The Covid-19 pandemic has altered the way in which we experience, shop and live. A move online has put a spotlight on the burgeoning platform economy. In this article, we explore what platform capitalism entails.
Around 1180 AD, the Champagne trade fairs were held in France where merchants from all across Europe travelled to sell their products, such as textiles, leather, fur, and spices. With the establishment of laws and courts to enforce contracts and police the fairs, these markets thrived for nearly a century. Not only were these medieval trade fairs considered revolutionary for their time, but they were also the ancestors of contemporary platform markets.
With the advent of digital technology, platform markets have evolved with the times. Today, the transaction of goods and services can be done within seconds on our phones or computers. Life as we know it has become increasingly convenient – and perhaps even reliant on these platforms. Digital platforms have become an indispensable way of life, especially in the pandemic. For many consumers, they provide essential services that we cannot live without.
What has been the main driver for these firms to achieve such stunning success in just a span of a few years? Data
The platform economy refers to any type of digital platform that uses the internet to connect dispersed networks of individuals to facilitate digital interactions between people. There is a large variation between the function and type of digital platforms that are available – ranging from communication platforms (e.g. WhatsApp, Skype, WeChat) to asset sharing platforms (e.g. Uber and Airbnb), to product platforms (e.g. Amazon and eBay). What has been the main driver for these firms to achieve such stunning success in just a span of a few years? The answer is simple: data. These platforms provide the infrastructure to monitor and capture data from consumers, which would then be extracted for companies to systematically analyse to facilitate content and service innovation. By continuously tweaking their operations according to the needs of the consumers, these companies ultimately gained an enormous advantage to emerge at the top of the food chain in their respective industries.
Digital platforms have already begun reshaping the global economy. Today, seven of the ten largest companies by market capitalisation are ecosystem players – Alibaba, Alphabet, Amazon, Apple, Facebook, Microsoft, and Tencent. We can further look to Ping An Insurance Group as a trailblazer for the industry, as they have successfully managed to frame themselves as the world’s most valuable insurance company. The company seized the opportunity to transform its business model by taking advantage of fintech operations to thoroughly embed themselves in the lives of more than China’s 500 million internet users. Their portfolio of platform businesses has moved beyond just mere insurance, including peer-to-peer financial services, healthcare services, automotive services, and more. According to a McKinsey research report, emerging digital economies could account for more than 30% of global corporate revenue, estimated at $60 trillion by 2025. Despite not having their own supply chains, small and medium-sized businesses have the potential to go global, enabled by e-commerce platforms like Alibaba. Yet, experts estimate that only 3% of established companies have adopted an effective platform strategy.
Emerging digital economies could account for more than 30% of global corporate revenue, estimated at $60 trillion, by 2025
At the same time, the drive towards more data in the platform ecosystem faces critical challenges with regards to privacy violations, anti-trust challenges, and online harms. As these platforms rely on data to function, the intrinsic need to gather more data has gradually led to firms testing the boundaries of the private realm. There are many examples: Facebook has been criticised for not revealing information about data thefts, Google was under fire for its data collection practices and user tracking, and so on. Furthermore, it’s not only big corporations accumulating our data. Companies like Sift, who are hired by said big corporations to identify stolen credit cards and identity thieves, have access to years of both our online and offline behaviour. This is a case for concern, especially when backlash against big tech corporations seems to have disappeared in the era of Covid-19.
Amidst global financial chaos, the technological industry is the one pillar of the economy that has not caved under Covid-19 restrictions. In fact, it is the infrastructure and connectivity that they provide which has helped the economy to stay afloat. Amazon, Microsoft, Alphabet and Facebook are now each worth more than $1 trillion dollars. As such, we also have to be wary about the monopolisation of industries by a few large corporations. Despite being depicted as an abuser of blue-collared workers, Amazon’s monopoly in the industry seems to be incontestable. At a time where companies are furloughing their employees, Amazon is hiring up to 175,000 workers as demand for their services continues to grow.
This health crisis has given us the opportunity to reimagine technology and shape the future of the platform economy
In a post-Covid world, there is no doubt that the platform economy will take the centre stage. Despite its ubiquitousness, digital platforms have only just begun to penetrate our daily lives, and will continue to do so in the near future. The tech industry seems poised to remain even more entrenched and influential than when the crisis first started. However, this health crisis has given us the opportunity to reimagine technology and shape the future of the platform economy. How the platform economy evolves from here will depend on how we navigate the balance between information vis-à-vis privacy concerns to provide a seamless and secure service for consumers.