In Chapter 6 of The Subscription Playbook I made a bold claim: network effects are the most powerful strategic factor in the whole book.
A product with a network effect gets more valuable every time someone new uses it. More videos on YouTube attract more viewers, which attract more creators. That loop is the deepest moat a subscription business can dig, because a competitor can't copy your users.
But most owners either assume network effects are only for Facebook-sized companies, or try to force a marketplace onto a business that doesn't need one. This scorecard helps you find out which, if any, of the six types fits you.
How do you use the Network Effects Scorecard?
- Describe your network. If you connect two groups (providers and customers, sellers and buyers), name them. The plan uses your words.
- Tick the signals under each of the six network effects: industry standard; media, content and messaging; marketplaces; platforms; data; and being the verb in a category. Tick what's true now or could realistically be true within a year.
- Run the leakage check if you connect two groups. It's the five questions I'd ask any marketplace founder.
- Read your plan. You get your best fit, how to build it, a supply-first plan for the chicken-or-egg problem and your disintermediation risk.
How the scoring works
Each network effect has three signals. Its fit depends on how many you tick: none is unlikely, one is possible, two is promising and three is a strong fit. The overall potential score rewards one strong network effect more than several weak ones, because that's how networks win.
Potential = (Signals for your best type × 2 + All signals ticked) ÷ 24 × 100
The leakage check is simpler: every box you can't tick is a hole. Four or five holes is high risk.
A worked example: a physio booking app
The preloaded example connects local physios with patients. It ticks all three marketplace signals, two data signals and one each for media and platforms.
Result: Marketplaces is a strong fit, data is promising, and potential is 54 out of 100. The plan says to start in the smallest area where a few dozen physios would already be useful, win the physios first with software or free leads, and only then spend money reaching patients.
The leakage check finds two holes: no on-platform guarantee, and the same fee on repeat bookings. That's the HomeJoy problem. Customers and cleaners met through the app, then dealt directly, and it shut down in 2015. The fix is the one StyleSeat uses: charge a capped fee for brand-new clients only, so there's nothing to gain by going around you.
And the money question is still open. That's the warning I'd shout loudest. Zvents built an events site with 14 million monthly users and couldn't get organizers to pay for listings. Decide how you'll get paid before you scale.
How do you read your result?
- A strong fit (3 of 3): build it deliberately. Give it an owner and a 90-day plan.
- Promising (2 of 3): test the missing signal cheaply before you invest.
- Nothing above possible: network effects may be the wrong goal for now. If one customer's use does nothing for another's, focus on switching costs, brand and usage instead.
One 2026 note. AI has made generic content cheap, so the media network effect is weaker than it was, and data network effects are now the prize. Ask what every customer generates that, pooled and anonymized, would make the service better for all of them.
What to do next
- Read the full guide to the six types of network effects, including gamification and the 2026 update.
- See how StyleSeat charges stylists for new clients and how Zillow turned Trulia's network into profit.
- Learn from HomeJoy's collapse before you launch a marketplace.
- Score the rest of your moat with the MOATS Scorecard.
Frequently asked questions
Can a small service business have network effects?
Yes, usually a local or niche version. A wedding planner with a trusted supplier list, an accountant who runs a client community, or a gym whose members train together all get more valuable as more people join. You don't need millions of users. You need each new member to make the experience better for the others, and a reason for them to stay inside your network.
What is the chicken-or-egg problem?
It's the start-up problem every network faces: no suppliers means no customers, and no customers means no suppliers. One side is usually harder to win, and that's where you start, which is usually the supply side. Give suppliers value before you have an audience, such as free software, leads or traffic, and shrink the network to one area or niche so you need fewer of them.
What is disintermediation?
Disintermediation is when a supplier and a customer meet through your platform, then cut you out and deal directly. It's deadly for subscription businesses that rely on repeat usage. The fixes are to run payments and booking through you, offer protection that only applies on-platform, keep reviews on your platform, and charge for new connections rather than repeat ones.
Are network effects the same as going viral?
No. Virality is about how fast a product spreads, with each user bringing in more users. A network effect is about value, with each user making the product better for everyone else. They often travel together, but not always. A funny video can go viral with no network effect, and an industry-standard form can have a strong network effect without ever going viral.
Which network effect is strongest in the AI era?
Data network effects, in most categories. AI has made generic content cheap, which weakens content networks built on answers anyone can generate. Data that customers create by using your product, and that nobody else has, gets more valuable as you grow. Community and accountability also hold up well, because a model can't replicate the people in your network.
Built on The Subscription Playbook
This tool turns frameworks from Robert Coorey's book into something you can use in minutes. Robert is the author of The Subscription Playbook and a Director at BPAG Accountants. More about Robert.