Metcalfe’s Law Rules OK

This morning’s Observer column:

There are two paradoxical things about Twitter. The first is how so many people apparently can’t get their heads around what seems like a blindingly simple idea – free expression, 140 characters at a time. I long ago lost count of the number of people who would come up to me on social occasions saying that they just couldn’t see the point of Twitter. Why would anyone be interested in knowing what they had for breakfast? I would patiently explain that while some twitterers might indeed be broadcasting details of their eating habits, the significance of the medium was that it enabled one to tap into the “thought-stream” of interesting individuals. The key to it, in other words, lay in choosing whom to “follow”. In that way, Twitter functions as a human-mediated RSS feed which is why, IMHO, it continues to be one of the most useful services available on the internet.

The second paradox about Twitter is how a service that has become ubiquitous – and enjoys nearly 100% name recognition, at least in industrialised countries – could become the stuff of analysts’ nightmares because they fear it lacks a business model that will one day produce the revenues to justify investors’ hopes for it.

They may be right about the business model – in which case Twitter becomes a perfect case study in the economics of information goods. The key to success in cyberspace is to harness the power of Metcalfe’s Law, which says that the value of a network is proportional to the square of the number of its users…

Read on

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