…However, the third is the most powerful. Firms that achieve scale in a Reed model capture the most value from the network

Number of Users

~2N

REED

METCALFE

SARNOFF

~N2

Value of Network

Based on number of potential interconnections

Total Network Value = aN + bN2 + c2N

a=20, b=5, c=1

The Value of Facilitated Venues...

This value is realized and shared by members and the host. To maximize network value, firms must increase the “c” coefficient of the network value equation

Best Content(Increase a)

Most Members

(Increase N)

Best Facilitation

(Increase c)

...Dominates Network Value as Users Increase

The

Winners