THE LEAKY BUCKET THEORY OF NETWORK EFFECTS

Summary from the TLDR Product newsletter

Network effects can create either robust competitive advantages or easily replicable dynamics, depending on how they are structured within a marketplace. The defensibility of these effects hinges on three factors: breadth (geographic reach), depth (supply heterogeneity), and multi-tenanting resistance. Successful platforms like Amazon achieve a deep moat through heterogeneous supply and high supplier retention, while others like "Uber for X" struggle due to their limited scope and weaker supplier loyalty.