Revenues of network platforms: can they be expected to follow a growth ‘law’?

Leo Van Hove, Michal Polasik and Radoslaw Kotkowski

Technology in Society, 2024, vol. 78, issue C

Abstract: Recent papers assume that whereas the value of ‘traditional’ communications networks follows Metcalfe's law – that is, grows with the square of the number of users – the value of group-forming network platforms should increase faster. The papers see evidence in the fact that the advertising revenues of platforms such as Facebook and Tencent follow a cube law or stronger. We argue that such tests do not make much sense, as they lack a theoretical justification. Growth laws such as Metcalfe's and Reed's were conceived with purely one-sided networks in mind, reason in terms of utility for users, and have little to say about the monetisation of the value created. The results of the very papers that we discuss show that the laws have no generality. We also provide a counterexample of our own and proffer an alternative explanation.

Keywords: Network platforms; Monetisation; Metcalfe's law; Reed's law; Network externalities (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0160791X24001933
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:78:y:2024:i:c:s0160791x24001933

DOI: 10.1016/j.techsoc.2024.102645

Access Statistics for this article

Technology in Society is currently edited by Charla Griffy-Brown

More articles in Technology in Society from Elsevier
Bibliographic data for series maintained by Catherine Liu ().