Читать книгу Regulating Platforms - Terry Flew - Страница 22

The internet was generally seen as unleashing a new wave of innovation and entrepreneurial activity, with digital start-ups challenging incumbents in a range of industries, including the media. The boom in the technology stock index of the National Association of Securities Dealers Automated Quotations (NASDAQ) and the success of initial public offerings (IPOs) of companies such as Netscape (1996), Google (2004), and Facebook (2012) contributed to the sense that the digital age was one associated with a new form of capitalist market economy. The rise of the internet was seen as part of the ‘fifth long wave’ of capitalist development, also known to us as the information age or the informational technoeconomic paradigm.

This position was related especially to Manuel Castells’s concept of a network society (Castells, 1996), but it also drew upon the literature on technology and innovation associated with authors such as Christopher Freeman and Carlota Perez (Freeman, 2008; Perez, 2010), who were in turn inspired by the Austrian economist and innovation theorist Joseph Schumpeter (McCraw, 2007). Perez argued that technoeconomic paradigms are distinct from simple clusters of technological change, as they involve transformations not only in systems of production and forms of consumption but also in cost structures, new spaces for entrepreneurial activity, and institutional and organizational forms (Perez, 2010, pp. 191–7). Such paradigms are marked by significant innovation, but also by considerable disruption, until such time as ‘the new TEP [technoeconomic paradigm] becomes the shared, established and unquestioned “common sense” both in the economy and in the socio-institutional framework’ (p. 199). The movement of a technological innovation trajectory is shown in Figure 1.2.

Figure 1.2 Trajectory of a Technological Innovation. Source: Perez, 2010, p. 187.

As the fifth long wave placed information and communication technologies at the forefront of globally networked economies, it is not surprising that many of the biggest impacts were felt in the information, media, and communication industries. As the internet had core elements such as the proliferation of information available to networked users at minimal to zero cost, radically decentralized models for the production, distribution, and circulation of digital media content, and horizontal or peer-to-peer communication at multiple scales through easy-to-use social media platforms, it was seen as a natural platform for disruptive innovation (Benkler, 2006). In the media sector, to take an important example, these new digital communications ecologies were highly disruptive of traditional media industries, as they were typically reliant on copyright-based business models, monopolies or oligopolies at a defined geographical level (e.g. local or national newspaper and broadcast media industries), and the credentialed expertise of professional media content creators such as journalists, photographers, filmmakers, and so on. The internet offered the basis for a ‘pro-am revolution’, setting the stage for new forms of competition between the incumbent media industries and those that promoted user-created media content (Shirky, 2008, 2010).

If we place the initial phase of the fifth long wave in the 1970s and early 1980s, as Castells, Perez, and others do, then we can see the 2010s as marking its last phase. This does not mean that the technologies or businesses that exemplified it simply disappear: automobiles remain vitally important as an emblematic fourth long wave industry, as do railways as a third long wave sector. But two characteristic features of the latter stage of a long wave are the growing concentration of ownership and a decline in the amount of innovation; and we can find evidence for both in the ICT sectors.

Evidence of the growing concentration of ownership and control can be found on a variety of indicators and across markets such as social media, search, apps, software, e-commerce, and digital advertising. These sectors have come to be increasingly in the hands of a small number of digital technology giants. In the global search market, Google accounted for 88% of all search in 2019; its market dominance went largely unchallenged for a decade, Microsoft Bing being second, with 5% of the market, and Yahoo, Russia’s Yandex, and China’s Baidu having less than 3% of the global market (Clement, 2020c). In the social media sector, 2.8 billion people used at least one of Facebook’s social media services each month, and in August 2019 2.2 billion used them every day (Clement, 2019). Usage of the four main platforms owned by Facebook (Facebook, WhatsApp, Messenger, and Instagram) dwarfed competitors such as Twitter, Snapchat, and Pinterest. These platforms are challenged globally only by Chinese social media platforms such as WeChat, Sina Weibo, and TikTok/Douyin (Clement, 2020b). In global markets other than China, Google and Facebook are effectively a duopoly in the fast-growing digital advertising market (Enberg, 2019), while Apple and Google dominate the global apps market (again, excluding China) and Microsoft retains its ascendancy in business software. There is therefore considerable evidence to support Tim Wu’s assertion that over the course of the 2010s we saw ‘the centralization of the once open and competitive tech industries into just a handful of giants’ (Wu, 2018, p. 21).

These digital tech giants have been labelled the FAANG (Facebook, Apple, Amazon, Netflix, and Google), the FAMGA (Facebook, Apple, Microsoft, Google, and Amazon), and the GAMFA (Google, Apple, Microsoft, Facebook, and Amazon) (Rogoff, 2018, 2019; Yglesias, 2019). The companies are internally differentiated by their core businesses, but collectively they dominate digital markets. They have first-mover advantages and benefit from powerful network effects and from barriers to entry set for new competitors who want to establish monopolistic or oligopolistic positions in digital markets.¹ In establishing themselves at the centre of ‘winner takes most’ digital markets (Digital Competition Expert Panel, 2019), these companies have developed two characteristics of oligopolies that we saw emerging in other industries in the twentieth century: the capacity to establish unequal terms of trade with content providers of various sorts; and the ability to grow through mergers and acquisitions, particularly of potential competitors developing innovative products and services. The details of this process will be outlined throughout the book, but the growth in these companies during the 2010s is shown here, in Figure 1.3.

Figure 1.3 The Growth of the GAFAM in the 2010s. Source: Statista, 2019. Licensed under CC BY-ND 3.0. Available: https://www.statista.com/chart/20285/market-capitalization-of-google-apple-facebook-amazon-and-microsoft/?fbclid=IwAR2fY6SgXimpIDyW_IZk7bewMMOmjwFM0dunKC4uYBivc9G-BEnvQ73jk18

This leads to the second, somewhat surprising finding, which is that the rate of innovation in digital industries has declined. In its April 2019 World Economic Outlook, the International Monetary Fund (IMF) expressed concern that the concentration of digital markets has adverse impacts that are not only microeconomic, for instance by reducing the rate of innovation in digital industries, but also macroeconomic, as the concern to protect market power and associated markups on products and services supersedes the desire to invest in new digital products, services, and processes (International Monetary Fund, 2019). This somewhat surprising finding was reinforced by the Stigler Center for the Study of the Economy and the State at the University of Chicago, a strongly pro-market research centre, which found that the competition for first-mover advantage within particular markets did not translate into strong competition once market dominance was established. It identified the existence of ‘kill zones’, where innovation slows down outside the dominant firms, as there is seen to be little prospect of capturing market share:

The evidence thus far does suggest that current digital platforms face very little threat of entry and are negatively impacting investment in key digital areas. This is reinforced by the fact that the key players in this industry remained the same over the last two technology waves, staying dominant through the shift to mobile and the rise of AI [artificial intelligence]. (Stigler Center for the Study of the Economy and the State, 2019, p. 77)