Metcalfe's law applied to social networks

Description

Metcalfe's law states that the value of a (telecommunications) network is proportional to the square of the number of connected users of the system (n2) [1]. Metcalfe's law has also been said to appy to (social) networking websites. This presents interesting prospects for sites such as Wikipedia, Facebook, LinkedIn, etc. with growing numbers of users each year.

For example, the number of facebook users grew by a factor of 7.5 between 2007 (40 million users 3) and 2009 (300 million users 9). This would suggest the value of the site increased by a factor of more than 50 in two years time.

Enablers

• Reduction of organizational and technological complexity
• Development of informatiion search technologies
• Digital Literacy
• Increasing influence of Millennials
• Increasing use of digital media on internet
• Increasing use of computer-mediated communication
• Increasing user-generated content
• Low cost of Internet Connections
• The Increasing Use of Internet

Inhibitors

• Violence in computer games: this can be extended to (promotion of) violence on social networking sites
• Increasing social isolation
• Governmental/Societal: pressure against the adverse effects of excessive time spent on sociel networking sites
• Governmental/Societal: pressure against cyberbullying/stalking
• Societal pressure against social networking sites based on:
  • Privacy issues: although people can determine the information they post on a social networking sites themselves, privacy issues are raised around the question how secure this information is in the hands of the party that owns/administrates the site
  • The inability of site administrators to effectively deal with abusive/offensive content
  • Censorhip by governments (e.g. Iranian government blocked access to the site during 2009 presidential campaign period)
• Data Mining/data ownership: the large amount of specific user data is valuable for marketeers targeting specific sectors. But is the site administrator the owner of this data?
• Use of social networking sites by government intelligence agencies [11]

Paradigms

The number of users on social networking sites increases daily. For "generation y", social networking sites have become an essential extension of 'offline' social interaction. 67% of the generation y cohort claims to visit a social networking site at least once a day [13]. 'Real life' social phenomena can be observed on these sites (e.g. status, social team formation, social exclusion, online bullying).

[1] As users spend a significant amount of time on these sites, they provide an attractive platform for advertisers and marketeers. Advertisers are primarily intrested in targeting specific users with advertisments [14] whereas marketeers see great value in the data that the user profiles on social media sites offer.

[2] As social media sites become an extension of 'offline' interaction, they can be expected to become more prominent and take the role of a people locator: Facebook/MySpace/Goole Wave/Twitter 'knows' where you are and what you're doing 24 hours a day. Others can follow you and you can follow others on the site or on a mobile application. People will be in touch permanently with the social media site acting as a connector on which you leave a 'trail' of activities which others can follow.

Timing

2006: Facebook launched [6]

2007: Microsoft acquires 1.6% stake in Facebook for $240M, valuing Facebook at $15 billion [4]

2009: Google unveils plans to launch 'Google Wave', its own collaboration and social networking application [5]

Web Recources

1. Wikipedia on Metcalfe's law
2. Bob Metcalfe on his law
3. Microsoft takes 1.6% equity stake in Facebook
4. Google vs. Facebook
5. Google wave
6. http://en.wikipedia.org/wiki/List_of_social_networking_websites
7. http://en.wikipedia.org/wiki/Facebook
8. http://mashable.com
9. Facebook has over 300 million users in september 2009
10. Criticism of Facebook
11. IRS uses social media to track down tax evaders
12. Estimated revenues and advertising spend of MySpace and Facebook
13. http://findarticles.com/p/articles/mi_pwwi/is_200806/ai_n25498258/
14. Behavioral Targeting