Question
Why might a platform or marketplace business be expected to earn strong returns on capital?
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Answer
It is asset-light and benefits from network effects.
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Question
Why do network effects create a competitive moat?
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Answer
More users increase value, making rivals harder to displace.
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Question
How does technology disruption risk affect the analyst's view of a digital business model?
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Answer
It can quickly weaken the moat and reduce future growth.
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Question
What makes network effects part of a sustainable competitive advantage in a business model?
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Answer
More users increase value, making the revenue stream harder to displace.
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