70% of Value in Tech is Driven by Network Effects

Over the past 23 years, network effects have accounted for approximately 70% of the value creation in tech.

We did a study of the digital companies that were founded since the Internet was widely available in 1994 and that went on to become worth more than a $1 billion.

336 companies between 1994 and 2017 met this criteria.

By looking at each of the companies’ business models and comparing them to our list of 13 known network effects, we estimate 35 percent of those companies had network effects at their core. They were, however, typically much more valuable than companies without network effects so they added up to 68% of the total value in our spreadsheet.

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