In a world of constant global interconnectedness, internet platforms such as Google and Facebook have become an integral part of our everyday lives. Going to work with an Uber, shopping by Amazon, connecting with friends via Facebook the physical and the virtual world are merging while platforms define the conditions.

Originally based on libertarian principles, idealist visionaries like Bill Gates or Mark Zuckerberg have become businessmen as technology merged with capitalist principles. Embedded in a neoliberal economic order, platforms have become the key actors in the modern economy. While large oil companies shaped the industrial age, the ranking of the 20 most valuable companies today consists almost entirely of platforms. In this post-industrial society technology giants such as Google (3) and Amazon (1) have a value of about $300 billion each, while more traditional companies such as McDonalds (9) and the telecommunications provider AT&T (10) are only valued at about $130 or $100 billion.

The disappearance of the previous elite of Exxon and Chevron illustrates no less than a paradigmatic change, a transformation of the global economy in which Google had 2018 more value than the entire European telecommunications industry (Precht, R. (2018). JĚ_ger, Hirten, Kritiker: Eine Utopie fĚ_r die digitale Gesellschaft. 1st ed. MĚ_nchen: Goldmann Verlag: 48-50). This dynamic derives from the fact that the quality of platform services improves with the number of their users. These network effects inherit a new economic logic whose primary aim is not to maximize profit, but rather to increase the market capitalization. Defined by large up-front investments, platforms have the possibility to run losses for years. Thus, a specific winner-takes-all mentality shifts the classical understanding of capitalism as the natural drive to monopolies has become a characteristic of this system. In Smith’s classic theory, competition was seen as the requirement for a stable economic order, whereas this new economic model systematically undermines competition and leads the prevailing measures for market regulation ad absurdum.

While platform capitalism emerged from the characteristics of the neoliberal order with the liberties of modern finance, it developed a model with very specific characteristics. The fact that services are mostly free already depicts the demarcation from classical capitalism and its central system of supply and demand as a regulator of the prices. In contrast, platforms are built on dependency (social, emotional) and they exercise a structural power through the control of access to their services.

Platforms act like a gatekeeper and occupy a neuralgic spot to control the flows between supplier and consumer. Thus, users’ connection to friends and the availability of their data (e.g. pictures) is based on access to the platform infrastructure. This bubble is restricted by the company’s terms and the content is mainly subject to the moderation by the platform owner. It can be observed that Platforms create an externally controlled space which operates separately from the initial open network structure.

A central economic driver of the platform model is the surveillance element which is often characterized by the saying, ‘Data is the new oil’. In the hidden world of algorithms and AI, user data is systematically used as a waste product, e.g. from search operations (Montalban, M., Frigant, V. and Jullien, B. (2019). Platform economy as a new form of capitalism: a Regulationist research programme. Cambridge Journal of Economics, 43(4), pp.805-824). Thus, user behavior can not only be predicted, but it can be also deliberately manipulated. The analysis of search queries in Google as well as the monitoring of likes in Facebook leads to personalized advertising which can directly influence the user decision making and its consumer behavior. This dynamic derives from the particularities of the platform architecture where the platform owner can manage the content according to its principles. It must be emphasized that platforms are not neutral spaces but rather enclosed units which follow their own rules.

Based on a supposedly free service, the entire platform structure (network effects, surveillance, etc.) overrides the fundamental principles of the free market. While ordinary companies try to minimize entrepreneurial risk, platforms bring this to a new level. On the one hand, consumer interests can be monitored and controlled already in advance. On the other hand, platforms do not have to make capital-intensive investments because they do not offer products themselves but provide only the connection to suppliers. While traditional hotels need to continuously invest in their equipment and additional beds, platforms like Airbnb occupy the interface and participate heavily on the profits while they are almost excluded from the risks (Bartlett, J. (2018). The people vs tech. London: Ebury Press: 70). Thus, it must be asked if this is the future model of capitalism or rather a systematic manipulation of the existing order.

About the Author
Marc Oliver Heim studied International Relations and History in Vienna, London, Paris, Buenos Aires and worked for the United Nations in New York City. His main focus is global economic relations, value chains, international development, and digital capitalism.