16 ways of measuring network effect

1. Acquisition-Related Metrics

1.1. #1 Organic vs. paid users What percentage of your new users are organic?

1.2. #2 Sources of traffic As the network grows, how much traffic/transactions on the network are generated internally, arising from the network itself vs. from external sources?

1.3. #3 Time series of paid CAC How much do you need to spend to acquire supply?

2. Competitor-Related Metrics

2.1. #4 Prevalence of multi-tenanting How many of your users also use other similar services? How many users are active on similar services?

2.2. #5 Switching or multi-homing costs How easy is it for users to join a new (and even a non-existent) network? How much value can users get as a new user from joining a different network?

3. Engagement-Related Metrics

3.1. #6 User retention cohorts Is your user retention improving for newer cohorts?

3.2. #7 Core action retention cohorts Is retention, as defined by users taking a core action for the product, improving for newer cohorts?

3.3. #8 Dollar retention & paid user retention cohorts Are newer cohorts retaining better on a dollar basis, for every given time period, than older cohorts?

3.4. #9 Retention by location/geography Are participants in the oldest markets — for businesses with local network effects — better retained, than those in newer markets?

3.5. #10 Power user curves (aka L7 & L30 charts) Are users shifting to the right side of the power user curve? In other words, are they becoming more engaged over time?

4. Marketplace Metrics

4.1. #11 Match rate (aka utilization rate, success rate, etc.) How successfully can the two sides of the marketplace find each other?

4.2. #12 Market depth Is there enough supply and does it fit users’ needs?

4.3. #13 Time to find a match (or inventory turnover, or days to turn) How long does it take for supply and demand to match?

4.4. #14 Concentration or fragmentation of supply and demand How concentrated is the marketplace on the supply and demand sides?

5. Economics-Related Metrics

5.1. #15 Pricing power How much are you able to charge for your product? What would your customers be willing to pay to stay on the network?

5.2. #16 Unit economics How is the business doing, basically?