Network effects- what on earth are they?

Earlier in the year, we were asked to look at network effects. Network effects, which are also known as Metcalfe’s Law, happen when higher sales of a product, or a service, increase its value and therefore make further sales. One of the simplest examples is the telephone network. There would be no point in owning the only telephone in the world, because you would have no one to talk to and the equipment would be useless. If a few hundred people had telephones connected to the same network, then they would start to become useful. Another example would be the internet, where thousands of people connect to the same network, creating a valuable business market. Direct network effects occur if the user’s act of adopting a good encourages other people to adopt that good, and so on, branching out. Indirect network effects arise if adoption is complementary because of its effect on a particular market. For example, users of hardware or software may gain when other users join them, not because of any direct benefit, but because it encourages the provision of more and better software, such as torrent sites like the popular Pirate Bay or a torrent such as Limewire.

One of the best examples of network effects in the media is the VHS. Once VHS video tapes gained the significantly greater market share than the old Betamax, the latter disappeared. However, DVDs have now come taken over, and VHS has sadly disappeared off the shelves. Recently though, we have seen Blu ray creep into our shops, probably coming to replace DVD’s just as DVD’s did the VHS. The rate technology is developing; it won’t be long after that until a brand new one is created.

Metcalfe’s law describes how more users increase the value of a network, which would explain the uprising of Facebook and the downfall of MySpace, as discussed in a previous blog entry. Twitter is now attempting to take the lead. When a new Twitter user talks to an existing user, it creates value to the old user, and if Twitter adds a new application, more people will join that application, making it more popular. This is network effects being put to use in our every day lives, and yet few know what network effects mean! I know before I took this class, I didn’t!

In conclusion, Network Effects are a useful tool in media society. They support media trends, and fuel business networks. Without them, business would probably crumple, as they are the hidden framework to our economy.

Second Life and virtual worlds

For an inside look on virtual worlds, we were asked to create a Second Life account online. Second Life is a place where people create human like figures called Avatars and use them to explore a computerised world where you can interact with other people from all over the world. It was created in 2003 by Linden Labs, and Jonathan Richards from The Times said that it “has become synonymous with what many believe will bring about the next wave of technology innovation: ‘the 3D internet’”. There have been many attempts at online virtual worlds, such as Coke Music (2002), Habbo Hotel (2000), and Virtual Magic Kingdom (2005), but ones such as Second Life and the popular World of Warcraft have set the standards much higher for graphics and online activities.

Many people flock to virtual worlds to get away from their everyday lives, like a holiday for the mind, but some tend to go too far. They can go so far that it would appear that a virtual world is their everyday setting, and reality is the holiday. While this seems like I am taking the extreme angle on this one, I have seen what a virtual world can do to a person’s social life if the user buries them self too deeply into it. Because anybody from around the world can access them, virtual worlds are full of new people- people who do not know a thing about you. The allure of creating a new identity attracts quite a few, especially those that are unhappy with their current identity in reality. My brother is quite addicted to World of Warcraft, and it has gotten so bad that he barely leaves the house anymore and often doesn’t acknowledge that a person has spoken to him because he’s too absorbed in the game. But, because he has so many friends just like him online, he doesn’t seem to feel the need to return to the real world, and believes that his loved ones just nag at him for no reason. So it seems that, quite ironically, the virtual worlds created to get a person more in touch with society and to venture out globally has in fact done the opposite and encouraged people to sit at home alone in a room, with no actual social contact.

I tried to understand what the fuss was about, so I created a Second Life account for class, and gave the account a test run. While at first it seemed fun tweaking the Avatars appearance, over an hour n a half later I grew frustrated. Why did there need to be so many options to change the angle of this Avatars eyebrow or nose etc? I set myself the challenge to attempt to make my Avatar appear as much like myself as possible, but I cannot deny that the desire to change a few things crossed my mind more than once. Out of all the people I asked, none had decided to make theirs like themselves, simply because no one is completely happy with the way they look, and we would all like a little control over how we appear to others. I could now relate to my brothers desire to create a new person, but I was still at a loss to what I should do in this new world. My class mates and I explored the Second Life world, but found very few people willing to have a normal conversation- one even asked my friend for online sex. This reminded me of the risks of creating a virtual world so open to the public- anyone could pretend to be any age or gender, and could easily lure in younger and more naive people, maybe even children. My cousin is only 9, and he goes on World of Warcraft often. Any member of the public could approach him and take advantage, maybe even try and meet up with him in real life. This is a worrying issue, and while these worlds may appear great fun and open up social gateways, we cannot forget that sexual predators are out there, and will take advantage of any device which allows them easier access to their prey.