Over the last year, I have read a number of articles describing and analyzing the rise of “the platform economy” and the growing concentration of corporate revenues and profits in a very small number of very large companies, including especially the large tech companies [this situation may be seen as analogous to the growing concentration of personal income and wealth among a VERY small number of people and families in the “top 1% or top .1% that we have seen in the US and many other countries]. A series of articles covering these issues have appeared over the last year in a number of newspaper and magazines, including the (British) magazine Economist and the Wall Street Journal—and here are just a couple of links, in case you are interested:
More recently, another article dealing with much the same topic appeared in the Wall Street Journal under the title “Can the Tech Giants be Stopped” (by Jonathan Taplin). Here are just a few excepts that may give you a sense of what has been happening over just the last 10 years:
- “Ten years ago, only one of them, Microsoft , was among the biggest companies in the world as measured by market capitalization. These days, the top five usually consists of Apple, Alphabet (the parent company of Google), Amazon, Microsoft and Facebook.” [Interestingly, these are all US companies—which explains the growing concern of Margrethe Vestager, the (Danish) head of the EU Commissioner for Competition—and 3 of the 5 are of course Silicon Valley companies]
- Given the increasing role (at least potentially) of big data and AI (including Machine and Deep Learning] to affect future competitiveness of companies, this comment in the article by AI venture capitalist Kai-Fu Lee should give us all pause: “A.I. is an industry in which strength begets strength: The more data you have, the better your product; the better your product, the more data you can collect; the more data you can collect, the more talent you can attract; the more talent you can attract, the better your product.”
- Taplin notes that “this shift [towards platform domination of a small number of players] has brought about a massive reallocation of revenue, with economic value moving from the creators of content to the owners of monopoly platforms.” And Taplin adds that “In the third quarter of 2016, companies owned by Facebook or Google took 90% of all new digital ad revenue.”
Europeans are understandably worrying about their media organizations (and even about the future implications of the role their national languages will see use in the new media world) and what will happen to them as they try to compete with Google and Facebook, especially. Taplin notes that in the US, “newspaper ad revenue fell from $65.8 billion in 2000 to $23.6 billion in 2013 (the last year for which data are available).” In Norway, an effort was launched in the spring of 2016 among Norway’s leading media companies to create a consortium that could pool resources to build a competitive, joint media platform that would offer Norwegian consumers more personalized and competitive services to what Google and Facebook can offer them in Norway. The hope was to also get NRK, the (public) broadcasting system in Norway to join the group, and thereby bringing more content resources into the group.
Will we see more efforts in the Nordics, elsewhere in Europe and in other countries around the world as they see the growing US dominance continue and perhaps grow? And what is the likelihood that these smaller national or regional companies or consortia can provide the resources needed to compete effectively with the big US tech players? While large and powerful Chinese media companies are emerging—including Baidu, Tencent and others—and which have enormous data bases and unique access to data on Chinese consumers that can give them an edge in leveraging their new AI-based platforms in their domestic market, it is not clear they will be able to compete effectively against the big US tech giants in international markets.
The Taplin article in WSJ used a graphic which showed a vacuum cleaner sucking up media/content, consumers, technology and companies, and some of this may be good news to many foreign and US startup companies that see potentially lucrative exits by selling out to the US tech giants. But we should perhaps start also thinking more broadly about the social, economic and political implications we will face in the future if the trend over the last 10 years continues or even accelerates.
Illustration: Robert Neubecker