Image source: http://bigdata-101.blogspot.com.au/
The networks effect is all about scale and reach. The more people who use it, the more value it brings to all users.
Eharmony is a good example of how to use network effects to run a business.
When entering the market in 2000, Eharmony faced a saturated online dating market with a number of free dating sites available.
Eharmony has focused on a mature age group looking for serious long-term relationship and charged memberships fees to provide compatibility matches. With a large pool of people familiar with online dating already, the niche market could accept this deal if they believed the service was unique.
When facing more competitors offering free dating service, such as RSVP (2 million members), Oasis Active (1.6 million), OkCupid and Tinder , Eharmony has employed a different strategy: check compatibility for users based on their comprehensive profile created from detailed questionnaires.
(Image source: http://www.emergingstateofmind.com/2015/03/
Instead of users filtering through thousands of other users’ profiles, Eharmony sends a user only the matches that are selected by their algorithm. This is a smart way to reduce the negative network effects which other dating sites receive for wasting time and getting lost in the jungle. This is the case that quantity is important but quality matters more.
Moreover, this behind the curtain strategy can present “standalone-value” for users, as it can trick users into believing there is a bigger market than there is. The more members, the higher chance to meet the right person. It also enables users to effectively communicate with the possible partners.
As Eharmony titles its core tenet, “Meet compatible singles”!
Eharmony success relies not only on network effect but also because its stand-alone value.