Virality and network effects are conflated by even experienced Founders, and it keeps them from having the right strategies and developing world-class products.

Viral effects and network effects are two completely different things.

Viral effects are about growth of new users. Viral effects are when you get your existing customers to get you more new customers, ideally for free.

Network effects are about adding value and defensibility to your product. A network effect is when every customer of your product adds incremental value to all the other customers of your product so that it becomes difficult for customers to find any alternative product which gives them as much value.

Viral effects can exist without network effects, and network effects can exist without viral effects.

Further, there are very different playbooks and mental models for building virality vs network effects. Not understanding the distinctions will be detrimental to your company’s long term success.

Yet at the same time, we learned how much less important viral effects are to long-term value creation than defensibilies like network effects.

While viral effects are a useful attribute of products to reduce the expense of acquiring new users, network effects remain the key driver of value creation for startups in the digital age by keeping people using them.

By [[James Currier]], [[NFX]], https://www.nfx.com/post/viral-effects-vs-network-effects/