Metcalfe's Law

“The systemic value of compatibly communicating devices grows as a square of their number.” —Robert Metcalfe, “Metcalfe’s Law Recurses Down the Long Tail of Social Networking”, 2006-08

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From The Cold Start Problem: How to Start and Scale Network Effect:

Originally formulated in the 1980s by Robert Metcalfe, an early computer networking pioneer, this theory defines the value of a network as a mathematical function based on the number of connected devices (fax machines, telephones, etc.). It was originally derived from Metcalfe’s experiences selling Ethernet, a pre-internet computer networking protocol. …

However, with the benefit of hindsight, it’s not clear why Metcalfe’s Law ought to apply to building internet websites.

Metcalfe’s Flaws:

Metcalfe’s Law leaves out important phases of building a network, like what you do right at the beginning when no one is using your product. Nor does it consider the quality of user engagement, and the multi-sidedness of many networks—buyers and sellers, for example. Nor the difference between “active users” versus just people who have signed up, or the degraded experience of a product as too many users start to overcrowd a network. This is far beyond the simple model of “more nodes is better.”