Trying to disrupt ChatGPT, Google? Good luck.

Unless you’ve been living under a rock, you’ve probably heard of ChatGPT. The artificial intelligence chatbot was launched by software company OpenAI in November 2022 and immediately skyrocketed into mainstream consciousness.

To say that ChatGPT has been disruptive would be an understatement. Thanks to the popularity of the platform, AI has gone from a niche, futuristic topic to something your 60-year-old aunt will ask you about at a family dinner.

In January 2023, ChatGPT reached over 100 million users, making it the fastest-growing consumer app of all time. Its rapid rise has tech giant Google shaking. Could ChatGPT be the demise of Google's search engine domination?

You might be wondering “Well, what is Google so worried about?” If they can invent a driverless car, surely they can create their own version of an AI chatbot!” 

The answer is: Yes, they can, and they are. In February, Google announced they were launching their own AI conversation service called Bard. Unfortunately for them, they could be a little too late to the party to overtake ChatGPT’s popularity. And that’s due to something called ‘network effects.’ 

1. What are network effects?

A network effect is the phenomenon where the value of a product, service, or platform depends on the number of people who use it. Generally, this effect is positive. The more people who join the network, the more valuable it becomes.

Network effects are one of the most valuable competitive advantages a business can build, because it's super hard to disrupt a company with strong network effects. Can you remember how many copycats Facebook had in the early days? Thousands. But none were able to overcome the amazing network effects momentum that Facebook has amassed.

Even recently, many ambitious social media platforms have tried and failed to become the next Meta. But, why would you join BeReal, if your friends and family are only on Instagram and Facebook? There’s little incentive to do so.

2. What are some examples of network effects?

Anywhere there is a network, there are network effects. You experience it any time you log onto the internet, order takeaway food or even catch public transport.

The telephone is a classic example. There would be no point owning a phone if there’s nobody to call on the other end. The value doesn’t come from the handset, but from the network itself — having other people you can call for a chat. The same applies to social media platforms, which become infinitely more valuable as more people join.

It’s important to note that network effects aren’t just about facilitating communication between consumers. Sometimes, they’re about strengthening communication between the consumer and the platform itself. 

Take Spotify, for example. The music streaming app benefits from network effects in a few different ways. They benefit from network effects when both new artists and listeners join their platform, and also have a social media element with their ‘friends’ feed.

However, there’s also a third, less obvious way: any time a new user joins, it trains the Spotify algorithm on the other types of music fans of Metallica (for example) like to listen to. They can use this data to make them smarter at recommending songs and artists to other Metallica fans and therefore, their platform becomes more useful and valuable.

3. How does Chat GPT benefit from network effects?

Like Spotify, ChatGPT gets its network effects through machine learning. Their platform works by pre-training a neural network on a vast dataset of text. However, what truly makes ChatGPT remarkable is its advancements in NLP (natural language processing). It’s able to process patterns in data and language patterns, in order to provide responses in a more human-like way.

In other words, any time you feed ChatGPT a question or prompt, you are helping to fine-tune its algorithm for the future. So, with every new user, ChatGPT becomes a little more (scarily) accurate.

So, just how powerful is ChatGPT’s network? Well, there’s a term in the business world for when platforms reach peak network effects: critical mass. This is when the value produced by the network itself exceeds the value of the product itself and of competing products. 

Whether or not ChatGPT has reached critical mass yet is up for debate, as there’s not always a clear goal post. However, given that their servers became so overloaded that they couldn’t keep up with the demand (leading them to launch a paid membership with faster response speeds), it’s safe to say they’re not far off. Sorry, Google!

To be fair, Google does have a fighting chance because it has very useful user data. Think about all the data stored in your Gmail, Chrome, or Google Maps. If Google was able to develop a similar technology to ChatGPT, it would have an edge because AI could already know a lot about each user so its answers could be more tailored. 

4. Why network effects matter for designers

The good news is, you don’t need to create elaborate AI software to benefit from network effects. There are a few key takeaways here to help designers create more valuable products.

• Does your product or service already have network effects? Make sure your design supports it. It’s crucial to have the infrastructure in place to support frictionless communication between your users — especially if you have a double-sided marketplace. To achieve greater network effects without sacrificing the performance of your product, you might consider using clustering — how can you encourage smaller, more active sub-groups of users?

• Not taking advantage of network effects yet? As a designer, you know your consumer’s pain points inside out. Their struggles are what keep you up at night. But what if instead of solving their problem with your product, someone else could instead? And what if that was a two-way street? Consider how a double-sided product or service could work for your organization — even if it’s not immediately obvious. It’s a great way to achieve better economies of scale.