Many of these data platforms attract users based on other users participating in those networks, a prime example being social media like Facebook, where consumers become mutually locked-into a service. This is reinforced as users share information with one another, which in turn means there is data on those networks exclusive to those data platforms. Metcalf’s Law, named for networking technology pioneer Brian Metcalf, argues that the value of a network increases as the square of the number of users, which means larger networks are exponentially more valuable than even slightly smaller networks, making it extremely hard for runner-ups to thrive in networked industries.[i]
Network effects reinforce market power for already dominant companies in a range of ways.