A New Network Value Framework

1
A New Network Value Framework

• Developed by Todd Huotari
• BBUS 489 Digital Business Lab
• Presented May 15, 2006

2
Agenda

• Introduction
• Overview of Current Models
• Network Value Growth Inhibitors
• Short Messaging Service (SMS)
• New Network Value Framework
• Conclusion

3
Introduction

• Networks are valuable
• Increased levels of communication
• Models relate growth of value as a function of
  user base
• Networks are dynamic
• Need a framework that encompasses all

4
Overview

• Sarnoffs Law
• Proportional to audience size (Value N)
• Metcalfes Law
• N2
• Reeds Law
• 2N
• N log(n) Rule
• Takes into account inhibiting factors
• Individual Utility Rule
• Value Proportion of adoption Total users
  adopted Probability that a user of one base
  will call a user of another base

5
Individual Utility Rule
6
Network Value Growth Inhibitors

• Saturation
• All resources are available
• Cacophony
• Too many talkers, not enough listeners
• Contamination
• Spammers, stalkers, etc.
• Clustering
• Formation of groups and staying within them
• Search costs
• Harder to find what you need

7
Inhibitors (cont.)

• Differentiation among providers
• Outdated technology

8
Short Messaging Service

• Text messaging
• Uses frequency that voice communication doesnt
• First commercial message sent in 1992
• 1995 avg user sent 0.4 msgs/mo
• 2004 30-50 msgs/mo (Europe)

9
SMS Value Inhibitors

• Ability to cripple entire metropolitan networks
• Jam for several minutes through repeated message
  sending to multiple network users
• Ability to cripple entire regional networks
• Same, but larger scale
• Targeted attacks
• Maliciously obtain and/or delete information from
  phones, impair SMS ability, kill batteries
• Network contamination
• Spam, phishing, viruses

10
New Network Value Framework
11
Conclusion

• Implications for Reality
• Provides framework
• More realistic
• Better estimations and risk analysis
• Avoid inhibiting factors
• Understand that new technologies may be developed
  and prepare for death of current network
• Shortcomings and Areas for Further Research
• What happens between the arrows
• Mathematical model
• NW A B C D