How to Calculate the Value of Online Community, plus How Much Does It Invoice?You are setting up a Blog or an ecommerce and are thinking about how to generate revenue through them, right?

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You are riding a Blog or an ecommerce and are thinking of how to generate revenue through them, right?

Have you ever thought that the value of a site goes beyond what he can bill?

What if you created a group, an online community, it is worth even more!

If someone asks you: how to quantify the value of your Facebook page, you will answer that depends on the number of likes , right?

But one can be like “cold” or “hot.”

See this mini video and convert Facebook Likes in Leads  :

Think about Whatsapp or Instagram that were sold to Facebook for $ 19 billion and $ 1 billion.

Both virtually no revenue.

Why that? Because social networking is as good if not produce income?  

If someone wants to advertise the product or service it in your community, he already has an idea of ​​the visibility it will have.

Think of the interest-free TV.

The TV programs presents “free” when in fact won by advertising.

Since the advertiser knows that disclosing their ad, will have a certain estimated visibility.

This goes for any kind of real-world community.

In digital it is simply easier to estimate the visibility of your product

The fact is that when you create an online community , you are creating an “active” as if it were a property, a house that you will build gradually.

And how your home will increase in value as you get to the end of construction, your network will also increase the value as participants are increasing it.

Clearly this concept is not only true for the Blog or Site, but for the entire online community that you can create.

Ideally join in a community only, the various social networks and their channels like Facebook, Twitter, LinkedIn, Instagram, Pinterest, Stumble-upon, Reddit, Quora, etc .

Social networks are structures made up of individuals or organizations that create powerful ways to communicate and share information.

Social networks are important in relationship management with customers and serve as online meeting places for professionals.

Robin Dunbar developed an equation which relates the size of the human brain with the largest possible size of a social group.

As a result he claimed that, for humans, maximum number of people who can be part of a close social relationship is 147.8, or about 150 people.

Dunbar ideas can be taken as an indication that most social networks are networks of “small worlds”.

But how to calculate the value of this asset? How to know how much is the community that you are creating or managing?

value of the online community

Online Social Networks

Different laws have been proposed to determine the value of a social network .

The issue related to the size of the network value is an important issue, both from the point of view of connectivity as business investment.

false and exaggerated estimates of the value of a social network can have significant implications for investors in technology.

Metcalfe’s Law

The value of a communication system grows in the ratio of the square of the number of users of the system

The law of Metcalfe states that the value of a telecommunications network is proportional to the square of the number of connected users of the system.

With the globalization of the Internet, this law was transferred to users and web networks .

Until the explosion of the IT bubble in 2001, it was common to estimate the market value of a social network based on the law of Metcalfe.

Then Odlyzko argued against the law Metcalfe, saying the value a network can not be associated only the size but also the interactions it.

David P. Reed Law

The utility of large networks, particularly social networks, can scale exponentially with the size of the network

Imagine each user as a NODE of a network, network type of fisherman same.

This law is especially used to explain the effects of social networks on the dissemination of information .

Beckstrom’s Law

The value of a network is equal to the aggregate net amount to each user’s transactions through this network, added to all users

Then the value of the network increases with the number of transactions .

According to its creator, this law can be used to evaluate any network, whether social networks, computer networks, support groups and even the Internet as a whole.

He claims that the value of the network adds to each transaction based on the fact that turning off the network, it would generate losses by not lost transactions.

We can compare this concept to a pizza delivery service offered to its customers.

If the pizza delivery service off, the social value generated by their deliveries decreases, and people will want to eat elsewhere.

Zipf’s Law

The value of a network is proportional to the number of users and the logarithm of the number of users

To Zipf it is necessary to consider the interaction between the users to not only their access on the network.

The network is in fact formed by us and, as a fisherman’s net, each node is connected to other nodes.

The more connections between nodes, will be more robust network.

Less connections will weaken the network.

This concept is fundamental to understanding how to work the social networks.

For it is not only important to create interactions with us, but also among the “we” in this case are the users.

We can call these interactions of “rewiring”.

The Zipf’s law is an empirical originally proposed law for words in a large text and states that given a corpus of statements in natural language, the frequency of any word is inversely proportional to their position in the frequency table.

The most frequent word occurs about twice as often as the second most frequent word that occurs twice as often as the fourth most frequent word, etc.

As the number of users is n, the total value of the network is proportional to n * log (n).

Increase the value of the network as a design goal.

So in fact the business model can be aimed not only to create recipe itself, but the increase in the value of the asset.

This for example can result in a “threat” to a virtual community existing, which will then have the obligation to buy it.

Some examples of networks that were bought by the community value created

  • Facebook bought: whatsapp, instagram
  • Google bought: youtube , orkut (now closed)
  • Ebay failed to buy MercadoLibre and negotiated entry into the capital

 summing up

  • By the law of Metcalfe and Reed’s Law the value of the network increases with the number of users, independent of the interactions in the network.
  • By the law of Zipf Beckstrom and the amount increases with the interactions in the network, whether or not transactions.

I would like more details on how to estimate the value of community that you manage or want to create?

Contact with Time NoTopo.