Why companies with 'Network Effects' win

Nick Griffin, Head of Investments at Munro Partners, says network effects strongly dominate the digital business world. A network effect is when a good or service becomes more valuable as it’s more widely adopted, creating a virtuous cycle. Examples include Google, or closer to home, CarSales.com.au and RealEstate.com.au. “Once you have that network effect, for instance, with CarSales.com.au, it’s very hard to take it away… Ultimately, it’s not the customer who pays REA that is deciding whether to search at REA or not. It is the consumer, and the consumer is looking at it for free.” In this video, he explains why even Google has failed to compete against businesses with established network effects.