No, Netflix and Peloton Do Not Have Network Effects

One of the strongest competitive advantages in the business world today is network effects. At a high level, this generally means that as a company gains additional users or customers, the product or service improves for everyone else. 

While easy to comprehend, investors often mistakenly believe internet companies automatically possess this trait. Two popular companies in particular, Netflix (NASDAQ: NFLX) and Peloton (NASDAQ: PTON), are widely thought of as businesses with network effects. 

But there is more to the definition I gave above. Let's dive in and understand why the misconception exists.

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Source Fool.com