Indirect network effects occur when the value of a network increases as a result of one type of node benefitting another type of node directly, but not directly benefiting the other nodes of its same type. Same-side nodes indirectly benefit each other because they create an increased incentive for complementary users on the other side of the network to use the network, which in turn benefits all the nodes on the same side.

For example, in a 2-Sided Marketplace like eBay, the addition of a new seller does not directly benefit other sellers. In fact, another seller just means more competition for all the other eBay sellers. However, because an expanded inventory of goods makes the marketplace as a whole more attractive to buyers, additional sellers end up indirectly benefiting other sellers because of the total increase in potential customers. There's a powerful indirect growth in the value of the network for sellers with every new seller.

OS platforms like Microsoft Windows are another good example of indirect network effects at work. New Windows developers don't directly benefit other developers. However, with an increased library of Windows programs, the number of Windows users will grow. And a greater number of windows users are beneficial for all developers because it increases the pool of potential customers for their programs.

This 1992 NYU paper by Economides and Salop is one of the earliest studies of indirect network effects, which it says is a function of the value of "compatible complementary goods".