In the past five years, global Internet platforms have made great strides. Since 2013, the so-called big fangs of US technology stocks have helped the FAANG(Facebook, Amazon, Apple, Netflix, Google)Together with Microsoft, they contributed about 37% of the increase in the total market capitalization of S&P 500 companies. During the same period, about 28% of the increase in the market value of Chinese companies came from two companies: Alibaba and Tencent.
However, since the second half of last year, the market value of the Big Fang Gang has dropped by 1.13 trillion US dollars, and the market value of Facebook has fallen by 30% from its peak in July last year. And the reflection and discussion on the economic development model of the Internet platform has also increased for a while.
BAADD’s label
Internet giants have been labelled BAADD.
What is BAADD?
First is the big(Big). The global Internet giants have grown rapidly in the past few years, becoming extremely rich, and because of network effects, they are likely to become oligarchs in the industry, winner-take-all.
second is to suppress competition(Anti-Competi-tive). With the empowerment of artificial intelligence and big data, high-tech giants have mined versions of network effects 2.0. They are able to gain insights from the platform to build their own kill zones. The time and space of innovation and entrepreneurship may be greatly compressed, and it may become the fate of many new start-ups to be incorporated or crushed.
The third is addiction(Addictive). This also makes many people question whether the giants are providing cheap or even free services to consumers, or whether they are packaging consumers into commodities and selling them to advertisers. The difference between the two is huge, and it also determines the giant’s attitude towards addiction.
The fourth is to endanger democracy (Destructivetodemocracy). A prominent example reflects what role Facebook played in Trump’s “Russia” incident. This also represents a common reflection on the development of the Internet over the past two decades—Does the Internet help civil society, or does it cause more harm to civil society?
problems faced
It is not difficult to see from BAADD’s analysis that people have many doubts about Internet giants. The biggest challenge facing the Internet platform economy is not that there is a problem with their growth. On the contrary, it is precisely because they are bent on rapid development that they have exposed two major problems.
The first major problem is that with the rise of the platform economy, the mobile Internet platform has a natural monopoly and a situation of inhibiting competition.
First, the platform determines how the process is designed, how the transaction is executed, controls the consumer interface and user experience, and therefore determines what kind of information the user will get.This also means that the bargaining power of product and service providers on the other end of the platform and the platform is getting weaker and weaker.
Second, the platforms of the data economy have an inherent tendency to monopolize.Giants are not just competing in the market, they are increasingly becoming the market itself. Platforms have become an indispensable infrastructure for the digital economy. Many services on the platform appear to be free, but users are actually paying when they hand over their data—big data becomes the currency for obtaining platform services. Today’s Internet platforms have mastered massive amounts of data, such as personal behavior data, social graphs, pricing information, purchasing habits, and more. For example, Facebook not only has the richest personal data in the world, it also has the largest “social graph” – the list of users and the connections between users, Amazon has more pricing information than any other company, and more than 90% of the United States All web searches are done on Google.
While collecting massive data, platforms are also building their own fences, digging the digital divide, and encircling their own big data. A business model based on hoarding user big data as the core competitiveness may be beneficial to the platform, but not necessarily to the society, because it does not help the overall society to share the dividends of utilizing big data.
Third, giants are building “strangler zones” around their own ecosystems. Entering a young company, it may be extremely difficult to survive. Tech giants will either copy these startups and crush them, or they will take over the threats ahead of time. Any business related to the consumer internet has been seen as a danger zone due to the dominance of Amazon, Facebook and Google. A typical example is the short-video social software Snap. In 2013, Snap rejected Facebook’s $3 billion acquisition. After Facebook cloned many of Snap’s popular features, it suppressed its development.
Now the giants have circled their respective spheres of influence. In search, social media, digital advertising, e-commerce, smartphones and smart speakers, cloud computing and other aspects, the giants have basically completed the enclosure. Startups used to be able to lead for years developing new products without the giants noticing, but now startups only have a lead period of 6 to 12 months, after which incumbents quickly catch up.
To sum up, these points actually highlight a problem:The platform has mastered a large amount of big data, and the platform built by the giant has become an indispensable infrastructure in the digital economy era.Platforms put profit first, and they are motivated to build digital fences, but not necessarily motivated to promote data sharing. They do provide consumers with cheaper and better services, but looking into the future may inhibit innovation.
The second big problem is the erosion of the public nature of the Internet.
The original intention of the Internet is decentralization. Twenty years ago, people imagined that the Internet could promote the interconnection and communication between people, promote the sharing and dissemination of knowledge, tap collective wisdom, and become a platform for civil society to organize itself. But the development of reality, especially the development of the past few years, has come to the opposite of publicity. It is concentrated in: the proliferation of fake news, the intensification of circles, and seeing consumers but not citizens.
Let’s start with the proliferation of fake news.
There has always been a problem with fake news, it’s just that social media has accelerated its spread. In 2016, Russia used Facebook to spread fake news to influence the US election, making more people aware of the dangers of fake news. However, what we need to see is that fake news in a broad sense, that is, headlines, sensational news, and information mixed with untrue information, has the risk of swiping the screen at the moment. On the other hand, traditional media has become increasingly marginalized. Giants grabbed the bulk of new digital advertising, such as Facebook and Google, which control two-thirds of U.S. online advertising revenue, and the advertising that traditional media depends on has suffered a cliff-like decline. In this context, fake news in a broad sense may drive out bad money to drive out good money, because the threshold for providing information has been lowered, and because social media platforms have given more people the tools to accurately distribute information.
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