Additional participants can create more useful interactions, complementary services or opportunities for existing users. The effect concerns how participation changes value, rather than simply how many customers a business has.
More users do not automatically make a product better. Congestion, low-quality contributions and privacy problems can reduce value, and a benefit from extra training data is not by itself proof of a network effect.
ELI5
A network effect means other people's participation changes how useful a service is to you. For example, a communication tool becomes more useful when more of the people you need to contact join it.
Growth alone is not enough. If new users do not improve useful connections or interactions, the product may just be getting larger rather than more valuable for each participant.
Is every growing product benefiting from network effects?
No. Growth describes increased adoption, while a network effect concerns how participation changes value for users or other participants.
Can a network effect be negative?
Yes. Additional participation can create congestion, noise or other costs that reduce the service's usefulness.
