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> Can someone explain how Amazon's consumers benefit from network effects? Volume. Marginal cost of fulfilling 100,000 orders/day <<< Marginal cost of fulfilli
by mseebach 15y ago
> Can someone explain how Amazon's consumers benefit from network effects?
Volume. Marginal cost of fulfilling 100,000 orders/day <<< Marginal cost of fulfilling 1,000 orders/day.
GroupOn's claim to scale is that you need eyeballs to convince businesses to put on good deals, and you need good deals to attract eyeballs. Also, there's a land grab going on. If they allow a competitor to become entrenched, taking him on later is going to be difficult, as I'd guess breaking someone else's eyeballs/deals loop is even harder than creating it in the first place.
- barrkel 15y agoThese are economies of scale. I object to relating them to network effects. Network effect, if the term is to have any meaning at all distinct from economy of scale, should relate specifically to value added by edges joining nodes, where those nodes are customers, suppliers or partners etc., and the edges are something the company enables.
- mseebach 15y agoActually I agree, that's why I put "groupOn's claim to scale". They clearly mean economies of scale when they refer to Amazon, so that just adds to the sloppiness of the article.
- stonemetal 15y agoAmazon benefits from network effects by hosting reviews. When I am thinking about buying something I often go to Amazon first because of the reviews.
- wisty 15y agoAparently, network effect is not a buzzword for economies of scale. Well, I guess Amazon gains more a/b juice from customers, which lets it target you with better suggestions. But I doubt that's really what they meant.