The 50% rule states that, if the probability of finding an exact match for a request approaches 0, one third of all memory partitions are holes and two thirds are occupied blocks. Formally, n = 0.5 m, where n is the number of holes and m is the number of occupied blocks.
The 50% rule only refers to the number of holes but not the amount of space occupied by the holes. If the average hole size is equal to the average occupied block size then 1/3 of memory space is wasted. But a smaller average hole size implies better memory utilization since less memory is wasted on holes.