Monday, July 28, 2008

Metcalfe's Law is Wrong?

A more reasoned argument for valuing network connections as they scale, challenging both Metcalfe's Law of exponential growth of network value, and Reed's Law of the value of Group Forming networks like Ning, Facebook, MySpace and YouTube.

What does this say about BJ Fogg's exploration of Massive Interpersonal Persuasion on Facebook? Does Facebook's virality challenge the author's views of the returns to scale of networks. BJ seems to argue that Facebook follows Reed's law.

Lots of money was lost in the dotcom bust when entrepreneurs and venture capitalists overvalued network scale effects - the concept of "the more eyeballs, the more potential value" proved to be fool's gold.

Link from John Maloney on the ValueNetworks google group. Illustrations by Serge Bloch.

IEEE Spectrum: Metcalfe's Law is Wrong

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