Difference Between Virality And Network Effects

Virality is about the marketing side of how a platform can grow its audience in a scalable way. Network effects are about how the underlying platform gets fundamentally better the more users join in.

AspectViralityNetwork Effects
DefinitionA marketing strategy to increase exposure and user acquisition through sharing and word-of-mouth, often externally.A phenomenon where the value and utility of a platform or product increase with the number of users.
PurposePrimarily a growth tool and marketing tactic.Creates a lasting competitive advantage and enhances the user experience.
External vs. InternalFocuses on external exposure and sharing, often through social media.Internally driven by the platform’s inherent properties and interactions among users.
Key OutcomeIncreases user acquisition and visibility.Enhances the platform’s value and user satisfaction.
ExamplesSharing a YouTube video on Facebook.Airbnb becoming more valuable as more hosts and travelers join.
Relationship with Business StrategyPart of a marketing and user acquisition strategy.A fundamental aspect of platform strategy for long-term growth and competitiveness.


In this short article, I want to clarify the critical difference between virality and network effects. Often (too often) those terms are used, or thought of as the same thing.

However, they are not, and understanding the critical difference between the two is vital to also formulate a better business strategy for a platform business model.

Network effects happen when a platform becomes more valuable as more users join it. Virality instead is a growth tool which companies can use to create more exposure for their product or platform.

Thus, a network effect is a way to create a lasting competitive advantage. And to offer more value to users. A viral effect is primarily a marketing tactic to gain traction and visibility for your product.

Network effects and virality can work together. For instance, as more users join through viral effects, if the platform is taking advantage of network effects, the more also it will become prone to improve its virality.

As highlighted in the interview with Sangeet Paul Choudary, best-selling author of Platform Scale and Platform Revolution:

Network effects create value on the platform. Viral effects spread the word about the platform or the product externally.

And he continued:

So network effects, an example is the more users who are on Airbnb. The more hosts are setting up listings on Airbnb, the more choice there is for travelers. Now that’s a network effect.

Or take the example of YouTube, the more videos that are being set up on YouTube, the more choice I have as a viewer to view things on YouTube.

Instead, virality happens when:

Now, if I take a video from YouTube and embed it on Facebook, that’s not a network effect, that’s a viral effect.

In short:

So a viral effect is a growth tool that brings external users back to the platform. Whereas a network effect increases the value on the platform, just like adding more than more and more videos onto YouTube.

Read next: Dissecting Digital Platform Businesses With Sangeet Paul Choudary


Handpicked interviews:

Other business resources:

Linear business models create value by selling products down the supply chain. Platform business models create value by enabling exchanges among consumers.

Has the business world changed?

In the old business era, the business that dominated the business world were linear business models.

Nowadays, platform business models have become the dominant form of businesses as they can scale quickly and grab market shares more efficiently compared to linear business models.

Where a linear business might still be a great model for small organizations and startups, however, as companies scale, platform business models enable them to scale more efficiently to grab larger shares of the total market.

Related: Dissecting Platform Business Models With Nick Johnson [Lecture]

What’s a linear business model?

A linear business model creates value by selling products or services down the supply chain. Thus, its value starts by controlling the supply chain.

This concept is critical to understand as a linear business model would start from the assumption that the value is in the supply chain, and as it grows it can grab more market shares, by controlling more pieces of it. Also, a linear business model that scales will want to own more assets, thus it will require more capital to be managed.

Also, a linear business model has to be closed and controlled by definition, as this is the way value can be captured. Those logics do not apply to platform business models; let’s see why.

What’s a platform business model?

platform business model unlocks value for its end users and consumers by enabling them to interact and transact smoothly with the other side of the transaction, be it another consumer or a producer.

Therefore, a platform business model won’t own assets, but it will make it possible to its end users to exchange things. In short, platform business models take their value from network effects. This means the platform business model scales way more efficiently than a linear business model because it’s able to reduce its transaction costs also as the scale reached is massive.

In other words, where linear business models hardly scale to the total size of the market, platform business models not only might scale to the size of the market; but they might actually expand these markets altogether.

Key Highlights

  • Difference Between Virality and Network Effects: Virality is a marketing strategy that aims to grow an audience through exposure and sharing, while network effects occur when a platform becomes more valuable as more users join. It’s important to distinguish between these two concepts for effective business strategy.
  • Network Effects: Network effects occur when a platform’s value increases with the number of users. It creates a lasting competitive advantage and enhances user experience. Examples include Airbnb, where more hosts lead to more choices for travelers, and YouTube, where more videos increase viewers’ options.
  • Virality: Virality is a growth tool used for marketing purposes to gain traction and visibility for a product or platform. It involves spreading the word externally, often through sharing on social media or other platforms.
  • Synergy Between Virality and Network Effects: While distinct, network effects and virality can work together. As more users join through viral effects, a platform that leverages network effects can become more prone to improving its virality as well.
  • Platform Business Models vs. Linear Business Models: Platform business models create value by enabling exchanges among consumers, leveraging network effects to scale efficiently. Linear business models, on the other hand, create value by selling products down the supply chain and controlling the supply chain. Platform models have become dominant due to their scalability and market share advantages.
  • Linear Business Models: Linear business models control the supply chain and capture value by owning assets. They are less efficient in scaling and require more capital management as they grow.
  • Platform Business Models: Platform business models create value by facilitating interactions and transactions among users. They leverage network effects for efficient scaling and can even expand markets, unlike linear models.

Read next: 

Other key resources:

Business models case studies:

Platform business models case studies

Amazon Business Model

Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services,  Amazon AWS, Subscription Services, Advertising revenues and Physical Stores.

Doordash Business Model

DoorDash is a platform business model that enables restaurants to set up at no cost delivery operations. At the same time, customers get their food at home and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.

Etsy Business Model

Etsy is a two-sided marketplace for unique and creative goods. As a marketplace, it makes money via transaction fees on the items sold on the platform. Etsy’s key partner is comprised of sellers providing unique listings, and a wide organic reach across several marketing channels.

Uber Business Model 

Uber is a is two-sided marketplace, a platform business model that connects drivers and riders, with an interface that has elements of gamification, that makes it easy for two sides to connect and transact. Uber makes money by collecting fees from the platform’s gross bookings.

Uber Eats Business Model

Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fee; Drivers earn through making reliable deliveries on time.

Connected Business Frameworks

Blitzscaling Canvas

The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

Business Analysis Framework

Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Digital Marketing Circle

digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

North Star Metric

A north star metric (NSM) is any metric a company focuses on to achieve growth. A north star metric is usually a key component of an effective growth hacking strategy, as it simplifies the whole strategy, making it simpler to execute at high speed. Usually, when picking up a North Start Metric, it’s critical to avoid vanity metrics (those who do not really impact the business) and instead find a metric that really matters for the business growth.

ICE Scoring

The ICE Scoring Model is an agile methodology that prioritizes features using data according to three components: impact, confidence, and ease of implementation. The ICE Scoring Model was initially created by author and growth expert Sean Ellis to help companies expand. Today, the model is broadly used to prioritize projects, features, initiatives, and rollouts. It is ideally suited for early-stage product development where there is a continuous flow of ideas and momentum must be maintained.

Virtuous Cycle

The virtuous cycle is a positive loop or a set of positive loops that trigger a non-linear growth. Indeed, in the context of digital platforms, virtuous cycles – also defined as flywheel models – help companies capture more market shares by accelerating growth. The classic example is Amazon’s lower prices driving more consumers, driving more sellers, thus improving variety and convenience, thus accelerating growth.

Freemium Business Model

The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Growth Matrix

In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

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