The Role of Artificial Intelligence and Data Network Effects for Creating User Value

Some of the world’s most profitable firms own platforms that exhibit network effects. A platform exhibits network effects if the more people that use it, the more valuable that it becomes to each user. Theorizing about the value perceived by users of a platform that exhibits network effects has traditionally focused on direct and indirect network effects. In this paper, we theorize about a third type of network effects—data network effects—that has emerged from advances in artificial intelligence (AI) and the growing availability of data. A platform exhibits data network effects if the more that the platform learns from the data it collects on users, the more valuable the platform becomes to each user. We…