Some of the most successful companies and products have been predicated on the concept of network effects, where the network becomes more valuable to users as more people use it… if managed well.
But you can’t manage what you can’t measure. So, what metrics should you look at to determine if you even have network effects in the first place? And how do you nurture and improve your network effects? Should product managers be looking at leading indicators (like retention cohorts and power user curves) or lagging indicators (like DAU/MAU ratio, pricing power, gross margins)?
In this final segment of our three-part mini-series on network effects, consumer deal & investing team partners D’Arcy Coolican and Li Jin — who recently co-wrote a pair of posts on the dynamics and metrics of network effects — discuss managing and measuring network effects with a16z operating partner Frank Chen.