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Twitter and Network Effects April 13, 2009

Posted by HubTechInsider in Social Media.
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Image representing Twitter as depicted in Crun...

Image via CrunchBase

Metcalfe’s Law: The value of a network increases in proportion to the square of connections in the network.

It is amazing how many people are out there who still don’t “get” Twitter. Twitter is the most perfect example yet of a medium created for and by network effects.

Guy Kawasaki, former Evangelist for Apple Computer, has called Twitter a “weapon”.

If you can’t quite understand how yet, here is something you might not have thought of:

Did you know a 10,000-person reach FM radio station in a town of 200,000 people is worth $3-15 million?

Now compare that to the list of 100,000+ people (“followers” in Twitter parlance) on Twitter that many celebrities, social luminaries and internet gurus have amassed.

Twitter recently passed Digg in popularity. Since January 2009, Twitter has grown by 1600% in the USA. The growth is exponential each month. Celebrities worldwide are flocking to Twitter.

Twitter is surely big now, but it’s going to be huge. How do I know this?

Look around… watch CNN or FoxNews… these mainstream media outlets are pushing their Twitter accounts onto the viewers. It makes Yahoo’s home page when NBA stars get caught Tweeting during halftime of their games.

In effect, the mainstream media is turning Twitter into the new mainstream media.

But…if you’re not famous, chances are you’re going to get lost in the shuffle on Twitter. Twitter has even rigged it so that these famous people and businesses get even more followers by putting them on a “suggested followers” list for newbies that are just getting started on Twitter.

A few people have offered $100,000 – $250,000 a year to be on that suggested users list. Why pay that kind of money? Because being on that list gets you thousands of new followers daily. So what does that tell you? It should tell you that there’s a lot of money to be made by having a large following on Twitter.

Earlier this year, Jason Calacanis, founder of the search engine Mahalo, offered to pay Twitter $250,000 to place his account on the recommended users list. He later claimed he was “half joking”, but he maintains the investment would have paid off. He calculated that the placement would have steered 5MM to 15MM new followers to his account within two years and that many would have navigated to his web site from there:

“If 10% click on a link once a month…you have about 1 million visits a year…I’d pay $.05 for a follower.”

Calacanis contends that lots of businesses could benefit from such large followings. As an example, an airline such as JetBlue could perhaps offer a discount to the first 1,000 Twitter responders and “never have another empty seat.”

Getting back to my radio station example above: in a lot of ways, a large Twitter following is way more powerful than that radio station’s listener following. Seriously think about that because Social Media is EXPLODING and you need to get in on the ground floor and ride the wave up.

Like any network, you get out of Twitter what you put into it. If you don’t build up your following, or network – your tribe, then you won’t get much out of it. If you engage your following, respond to them and in general, show them that you truly understand how to use this new social networking platform and communications medium, then you will begin to reap the rewards of network effects.

Some definitions I found of “Network Effects”:

– In economics and business, a network effect (also called network externality) is the effect that one user of a good or service has on the value of that product to other users.

– The phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters.

Want to know more?

You’re reading Boston’s Hub Tech Insider, a blog stuffed with years of articles about Boston technology startups and venture capital-backed companies,software developmentAgile project managementmanaging software teams, designing web-based business applications, running successful software development projectsecommerce and telecommunications.

About the author.

I’m Paul Seibert, Editor of Boston’s Hub Tech Insider, a Boston focused technology blog. You can connect with me on LinkedIn, follow me on Twitter, even friend me on Facebook if you’re cool. I own and am trying to sell a dual-zoned, residential & commercial Office Building in Natick, MA. I have a background in entrepreneurshipecommercetelecommunications andsoftware development, I’m the Director, Technical Projects at eSpendWise, I’m a serial entrepreneur and the co-founder of Tshirtnow.net.


1. How to expand your professional network on LinkedIn « Hub Tech Insider - June 3, 2009

[…] or “Network effects”, in much the same manner as I have written about regarding Twitter. A large network allows you to see deep within organizations, check out potential employers, […]

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