Comments on: Metcalfe’s Law, Meet Market Reality

By: Anonymous

Anonymous — Wed, 01 Feb 2006 17:08:43 +0000

Yes.. I agree ..8

By: Om Malik’s Broadband Blog » SkypeBay done for $4.1 Billion.

Om Malik’s Broadband Blog » SkypeBay done for $4.1 Billion. — Mon, 12 Sep 2005 15:16:19 +0000

[...] A few months ago, I wrote, Mr. Metcalfe Meet Market Reality – a piece that highlighted that eBay’s natural growth days might be over. This is proof the company, which is floundering a bit, is looking for new markets. I don’t think this is as much about voice as it is a quest to get a new set of users. Also what does it say about eBay – the company that buys Skype after Yahoo, Google and others had passed on it? [...]

By: Bill Hartman

Bill Hartman — Sat, 06 Aug 2005 01:17:43 +0000

Work the numbers here. If a network triples in size, it becomes 9 times as valuable, the square. But if it grows slowly compared to the existing size, it increases in value at essentially twice the number of nodes added (1% increase in size means 2.01% increase in value), which is multiplicative. Not so great, but hey, each addition adds twice its cost, so the whole gains twice the value added. More important, each 1% addition is 101 times as valuable FROM ITS OWN PERSPECTIVE than if it were to be created as a separate network instead. So the economic incentive to join the network is larger for a large slowly growing network than a small quickly growing one, unless one presumes that the small one will eventually outgrow the large one. Which is to say the attraction to join should continue to increase, not decrease, when growth becomes less extreme.

By: VoIP Blog - Rich Tehrani

VoIP Blog - Rich Tehrani — Wed, 30 Nov -0001 00:00:00 +0000

eBay and Google

Om writes about eBay missing it’s numbers and how it is possible that the ever-expanding network of buyers and sellers could be tapped out. We may have hit a growth wall with this business model. And while Om could be…

COMMENT: AUTHOR: Henrik Torstensson

It should be noted that eBay beat its financial goals of 32 cents/share in profit, but missed the analysts’ consensus of 34 cents/share.

I think this says more about the valuation of the leading Internet companies than the validity of Metcalfe’s Law. The underlying value of the network effetcs eBay enjoys does not fall by 20 percent when the network grows 40 percent or so. The valuation might could change though, as it has.

COMMENT: AUTHOR: Om Malik

Oh I agree with you - the validity of metcalfe’s law as a theorem is not even in doubt. what i am thinking here - thinking out loud is that if there is an economic limit to it, especially when applied to high growth business models like ebay. forget what analyst expectations are - the fact is that they forecast a slower 2005. which tells me the growth is petering and they might have met the limits