In September of 2019 - about 18 months ago now - I was looking at Zillow Group ($ZG).
The stock caught my attention while I was on the look out for great platform companies which also happened to benefit from a network effect. Often the two go hand in hand, but not always.
Platform companies are great because generally they are capital light, have high returns on invested capital, and (most importantly) generate massive amounts of free cash flow. Add on to that the benefits of a network effect and you have a truly great company: one that generates massive amounts of free cash flow AND has a fat moat.
Consider for example the stocks of AutoTrader (AUTO.L) and Rightmove (RMV.L) here in my domestic market of the United Kingdom. These companies operate marketplace platforms for the new/used car market and the real estate market respectively. They absolutely DOMINATE their categories - the competition doesn't even come close.
In the UK, when you think about buying a car - you think AutoTrader. And when you think about real estate - you think Rightmove.
The network effects for marketplace platforms are obvious. As a seller you want to go where all the buyers are, and as a buyer you want to go where all the sellers are. Therefore it is natural for enduring monopolies to form.
And the monopoly power of these platforms was reflected in the financials as I saw them in September 2019:-