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🪵 The Threshold

Network effects embed monopoly tendencies directly into platform structure

Properties2
tagsja-picks, xref, define, candy, causal_relationships, trade, singleton, category/causal-relationships
aliases@srnicek_platform_2016, loc. 80

5 min read

Network effects embed monopoly tendencies directly into platform structure

Evidence

With network effects, a tendency towards monopolisation is built into the DNA of platforms: the more numerous the users who interact on a platform, the more valuable the entire platform becomes for each one of them. Network effects, moreover, tend to mean that early advantages become solidified as permanent positions of industry leadership. Platforms also have a unique ability to link together and consolidate multiple network effects. Uber, for instance, benefits from the network effects of more and more drivers as well as from the network effects of more and more riders. Leading platforms tend consciously to perpetuate themselves in other ways as well. Advantages in data collection mean that the more activities a firm has access to, the more data it can extract and the more value it can generate from those data, and therefore the more activities it can gain access to. Equally, access to a multitude of data from different areas of our life makes prediction more useful, and this stimulates the centralisation of data within one platform. We give Google access to our email, our calendars, our video histories, our search histories, our locations – and, with each aspect provided to Google, we get better predictive services as a result. Likewise, platforms aim to facilitate complementary products: useful software built for Android leads more users to use Android, which leads more developers to develop for Android, and so on, in a virtuous circle. Platforms also seek to build up ecosystems of goods and services that close off competitors: apps that only work with Android, services that require Facebook logins. All these dynamics turn platforms into monopolies with centralised control over increasingly vast numbers of users and the data they generate. We can get a sense of how significant these monopolies already are by looking at how they consolidate ad revenue: in 2016 Facebook, Google, and Alibaba alone will take half of the world’s digital advertising. In the United States, Facebook and Google receive 76 per cent of online advertising revenue and are taking 85 per cent of every new advertising dollar. — Nick Srnicek, Platform Capitalism, 80

Categorization

  • XREF: Directly parallels Zuboff’s surveillance capitalism: the data-driven self-reinforcing loop is the causal mechanism both frameworks rest on, though Srnicek frames it as intra-capitalist competition rather than a new mode of accumulation. — connects to: The internet’s many-to-many ideal collapsed into a many-to-one structure — Nick Couldry & Ulises A. Mejias, The Costs of Connection: How Data Is…, 175; Competition among platforms produces four systemic tendencies in the economy — Nick Srnicek, Platform Capitalism, 82; Platforms look like markets but are centralized fiefs owned by algorithms — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 868 (+8 more)
  • DEFINE: Establishes the precise definition of network effects and how they compound across data, complements, and ecosystems — the load-bearing concept of the whole chapter.
  • CANDY: The stat that Facebook and Google take 85 per cent of every new advertising dollar is a striking, quotable figure for casual conversation.

Broader Connections

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