Sunday, January 16, 2011

Metcalf's Law and The Network Effect

Metcalfe’s law says that the value of a network is proportional to the square of the number of users. For instance, this law means that if a person has a cell-phone and no one else has it in the world, then the cell-phone does not have any value because the person cannot get any benefit from it which is communicating with other people around the globe through using the cell-phone.

Network effect is a number of those people who get benefits from the same product that they use, and the value of the product grows as more people use it. For instance, we can use the above example. The group of people who use cell-phone, and they communicate with each other and get benefits for themselves and give benefits for the other is called the network effect.

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