OK, I admit it:  When first I saw the title of Sean Parker’s session at Web 2.0 today, I immediately thought HARDWARE.  After all,  “The Rise of the Network Company” initially seemed to suggest IT infrastructure, switches and routers,  and all the geekiness that lurks inside those stuffy data centers.

But this is Web 2.0–and Parker is the guy who co-founded Napster and Facebook before his 28th birthday.

Parker’s definition of a network company isn’t Cisco.  It’s Twitter, Apple, eBay, Facebook, and other organizations that understand the value of networking people.

Parker began his 10 minute talk with the assertion that Google won’t determine the future of the world, because collecting data is less important than connecting people.  He cited Metcalfe’s Law, which states that the value of a communications network is proportional to the square of the numbers of connected users in the system.   By this measure, a network company is only as good as the number of connections it facilitates.  Sound familiar, Facebook addicts?

While the first phase of the Internet was all about data–compiling it, searching it, organizing it, and analyzing it–Parker argues that the next phase is about building connections between people and things.

In the course of his discussion, Parker called out eBay, AOL and Craigslist as examples of his belief that groundswell makes big network companies even bigger, until they dominate the market completely.  And the best products don’t always win.  As the larger players drive out competition, organizations get too comfortable and stop taking risks.  Though Parker didn’t explicitly say what this dynamic means for innovation, his message was clear that a lack of competition doesn’t exactly foster excellence.

Parker’s real point today was that the new economic value on the Web isn’t Search–it’s establishing connections.  Here at Kosmix, we take a similar view that connecting ideas and putting things in context is inherently valuable.  We give people an easier, more visual way to explore topical information on the Web, and we also help you understand how different people, places and things relate to each other.  Our acquisition of Cruxlux this week gives some indication about the role connectedness will play in our overall Kosmix roadmap.

As Parker concluded his comments today, I suddenly found the words of British novelist E.M. Forster ringing in my ears.  “Only connect!,” he wrote in Howard’s End nearly 100 years ago.  “Live in fragments no longer.”