Value of Social Networks

Metcalfe’s law describes the value of a network as being dependent on the number of users that participate in it (and also on an unknown constant of proportionality), and although the wikipedia example is about fax machines, this law could also be applied to social networks (and recommender systems). In other words, there must be some critical mass of users in the system for there to be any value in the system itself: what is this critical mass? Unfortunately it depends on how we define the cost per connection (new user) and value added by each connection. Can this be measured?

This post- written by Metcalfe himself- has a lot of interesting thoughts, including a combination of his law with Moore’s law and Anderson’s Long Tail, to show that as technology evolves, we get more value from less users (or the number of users in a network for the value to exceed its cost halves every two years!)

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