What Is Metcalfe's Law?

A network's impact is the square of its nodes. Let's break that down. If you have ten nodes, that means you have 100 potential relationships. That's many people to make happy. Metcalfe's Law, known as "the network effect", describes the value of a network in which the more nodes or users there are in the network, the higher its value becomes. The idea is similar to how a business grows and becomes more valuable with more customers, eBay may not have had the best auction website, but it had the most users (more than any competitor). Because this is so difficult to replicate and powerful for driving out competitors, it increased their value as a company. Metcalfe's Law has been applied to many networks, including social media sites like Facebook or Twitter. For example, when Facebook started, it had only about 10 million users and was already worth billions. It would seem strange to look at each user individually and then multiply that by 10 million: each person has little value individually! If you start looking at how these people interact with one another within this networked system, then suddenly, everything changes. Suddenly, hundreds of millions of interactions increase in value as more people join. Metcalfe's Law is a simple formula that predicts how the value of a network grows with the number of users on it. It was initially used to describe the importance of phone connections, but its applicability to the Internet has become apparent as more people use it. The Law was first put forth by Robert Metcalfe, who co-invented Ethernet in 1973 and founded 3Com Corporation in 1979. The Law is known as "the power two," or 2^n, where n represents the number of users on a network. The Law states: "The value of a telecommunications network is proportional to n^2. " In other words, each new user adds value to your network. For example, if you have ten friends on Facebook and each invites ten friends, you will have 100 friends total, a 100x increase over your original ten friends! This concept works for social networks like Facebook and LinkedIn, as well as email lists and other forms of communication.