Big Tech - Platforms

Internet platforms have (at least) two quite distinct sets of customers. Google, Facebook etc. need to please both advertisers and readers.  Uber needs to please both drivers and passengers.  Hotel booking sites – and Airbnb - need to please both providers and guests. Spotify needs to please both musicians and their audience.

Economists say that these are ‘two sided markets’ because they can choose whether to seek income from the content provider or from the public.   In effect, one side usually subsidises the other.

These platforms can cause a number of problems which might need a regulatory response.  

1. It doesn’t always happen, but there is a strong tendency for the ‘winner to take all’ and create a monopoly.  Once there is an obvious ‘go to’ and free supplier, it can be very hard for competitors to force their way into the market.  And the big guys will generally seek to acquire any lively and threatening start-ups – and then either absorb or kill their technology (unless the competition authorities take firm action to defend them).

(The classic example was Facebook’s acquisition of Instagram for $1 billion.   Also, as a frequent user of Booking.com, I was surprised and concerned to learn that its parent company, Priceline, also had an online travel business in America as well as owning Kayak, OpenTable, Rentalcars.com and others – and insisted that customers should allow their data to be shared around the whole group.)

2. Their strengths derive from the power of their algorithms – which are commercially highly sensitive and sometimes rather creepy – and their control of ‘big data’ – creepier still.

3. And they all too often appear to expose their users to risks from which more traditional outlets typically protect their customers:

But … there are plenty of reasons to be careful before reaching for regulatory weapons.

 

Martin Stanley

Spotted something wrong?
Please do drop me an email if you spot anything that is out-of-date, or any other errors, typos or faulty links.