Network Effect

In 1908, Theodore Vail, chairman of AT&T, observed in the company's annual report that a telephone's value increases with the number of connections — an early description of the concept without yet naming it. Decades later, Robert Metcalfe formalized the idea with Metcalfe's Law (value scales as N²), and economists Michael Katz and Carl Shapiro advanced the economic theory in the late 1980s and 1990s.