›› 2016, Vol. 31 ›› Issue (1): 117-123.doi: 10.1007/s11390-016-1615-9

Special Issue: Computer Architecture and Systems

• Computer Architectures and Systems • Previous Articles     Next Articles

Metcalfe's Law and Network Quality:An Extension of Zhang et al.

Leo Van Hove   

  1. Department of Applied Economics(APEC), Vrije Universiteit Brussel(Free University of Brussels)Brussels 1050, Belgium
  • Received:2015-04-20 Revised:2015-05-28 Online:2016-01-05 Published:2016-01-05
  • About author:Leo Van Hove received his Ph.D. degree from the Vrije Universiteit Brussel (Free University of Brussels), Belgium, and is currently a professor of economics at the same university. His research interests include payment instruments, network effects, e-commerce, and access to finance. He has published extensively on these and other subjects in international journals as diverse as Journal of Money, Credit, and Banking, International Journal of Electronic Commerce, Economic Modelling, Energy Economics, European Journal of Operational Research, and Journal of Media Economics.

Zhang et al. exploited data on Facebook and Tencent to validate Metcalfe's law, which states that the aggregate value of a communications network is proportional to the square of the number of users. This note points out that the value of a social network may be driven not only by its size, but also by increases in the variety and quality of the services offered. I therefore extend Zhang et al.'s approach by explicitly controlling for changes in network quality over time. For the case of Tencent, I also filter out revenues and costs that are unrelated to Tencent's core (social network) services. I find that these two extensions only strengthen Zhang et al.'s conclusions:Metcalfe's law now outperforms the other laws even more clearly.

[1] Zhang X Z, Liu J J, Xu Z W. Tencent and Facebook data validate Metcalfe's law. Journal of Computer Science and Technology, 2015, 30(2):246-251.

[2] Metcalfe B. Metcalfe's law after 40 years of Ethernet. IEEE Computer, 2013, 46(12):26-31.

[3] Briscoe B, Odlyzko A, Tilly B. Metcalfe's law is wrong. IEEE Spectrum, 2006, 43(7):34-39.

[4] Van Hove L. Metcalfe's law:Not so wrong after all. Netnomics, 2014, 15(1):1-8.

[5] Madureira A, den Hartog F, Bouwman H, Baken N. Empirical validation of Metcalfe's law:How Internet usage patterns have changed over time. Information Economics and Policy, 2013, 25(4):246-256.
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