A network effect is the effect described in economics and business that an additional user of goods or services has on the value of that product to others. When a network effect is present, the value of a product or service increases according to the number of others using it; the classic example is the telephone. A positive externality is created when a telephone is purchased without its owner intending to create value for other users, but does so regardless. Online social networks work with sites like Twitter and Facebook increasing in value to each member as more users join; the network effect can create a bandwagon effect as the network becomes more valuable and more people join, resulting in a positive feedback loop. The expression "network effect" is applied to positive network externalities as in the case of the telephone. Negative network externalities can occur, where more users make a product less valuable, but they are more referred to as "congestion". Network effects were a central theme in the arguments of Theodore Vail, the first post-patent president of Bell Telephone, in gaining a monopoly on US telephone services.
In 1908, when he presented the concept in Bell's annual report, there were over 4,000 local and regional telephone exchanges, most of which were merged into the Bell System. Network effects were popularized by Robert Metcalfe, stated as Metcalfe's law. Metcalfe was one of a co-founder of the company 3Com. In selling the product, Metcalfe argued that customers needed Ethernet cards to grow above a certain critical mass if they were to reap the benefits of their network. According to Metcalfe, the rationale behind the sale of networking cards was that the cost of the network was directly proportional to the number of cards installed, but the value of the network was proportional to the square of the number of users; this was expressed algebraically as having a cost of N, a value of N2. While the actual numbers behind this proposition were never firm, the concept allowed customers to share access to expensive resources like disk drives and printers, send e-mail, access the Internet; the economic theory of the network effect was advanced between 1985 and 1995 by researchers Michael L. Katz, Carl Shapiro, Joseph Farrell and Garth Saloner.
Author, high-tech entrepreneur Rod Beckstrom presented a mathematical model for describing networks that are in a state of positive network effect at BlackHat and Defcon in 2009 and presented the "inverse network effect" with an economic model for defining it as well. Network effects become significant after a certain subscription percentage has been achieved, called critical mass. At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service; as the value of the good is determined by the user base, this implies that after a certain number of people have subscribed to the service or purchased the good, additional people will subscribe to the service or purchase the good due to the value exceeding the price. A key business concern must be how to attract users prior to reaching critical mass. One way is to rely on extrinsic motivation, such as a payment, a fee waiver, or a request for friends to sign up. A more natural strategy is to build a system that has enough value without network effects, at least to early adopters.
As the number of users increases, the system becomes more valuable and is able to attract a wider user base. Beyond critical mass, the increasing number of subscribers cannot continue indefinitely. After a certain point, most networks become either saturated, stopping future uptake. Congestion occurs due to overuse; the applicable analogy is that of a telephone network. While the number of users is below the congestion point, each additional user adds additional value to every other customer. However, at some point the addition of an extra user exceeds the capacity of the existing system. After this point, each additional user decreases the value obtained by every other user. In practical terms, each additional user increases the total system load, leading to busy signals, the inability to get a dial tone, poor customer support. Assuming the congestion point is below the potential market size, the next critical point is where the value obtained again equals the price paid; the network will cease to grow at this point.
Peer-to-peer systems are networks designed to distribute load among their user pool. This theoretically allows P2P networks to scale indefinitely; the P2P based telephony service Skype benefits from this effect and its growth is limited by market saturation. Network effects are mistaken for economies of scale, which result from business size rather than interoperability. To help clarify the distinction, people speak of demand side vs. supply side economies of scale. Classical economies of scale are on the production side, while network effects arise on the demand side. Network effects are mistaken for economies of scope; because of the positive feedback associated with the network effect, system dynamics can be used as a modelling method to describe the phenomena. Word of mouth and the Bass diffusion model are potentially applicable. If some existing technology or company whose benefits are based on network effects starts to lose market share against a challenger such as a disruptive technology or open standards based competition, the benefits of network effects will reduce for the incumbent, increase for the
Brad W. Dalgarno is a Canadian retired professional ice hockey right wing, he was drafted in the first round, sixth overall, by the New York Islanders of the National Hockey League in the 1985 NHL Entry Draft. Born in Vancouver, British Columbia and raised in Whitby, Dalgarno played three seasons of junior hockey in the Ontario Hockey League with the Hamilton Steelhawks, he spent his entire professional career in the Islander organization. In his NHL career, he appeared in 321 games, he added 71 assists. He appeared in 27 playoff games, recording four assists, he is now retired. Brad Dalgarno had to sit out the entire 1989-1990 season because of injuries he received in a fight against Joey Kocur. Dalgarno had a broken orbital bone, cheek bone and had a concussion. Brad Dalgarno career statistics at The Internet Hockey Database
Kotozakura Masakatsu was a former sumo wrestler from Kurayoshi, Japan. He was the sport's 53rd yokozuna, he made his professional debut in 1959, reaching the top division in 1963. After several years at the second highest rank of ōzeki, in 1973 he was promoted to yokozuna at the age of thirty-two years two months, becoming the oldest wrestler to be promoted to yokozuna since 1958, when the current six tournaments system was established. After his retirement he was head coach of Sadogatake stable and produced a string of top division wrestlers. Born Norio Kamatani, he came from a sumo background, as his father was involved in organising regional amateur sumo tournaments and his grandfather's brother had been a professional rikishi; the young Kamatani at first competed in judo. However, after doing well in a national high school sumo competition he decided on a career in professional sumo, his parents wanted him to continue with judo but they were persuaded by former komusubi Kotonishiki Noboru to let him join Sadogatake stable.
Kotozakura made his professional debut in January 1959. He reached the jūryō division in July 1962 and the top makuuchi division in March 1963. After making his san'yaku debut at komusubi in January 1964 he suffered an injury and returned to jūryō, but he recovered. After an 11–4 record at sekiwake in September 1967 he was awarded the Outstanding Performance prize and promotion to ōzeki, he won two tournament championships in July 1968 and March 1969, but by the early 1970s he had begun to be regarded as something of a "perpetual ōzeki" struggling with injuries and finding it difficult to come up with the necessary wins to maintain his rank. He was in danger of demotion from ōzeki, three times during this period. Remarkably however, he won consecutive championships in November 1972 and January 1973 to earn promotion to yokozuna at the age of thirty two, after thirty two tournaments at ōzeki. In July 1973 he defeated Kitanofuji in a playoff to win his only championship as a yokozuna. After injuring his knee in 1974 he withdrew from several tournaments and announced his retirement that July.
He had been expecting to open up his own training stable, but when his stablemaster died just days after Kotozakura's retirement, he took over Sadogatake stable instead. He produced many top division wrestlers over the years, such as ōzeki Kotokaze, Kotoōshū, Kotomitsuki and Kotoshōgiku and sekiwake Kotogaume, Kotofuji and Kotonowaka; when yokozuna Asashōryū was criticized for his behaviour in 2003, he defended the Mongolian by pointing out the lack of emotional strength in young Japanese sumo wrestlers today. Upon reaching the mandatory retirement age of sixty five in November 2005 he passed on ownership of the stable to Kotonowaka, who had become his son-in-law. Shortly after attending the ōzeki promotion ceremony of Kotomitsuki, Kotozakura died on August 14, 2007, he had battled diabetes for several years and had suffered the trauma of a leg amputation. Kotozakura's favoured techniques were the two most common kimarite in sumo -- oshidashi; when grabbing his opponent's mawashi he preferred a migi-yotsu, or left hand outside, right hand inside grip.
Glossary of sumo terms List of past sumo wrestlers List of sumo tournament top division champions List of sumo tournament top division runners-up List of sumo tournament second division champions List of yokozuna Japan Sumo Association profile Article on Kotozakura