Andrew Chen has written an interesting article titled How to design successful social products with 3 habit-forming feedback loops (2400 words). If you are interested in social networks/social products and their business model, you should read the article.
Chen explains that three feedback loops drive the success of social products:
- A feedback loop that rewards content posters when they push new content into the network.
A feedback loop that rewards passive content consumers with relevant and valuable content.
A feedback loop that rewards (and culls) connections within the network.
When the tree loops act in harmony, the players in the ecosystem produce and consume valuable content for the network. When one loop starts to fail, reverse Metcalfe’s Law1 goes into effect, leading ultimately to network collapse.
Innovation in social networks, Chen explains, can come from looking at each loop in isolation, and adding a twist in content creation, consumption, or how people are networked. (Think, for example, in recent products like Secret.)
Bob Metcalfe, the inventor of Ethernet and co-founder of 3Com states that the value of a network is proportional to the square of the number of users of the system (n^2). Applied to social networks, the idea is that every new user in the network connects with every current user, increasing exponentially the number of interactions between the users of the system.
The inverse Metcalfe’s Law simply states that every time a user leaves the network, the network value for the rest of the users decreases exponentially, not linearly. ↩