical letter to using telephones back in the days. THERE WERE NO ONE TO CALL!!
But as More people adopt the use of telephone, it compels more people to use it and brings exponential value as more and more people use this “telephone service”. Soon, telephone service becomes indispensable in our daily lives.
Remember Microsoft? (before everything went online?)
They are the #1 giant in producing this network/platform product called Windows Operating System.
As more and more people uses Windows, other people HAVE to use Windows to operate with each other, play games with each other, work with each other.
Do any of these products need to be ONLINE to achieve a network effect? =)
So, telephones and Microsoft are/were offline and still have a network effect, but they still require connectivity to a certain extent.
What if a product/service do not even need to have inter-connectivity to have a network effect?! Possible?
What is a product that you use everyday, so used to using, everyone is using and for no real absolute benefit (in modern days) apart from the fact that everyone else and everywhere else is also using thus you HAVE to use it?
The QWERTY keyboard.
Invented and patented around 1873 (almost 150 years ago) for the typewriter machine to SLOW DOWN typing speed so that the keys will not get jammed.
Thank you for reading
~ the only constant, is change