Economic Moat Sources: The Network Effect
Uncover where to find and how to measure this rare competitive advantage.
A network effect occurs when a product or service becomes more valuable as more people use it. This creates a self-reinforcing cycle that attracts new users, increases retention, and lowers customer acquisition costs over time.
Network effects are one of the stronger and most sustainable forms of competitive advantage, yet also one of the hardest to build and maintain.
In this report, Morningstar’s equity research team examines why only a small share of companies achieve this type of economic moat. This report helps investors and financial professionals identify true network effects and their strength.
