Direct network effects mean:

Question

BlackTom AI · Accepted Answer

Question: Direct network effects mean:

Option A: 'The value of a platform to a user increases as more users on the opposite side join.' This describes indirect network effects, where the value comes from more users on the other side of the platform (e.g., greater liquidity on a marketplace or more buyers attracting more sellers). It is not a direct network effect, so this statement is incorrect.

Option B: 'The value of a platform to a user increases as more users on the same side join.' This is the classic definition of direct network effects: each additional user on your own side makes the platform more valuable to all users on that same side, due to enhanced interactions, content, or utility. This option correctly captures the concept.

Option C: 'Platforms reduce multi-homing costs for users.' Reducing multi-homing costs is a strategic feature or competitive dynamic that can influence platform adoption, but it does not define direct network effects. This statement describes a capability or market condition rather than the core mechanism of direct network effects.

Option D: 'Users can easily switch between roles on the platform.' While role flexibility can be a design consideration for some platforms, it does not define direct network effects. It speaks to user capability rather than how value scales with user count on the same side.

In summary, direct network effects refer to the increasing value as more users join on the same side, which aligns with Option B. The other options describe related concepts (indirect effects, market dynamics, or design features) but do not define direct network effects.

Direct network effects mean:

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