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The Network Effect

June 17, 2011

Why is social networking via web so effective as compared to snail-mail, email, TV or phone? The reason lies in the structure of network and connections it allows to form (see the plot below). Take for example television network , it’s a one-to-many type of network and the number of possible connections such a network allows depends on how many people own/watch TV. Such networks are like one-way traffic where users don’t have any capability to interact with other users in the network system. So basically it’s networking capacity scales as a function of N, where N is the number of people (Sarnoff’s Law). Emails and phones allow multiple connection possibilities between people in the network which scales as N^2-N (Metcalfe’s Law). Social networking is just completely another beast which expands exponentially with the size of people in the network as 2^N-N-1 (Reed’s Law). Social networking allows formation of groups and sub-groups and there lies the immensely powerful network effect. In a group of N people, you can from 2^N such groups and thereby the potential networking capacity increases exponentially. That’s what Facebook and other social networking websites are trying to capitalize on. How strong are these networks and connections, that’s a different story and will be subject of my other post sometime later.

Top image credit: Facebook | Paul Butler

Filed under: Trivia


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