1/22/2010

Network effects only become significant after a certain number or percentage of users log in, when this occurs it is known as critical mass. This point is reached when the goods value is higher that the price that was paid for the said good. While the growth that has occurred is good it cannot continue indefinitely, because congestion will eventually occur. Another great example of this is Ebay. If it wasn’t because of the large number of users that are on Ebay, the use of the site would not be nearly as value able. EBay also must have a large number of users for it to be profitable for the company.