Digital platforms: the new gatekeepers

by | 24 Feb 2018 | Economy – Social

I’m not quite sure to like everything in the digital economy. But when you raise questions, you are always at risk to appear as the guy who didn’t understand how the digital world we are heading to is marvellous.

Well ! We try ?

Digital platforms are online intermediaries that facilitate the interaction between different types of users. They inspire a new entrepreneurial culture and transform deeply business models:

  • Innovation platforms enable the platform leaders to attract a very large pool of external innovators and serve as the foundation on top of which developers offer complementary products and services. That is how Apple or Google have established very large innovation ecosystems of app developers for their various mobile devices.
  • Transaction Platforms help individuals and institutions find each other, facilitating their various interactions and commercial transactions.  You find in this category e-commerce platforms like Amazon and eBay but also on-demand platforms like Uber, Zipcar or Airbnb that enable the exchange of goods and services between individuals.
  • Integration Platforms offer the capabilities of both transaction and innovation platforms. They result from two convergent trends: Google or Apple have established innovation platforms for their developer ecosystems, whose apps are then made available in their respective transactional platforms. On the other side, Amazon and Alibaba serve as transactional platforms for their individual users, and as innovation platforms for the many vendors who also sell their wares on their e-commerce platforms.

Platform businesses, almost exclusively US based, can be found in a growing number of industries such as :

  • social networking (Facebook, LinkedIn) ;
  • internet auctions and retail (Alibaba, Amazon, eBay, Angie’s List) ;
  • on-line financial and human resource functions (Workday, Elance, Freelancer, WorkFusion) ;
  • urban transportation (Uber, Lyft, Sidecar) ;
  • mobile payment (Mahala, Square) ;
  • clean energy (Sungevity, SolarCity, EnerNOC) …

MIT Professor Michael Cusumano summarizes it as follows: “A platform or complement strategy differs from a product strategy in that it requires an external ecosystem to generate complementary product or service innovations and build positive feedback between the complements and the platform.

To make it shorter, it means that digital platforms act as access facilities for other products or services, becoming the “gatekeepers” to other markets over which they can exert a clearly asymmetric power, especially when they become dominant on their respective markets. The situation is even worse when they are vertically integrated, playing at the same time the role of platform and of provider of goods and services,

That’s why we can see today a few major platforms becoming THE market, pushing competition to the periphery.

In such a context, the role of regulators and legislators should be to fairly reallocate regulatory obligations (consumer protection, tax, labour law, etc …) between platforms and providers, specifying the rights and obligations of these two categories of players. This framework should deal with all the different practices of data accessibility, interoperability, transparency, addressing regulatory issues on a case by case basis. It implies regulators make an effort to better understand the functioning of digital markets and emerging digital business models.

Platforms should contribute to the dynamism of the economy in a responsible and sustainable way. We are still far from that, and regulation can help to re-balance things. It’s going to come.

Iconography : a spider weaving his web (personal collection)