Most products become less valuable at scale. The database slows down. The support queue lengthens. The codebase becomes harder to change. Network effects are the exception: products with network effects become more valuable as they grow. Understanding the mechanism — and the architectural cost of building for it — is one of the most practically useful ideas in product strategy for technical leaders.
Network effects exist in several distinct forms, and conflating them produces design errors. The right architecture for a direct network effect is not the right architecture for a data network effect. Understanding which type of network effect a product has — or could have — determines what to build and in what order.