The Whatsapp Effect ( Utilizing the Network effect)

Hello Fellow Bloggers,

For this week I have been tasked with giving an example of how Web 2.0 platforms utilize all the different types of network effects and how that impacted the platform and proceeded to add value to the platform. There are 4 types of Network effects: Direct, Indirect, Cross-Network and Local. Direct Network effects are when the value of a platform increases the more users they have. Indirect Network effects are when the usage of a product increases the value and production of complimentary products. Cross-Network Effects is when one network increases the value of another network through the use of their own platform. Local Network Effects are the social influence of the platform and how they directly impact consumers.

Whatsapp is the platform I have chosen is a cross platform mobile messaging app which, simply put, allows you to exchange messages without having to pay for SMS. It is one of the few and the very first application to allow iPhone, Android, Blackberry, Nokia, and Windows phones to all communicate with each other through the one application.

The direct network effect for Whatsapp comes in the form of connection. The application has a various amount of features that promote connectivity with others, the basics are there from calling to messaging, as well as the ability to make groups. The more people that use the application the more people can meet and converse with each other therefore increasing the applications popularity and value. If a large majority of people use the app others will start to think it is the best way of communication therefore again increasing the applications value.

Whatsapp does not really have an Indirect Network effect because the application does not have any complimentary products or features. There are no adds that could encourage consumers to buy products, there no sign up process so that they can redirect attention to say a website instead of the app itself and because it is multi-platform and does not promote a specific platform or service provider. For these reasons i do believe Whatsapp does not have any Indirect network effects.

However, Whatsapp does have a cross network effect or rather could have a cross network effect. The calls and messages sent through Whatsapp are multi-platform and use WI-FI and mobile data instead of mobile credit therefore saving the user money. This could encourage the consumer to upgrade their phone plan to one with higher mobile data, which in turn helps the service provider as well as the customer, the provider gets a consumer wanted a better plan and the consumer gets more data so that they can continue to use the application. A clear connection between service provider and service user.

Whatsapp's possibly largest network effect is its local network effect. This being initially the combination of all these features encourage the consumer to take initiative and show their friends and family the app so that they can join to. To further explain, as a user of Whatsapp my experience and the value of the app to me increases the more people i have from my contacts list using the application, although there are hundreds of thousands of others using the application my experience wont be enhanced by them using the app. This leads to promotion and spreading the word about the application to my friends and family.

I hope I have proven that Whatsapp not only implemented these web 2.0 strategies of network effects however, used them to increase the value of their app and the experience of the users which lead to their success.


References: http://platformed.info/twitter-whatsapp-uber-airbnb-network-effects/ 

                    http://platformed.info/reverse-network-effects-why-scale-may-be-the-biggest-threat-facing-todays-social-networks/

                    http://innovationfootprints.com/revisiting-know-network-effects-startups/