Metcalfe’s law is a mathematic formula for measuring the value that a communications network has. It was developed by Robert “Bob” Metcalfe, an electrical engineer who became a pioneer of Web technologies.
Metcalfe’s law pits the success of a communications network on the number of users. More specifically, this law holds that the network value grows exponentially as the network accumulates more users. Metcalfe first formulated the law in regard to Ethernet — a local area networking (LAN) technology that he and researcher D.R. Boggs invented. This technology links personal computers, but it can be applied to the Internet in general, to Web 2.0 technologies, or to any number of telecommunications networks (telephones, fax machines, etc.) where cross-connections are necessary for the network as a whole to have value.
For instance, a social networking site with only one registered user would essentially be useless. If 100 users sign up, however, it becomes more attractive and beneficial for each individual user. If 1,000 people sign up, even better. The more people who join, the more useful, enjoyable or valuable the site becomes.
Expressed mathematically, Metcalfe’s law states that V = n2, where V stands for value and n stands for the number of users. Metcalfe first illustrated this concept in a 1980 slideshow presented to early Ethernet adopters; it was brought to the public’s attention in a September 1993 Forbes magazine article written by George Gilder.
Over the past two decades, Metcalfe’s law has become somewhat controversial, especially in recent years. Some have claimed Metcalfe’s law is outright wrong; others say it is simply misunderstood.
Since his original conception, Metcalfe has clarified several points. He has added that when Metcalfe’s law is applied to social networks (and thus social networking sites like MySpace, Facebook and LinkedIn), it is not just the number of users that must be considered but also the affinity between users. He has also pointed out that the law works best when applied to smaller networks and loses value when concepts like "connected" and "value" cannot be quantified.