The network effect is just one barrier that helps make your company more defensible from competitors. It's not a magic bullet though. Just ask MySpace or AOL.

The network effect is just one barrier that helps make your company more defensible from competitors. It's not a magic bullet though. Just ask MySpace or AOL. You should follow PG's advice to make something people want, but also try to think of barriers you can construct along the way to protect the value you create. Keep in mind that most small businesses don't have a strong network effect, yet many are very profitable and sustainable.