Metcalfe’s “law” has become the normie basis for valuing social networks. Robert Metcalfe conjectured that the cost of a network is proportional to the number of nodes N, but the network’s value is proportional to the squared number of nodes N^2. In human, he figured that networks tend to exhibit massive economies of scale when connections to other users matter more than connections to a mainframe (example: telephone v. electric grid). A common way to translate this intuition into a metric is to take some function of the possible unique directed connections N^2-2 as the “natural” upper limit to a network’s value. There also are many empirical ways to measure network connectivity all the way down to digraphs, cluster maps and node valences. The core use case for each of these valuation metrics typically is derivative of the insight behind Metcalf’s law. They rely on counting nodal links (even if those are repeat connections over time). Such metrics and ideas made Google and Facebook possible – and dominant. They also put them to sleep in the bed of Procrustes. Waking Up to Value Counting nodes, clicks and likes is easy. Grasping value is difficult. Remember print and TV? Using Metcalfe’s law to measure the value of a social network is the digital equivalent of print media’s charging advertisers on the basis of circulation and placement. Social networks which substitute nodal metrics (including “engagements”) for value will earn old media’s fate. Yet, that is the path of least resistance, and some are taking it. Take the path of most resistance. Success and contentment are built on this simple rule. — sᴛᴀʀᴛᴜᴘ ᴅᴀᴇᴍᴏɴ (@startupdaemon) 2017-11-18 Social monetizes network value through “eyeballs” (clicks, impressions, purchases etc.) and “meta” (what the company knows about users’ habits and identities). Eyeballs are easier to monetize. They … Continue reading Chancing, Value and Death on Social Networks