Reverse Network Effects: Can a network become too big?

From the eBay case study that we examined last week, the advantages of network effects are clear. The more people who join the latest social media site, the more new people want to join to be with their friends…so on and so on. Clearly, network effects are very powerful. All we have to do is look at how quickly Facebook overtook Myspace. A Bloomberg Businessweek article says that Myspace, from December 2008 (the peak of Myspace) to May 2010, “lost, on average, more than a million U.S. users a month.”

However, Metcalfe’s Law (the value of the network is equal to the square of the number of users) may not be exponentially sloping upwards towards infinity forever.


There may be such a thing as reverse network effects. Some networks may actually start to lose value as they grow because they get too big.  In an article by Sangeet Paul Choudary, he examines the possible reasons for this decrease in value.

( Two of the major sources that he associates with negative network effects are connection and content.

The connection source is when “new users joining the network lower the value for existing users” (the exact opposite intention of the network).  The examples he cites for this occurrence include dating service websites, as women become increasingly harassed and stalked as these sites increase in size, as well as ChatRoulette, which quickly went from an innocent random video chatting site to becoming know for its obscenity.  Fake profiles on different have also contributed to this problem.  Sometimes networks connect us with the people whom we may rather not be connected.

The content source arises when the methods of editing content on social networks break down as the size of the network increases, as each new user represents a new content poster. The double-edged sword of technology is in play here, as one of social media’s strength, the ease with which content can be posted, turns against itself when it comes to keeping content from a large group of users under control.  Typical methods for editing content, like rating YouTube videos or flagging Facebook posts, do not always scale with the size of the network.  As more people become apart of the network, these methods have to be able to handle more and more unsuitable content.  Another content problem arises results when it becomes increasingly difficult for users to personalize the content they receive.  As we friend more and more “friends” on Facebook (more casual acquaintances), or as networks allow more marketing/app related posts, we become bombarded with irrelevant and undesired information.  Facebook feeds or twitter pages become oversaturated with information and make it more difficult to keep in touch with the people that we actually want to keep to interact with.  This conflicts with the very purpose of social media in the first place.

We saw a potential example of a large network not being able to edit unsuitable content just over the last few days: (start at 3:15)

Additionally, how many of you were victims of misinformation when social media networks exploded with information during the last week in regards to the Boston Marathon suspects?  This family was:

Clearly, network effects can work in reverse.  As networks gain more and more users, and consequently handle more and more content, the value that they once provided can be jeopardized.  Large networks must be scalable in order for their value to continue to increase.  If not, they will only become bogged down, overwhelming, and obsolete, opening the door for a new network to experience the gains of network effects.


4 thoughts on “Reverse Network Effects: Can a network become too big?

  1. Pingback: One of the Many Heroes in the Boston Marathon Bombing – Technology | MI021 Class Blog

  2. This was a great extension of what we discussed in class on network effects. I like how you talked about the difficulties companies face by having more users who cause a greater need for supervision over what is suitable to be posted on social media sites. Your point about Facebook also relates to Prof. Kane’s comment in class about his students disliking the Newsfeed addition. This changed the Facebook interface and created a stream of activities of other users, but some of these “friends” are acquaintances, or have never even been met before, depending how lenient you are with accepting friend requests. I think reverse network effects can be just as crucial for a company to address, and perhaps even more important that typical network effects. Consumers can be turned away from certain products and services if they believe they are not trustworthy, as in the case with the rumors being spread via Twitter about a suspicious package in St. Ignacius on Marathon Monday. While companies cannot filter all information and certainly can’t judge whether news is true or not, it is definitely something to consider in situations where they can make an impact.

  3. I completely agree with your assessment of network effects. So many of the latest and greatest social media sites, such as myspace, chat roulette, and soon snapchat, have divulged into venues for people to be anonymously perverted. Even on the most popular social media site, Facebook, I find myself going on less and less because it’s an information overload of information I don’t want. In the end network effects are very powerful but we shouldn’t underestimate the power of reverse network effects.

  4. This is a great blog post! It’s really relevant considering the recent problems with social media after the bombings-i.e. crowdsourcing the bombing. I also think this is a pretty unique perspective on social media considering that usually people stand by the idea of network effects. I will be interested to see if this will ever happen to Facebook.

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