- LinkedIn is working to connect 1 billion professionals
- Facebook wants to connect everyone with an Internet connection – that’s 2 billion people and counting
- With more than 7 TRILLION potentially connected devices and products, M2M is an order of magnitude larger!
The sheer size of these companies’ ambitions is driving some pretty astronomical market valuations. Post its recent earnings call, LinkedIn has just passed $10 billion in market capitalisation. Facebook, the real titan of social networking, is flirting with a $100 billion valuation. These valuations are driven by a turbo-charged network effect that is unique to social networking.
First-generation Internet companies, such as Google, Amazon, and eBay, really benefited from the ability to reach large quantities of consumers with no friction. Ask Borders about the consequences of this advantage.
The social networking companies also benefit from this dynamic, but uniquely benefit from the massive interconnectivity that occurs when members of that network bring those we know outside that network into it. Those connections serve two purposes:
- They drive expansion of the network
- They increase the monetisation potential of the network
This double-whammy scale effect, I call the Social Effect.
While investors are excited about social networking, there is another emerging market that demonstrates the same type of network effect that social networking does, but is currently flying under the radar a bit (but not for long!). That market is M2M.
M2M is all about creating a complete cloud-based virtual representation of each and every product made — something I call “Connected Products.” With connected products, we can create “super apps” that not only improve that product, but can also enable the creation of emergent solutions that interact with many connected products. In this new world, each and every product will become a hub of massive activity. My air conditioner will not only play well with my travel calendar, but it also will be aware of the conditions on the electric grid and optimize its behavior based on my preferences and the current spot price of electricity.
LinkedIn and Facebook all focus on the network effects that happen with human activity. With Facebook, we all act as a hub for our own networks of interconnected friends. With M2M, that hub is a connected device or product. With more than 7 TRILLION possible connected devices and products, we are already working with a much larger scope than social networking.
Let’s do a little back-of-the-napkin math: what if 50 billion devices (a popular estimate of M2M connected devices in 2020) were the hub of 100 human and business interactions. That would be tantamount to a network with 5 trillion users. That’s a really big number, and it is only scratching the surface of 7 trillion possible end connections.
A little perspective — that is 2,500 times bigger than Facebook’s market scope of 2 billion connected people. The Network Effect of Connected Products has begun! How are your products leveraging this Network Effect? I’d love to hear your story and vision for 2020!
