Network effects create winner-take-most dynamics. A product with strong network effects tends to dominate its market because its advantage grows with its user base. This is a significant competitive moat, but it is also expensive to build and slow to develop. The period before network density is achieved is characterized by negative returns — the product is investing in growth without yet having the network density that makes the product valuable.
The architectural cost of network effects is real. Fanout at scale — the problem of propagating a single event to a large number of connected users — requires purpose-built infrastructure. A messaging service that must deliver a message to a million followers of a popular account cannot use the same delivery mechanism as one serving an account with a hundred followers. The scale difference requires different architectures, which means the system must be designed to accommodate both or must be rebuilt as scale increases.