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Social Network Theory and Metcalfe's Law -

Social Network Theory and Metcalfe's Law

“You may hate gravity, but gravity doesn’t care.”

Clayton Christensen, Harvard Business School professor and author ‘The Innovator’s Dilemma’

While the focus of this book is on digital marketing, which by its very nature tends to gravitate towards the newest trends in technology, it can be extremely helpful to step back and realize that technology and marketing do indeed follow somewhat predictive patterns.

These revolve around how human beings view new ideas, join and build communities, consume information and establish relationships with brands.

The Internet at its core is all about serving up connections across a network. It started on the desktop and has evolved to weave itself into the fabric of our daily lives through social media. Platforms for communicating and connecting started with email and have morphed into Facebook and Twitter.

Yet, for all this new technology it still shares some common characteristics that are quite useful to understand and we can look to the emerging field of Network Theory for answers.

Telephones as a way to understand Network Theory

Let’s start with an invention we all take for granted, the telephone. In 1876, Alexander Graham Bell famously cried out, “Mr. Watson, come here! I want to see you!” and with that phrase the telephone was invented. By 1935 the first telephone call around the world was completed.

But how did the technology get adopted?

In the case of the telephone the old joke often goes, “The hardest sell in the world was the first telephone”.

This joke underscores the huge challenge of early user adoption and presenting the benefits of joining a network.

Social Network Theory and Metcalfe’s Law

The telephone can teach us much about how the online world works today by exploring a field of study called network theory and in particular Metcalfe’s Law. (Metcalfe’s Law is attributed to Robert Metcalfe, a former researcher at the famous Xerox Palo Alto Research Center who co-invented ethernet.) [Source]

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).

A phone network is a perfect example to illustrate Metcalfe’s Law. A single phone really just being an end point in a network called a node. (The name comes from the Latin root of nodus, meaning ‘knot’). Obviously, today there are billions of nodes within global cellular networks.

So by punching in a simple phone number convention, we can use our phone to access the network (which we pay for) and connect to another node anywhere in the world. The value of the network to you as a user rises exponentially over time with the number of phones added to the network.

As you can imagine, in the 1930s the value of the phone network was still relatively small given the anemic number of people with access to a telephone.  But over time as the technology was adopted and the price fell, the value rose to the point that the simple telephone was in every home, business, and on every street corner.

Hint: See the parallel with the web and social media?