A network effect occurs when a company's product or service becomes more valuable as more customers use it. Often times, it grants the first-mover a perpetually dominant position in that industry. In the case of Facebook, as more users came onto the platform, Facebook became more valuable as the default social networking platform. It now boasts two billion users and has a $500 billion market capitalization. In the case of eBay, its early lead as the premier online auction site attracted more sellers because there were more buyers, and more buyers because there were more sellers. Tripadvisor has a similar advantage. Founded in 2000, it was an early mover in travel reviews and is now the dominant destination for researching and planning vacations. It too benefits from a network effect: the more reviews on the site, the more valuable it is to hotel and restaurant shoppers. The more shoppers on the site, the more hotels and restaurants want to list on Tripadvisor, which makes the site more valuable to customers, in a virtuous circle. One would think with this much supply and demand on the site, the company's stock would be doing better. Whereas Facebook and eBay generate revenue from just about every type of product (Facebook sells ads, eBay's auctioneers sell every type of good), Tripadvisor gets paid only by its hotel suppliers or the OTAs. Not only is this somewhat limiting, but the suppliers also indirectly compete with Tripadvisor, resulting in a complex relationship. Get the full story at Madison