Silicon Valley tends to get quite excited about “network value” . Eyeballs, social networking and even PayPal. In India Metcalfe’s law is not popular. See http://en.wikipedia.org/wiki/Metcalfe’s_law. Can Metcalfe’s law help Indian entrepreneurs create elephants ?
Building company value is not just about revenues and breakevens. Baazee was bought by eBay for $50 million even though it was losing money. eBay paid a huge amount for Skype. Is eBay crazy and headed for “value destruction” or are they enhancing network value.
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Smart Mobs argues that ebay is on an even higher growth curve, represented by Reed’s law. So whereas in traditional networks, the value of the network is quadratic to number of nodes, for social networks it is exponential (because there are exponential number of possible groups) — am not sure if that actually happens, but if it does, the value must grow pretty fast!
Even if this works only to justify the huge valuations being paid for some of these businesses 🙂