| Marketplaces |
At volume a marketplace aggregates the demand of buyers and the supply of sellers of goods or services, and also organizes the important information around its type of transaction in the most intuitive and efficient way. This creates competitive advantages that do not exist at a small scale – selection, price transparency, and depth – a classic network effect. |
| Exchanges |
Exchanges are a subset of marketplaces, often associated with the trading of standardized or commoditized products like equities and futures in the financial world. The number of exchanges for any given asset class is typically highly concentrated due to regulation as well as inherent network economics. |
| Networks |
Communication networks exhibit very strong network effects. However, regulation, technology standards and interoperability can offset the natural tendency to market concentration. Still, a number of “closed” communication networks, for instance Skype, are able to thrive with less regulated business models. |
| Data |
Data is more valuable in aggregation. For example, it is more convenient to find a residential telephone number using a single large directory rather than searching through several smaller ones. In this way aggregated data is often at the heart of a competitive advantage akin to a network effect. This is even more pronounced if the data is user generated. |
| Communities |
Much social interaction depends on community, so people typically want to be in the same place as their friends. Again, a single community has greater utility for all concerned than a divided world. Scale in users creates a better product that is hard to emulate for an entrant. |
| Language |
The benefit of being able to understand and be understood by others powerfully drives people to adopt a common language. This can be seen in the relative growth of the use of English, much as it is in the way common protocols and interoperable standards are widely adopted in the digital world, to the exclusion of others. Language, in all its forms, appears to concentrate according to network principles. |
| Currency |
The translation of value between disparate goods and services is a function of money with a certain resemblance to language. And like language, a particular currency has little utility if only a few people use it; but if it is universally accepted, it becomes very useful indeed. There are distinct network characteristics here that are as relevant to digital as they are to physical money. |
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