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)
Platformization of the Internet
One of the major debates of our time is around the extent to which digital platforms have transformed contemporary economies and societies. Concepts such as ‘surveillance capitalism’ (Zuboff, 2019) and ‘platform capitalism’ (Srnicek, 2017) point to a shift within the digital economy from the age of the open internet. In her account of the rise of surveillance capitalism, Shoshana Zuboff locates the shift in 2001 and in Google’s efforts, in response to the dot.com crash, to reuse search data so as to better ‘train’ its algorithms, and hence to develop more precisely targeted online advertising offerings (Zuboff, 2019). The rise of platforms is generally taken to mark the end of the open internet. The open internet may have been a conceptual ideal more than an empirical reality, but it captured a broad ideology, summarized by Eli Noam as being ‘based on a common set of values, a non-profit sharing ideology, and a libertarian philosophy of minimal government. The decision process was one of rough consensus. This mechanism was so successful that it enabled the emergence of the key communications system around the world’ (Noam, 2016, p. 559).
It can now be said that we are living in an age of platformized internet, where the overwhelming bulk of communication activity that occurs online is mediated through a relatively small number of digital platforms. As Tarleton Gillespie has observed, the users’ turn to platforms involved expedited access to digital content as a commodity, as it offered ‘a better experience of all this information and sociality: curated, organised, archived and moderated’ (Gillespie, 2018a, p. 14). We can now see the critical role played by successful digital platforms in curating the open web and enabling participation and engagement at scale among ever-growing sections of the global population (Helmond, 2015). Julie Cohen concluded that while, ‘in theory, the twenty-first century communications infrastructure still known as the Internet is “open” … for most practical purposes … the “network of networks” is becoming a network of platforms; Internet access and use are intermediated from beginning to end’ (Cohen, 2017, p. 143).
The implications of this platformization are deep and pervasive and have fundamentally changed the internet’s ‘open’ form, which animated discussion in the 1990s. One important consequence is that platformization has cemented an ongoing relationship, frequently fraught, between digital platforms and the traditional mass media, as the latter provide a significant amount of content for the former; and this in turn enables media companies to reach new audiences where both are direct competitors for the same advertising revenues.
Another important implication, which has paradoxical consequences, is that the platformized internet is more able to be regulated by governments than the open web, as internal governance is a core defining feature of digital platforms (Parker et al., 2016). As a result, the push for renewed forms of external regulation comes at a time when it is no longer possible to say that regulation is inherently doomed to fail, since the platforms are clearly subject to forms of governance regulated according to the principles of accountability and transparency, even if the precise mechanisms through which that would occur remain very much open to debate.
Internet
