August 28, 2009

Metcalfe Was a Pessimist

The value of a network grows at roughly the square of the growth rate of the users. That makes sense for telephone networks—add one more user to a network, and the number of new connections available goes up by the number of existing users.

Classically, this breaks down because the first people to add it get the most out of it. Maybe a phone was crucial for the first few people to use it—but the next phone sold today is probably going to replace an old phone, replace borrowing somebody else’s phone, or complement an existing Skype connection.

But Metcalfe’s law can break in the opposite direction, and I think we’re seing that in social media. In fact, I think we’ll see a lot more of it. Read the rest of this entry »