Why is network externalities a strategic entry barrier?

Network externalities is an economics concept that describes the circumstances where the value of a product or service changes as the number of users increases or decreases. According to the traditional economic theory, as the supply of a product increases the price of the product falls and becomes less valuable. In certain circumstances the opposite might happen, the value of a product or service may rise with the increase in the number of users. This is called the positive network externalities or the network effect. A mobile network is an example where this concept applies. The more users a mobile service provider has the higher its value. The telephone is a classic example where a greater number of users increases the value to each. When a customer purchases a telephone, a positive externality is created. The online social network is another example where the value is increased with each new user.