The beginning of the digital age and the neoliberal economic model has been roughly coterminous - both came of age in the 90s.  While the neoliberal economic model seems to be in a crisis, the digital monopolies show no sign of flagging.  On the contrary, along with the continued expansion of older players, we are witnessing the rise of many new ones.  It is clear that unlike the “financialisation” core of the new neoliberal model, the digital monopolies are not only not running out of steam, but also invading more and more areas of production, distribution and circulation of material goods.

The chart above shows the impact of these technological changes: the new digital monopolies have overtaken the older oil, automobile and financial monopolies in just two decades.  What is striking about this change is the pace at which this has happened.  While the US companies are the world’s biggest digital monopolies today, the Chinese companies are not very far behind.

If we look at the changes underlying the explosive growth of these digital monopolies, we see two major technology drivers: one, the internet, which caused a manifold increase in the connectivity of devices, and the other, the increase in computational speeds of the connected devices.  Both these – the growth of connectivity and the increase of computational speeds – show no sign of flagging.  Earlier, the connected devices were only main frames and mini computers, later, also personal computers.  Today smart phones, and with the Internet of Things (IoT) smart devices, connect to the internet.

Both the rise of data transmission and computational speeds are based on what are called power laws.  Computational speeds double roughly every 18 months, and connectivity doubles at a slightly slower rate.

More than monetizing data

Most people, including us in the left, have attempted to explain the rise of digital monopolies in terms of data as the new oil paradigm, popularised by the World Economic Forum.  This focusses on the meteoric rise of Google and Facebook, and the use of personal data to fuel their rise.  However, the rise of social media giants based on collecting peoples’ personal data does not explain the continued expansion of older companies such as Apple, Microsoft, and Amazon, or the rise of newer monopolies such as Uber and Airbnb. Clearly, there is more to the digital story than simply monetising personal data.

A different way of looking at digital monopolies would be to see what is new in their operations.  The first set of companies – Microsoft and Apple – that emerged in the late 70s and became big in the 80s are still among the top ten companies today.  They were based on different forms of intellectual property – Microsoft of software and Apple of hardware.  The next set comprises social media platforms such as Google and Facebook.  Their business model is based on advertising, selling their users to the advertisers – a fairly straightforward media model.  The latest monopolies to emerge are platforms monopolies in what is called the “sharing economy”.  An early forerunner of these is Amazon, which built a platform on which others could trade as a marketplace, with, of course, the platform taking the biggest cut.
 

The charts here show the rise of connectivity and the various technological changes that have taken place.  Before the rise of the internet, we had the main frame computers and the PCs.  IBM, the big player in main frames, believed that hardware had value and software was simply to be bundled with the hardware but by itself was not a commodity.  The personal computers or PCs created a market for software itself to be a commodity.  Microsoft became the key player in the software market, with DOS, later Windows, as the monopoly supplier of the operating system of the PCs.  With this monopoly, they also built a software monopoly over products that ran on their operating system: word processing, spreadsheets, databases, etc.

Both these monopolies – of IBM over main frames and Microsoft’s over software for PCs – depended on what the bourgeoisie call intellectual property.  Intellectual property – copyright over proprietary software, hardware and design patents – underpin the monopoly of Microsoft or Apple.  It is still the old-fashioned monopoly that, for example, a pharmaceutical company or Disney exercises.  This is what the commons movement has termed as the enclosure of the "intangible commons of the mind"[1], or enclosure of human knowledge that should not be converted into private property.

Since then, with TRIPs/WTO agreements, the intellectual property regime has only strengthened.  Apple and Google have sued their competitors for “theft” of intellectual property.  To believe that digital monopolies have been built on a different model of capitalism misses the point that capital will use whatever it needs to create monopoly and extract surplus, not just directly from labour, but also as monopoly rent from others.

Apple has the unique distinction of becoming the biggest manufacturer of smart phones and PCs without a single manufacturing plant.  Foxconn, the company that manufactures the actual Apple products, gets a tiny fraction of what Apple receives.  It has to invest in factories, carry inventory and pay the salaries of its workers.  Apple’s monopoly is built on its monopoly brand and designs, and control over the entire supply chain.

The advertising model

The communication monopolies of the 19^th and 20^th centuries, starting with the newspapers and later, radio and television, were all based on the broadcast model, and held their monopoly by owning the means of communications: printing presses, radio and television broadcasting equipment.  The model of communication for the internet is a decentralised model, with its origins in the US Defence Department’s Arpanet, and later its expansion.  But its fundamental character of not having a centralised architecture still remains.[2]  Initially, the internet was used by the scientific community to exchange information with each other and exchange technical papers.  To this was added the specific form of addressing of such sites: hypertext web pages and web links, creating the now familiar World Wide Web.

The problem with the decentralised net came out of the huge expansion in the number of content providers and websites: there was just too much content on the web, and very little information on how to reach them.  This is where search engines came in.  Initially, there were a large number of search engines, but Google won the race and emerged as the leading search engine.  It is this dominance over the search engine market that allowed Google to create its other tools – Gmail, Google Docs – all of which are given “free” to the users.  In lieu, Google accesses our personal information, and offers us to advertisers as commodity[3].  The creation of users as audience commodity is the consequence of these companies enclosing our data, and converting it to audience demographies[4] to sell what is known as targeted advertising.  Google’s virtual monopoly over the search engine made it the market leader for garnering digital advertising revenue.  This monopoly has now been extended by its acquisition of YouTube, the video streaming platform, and Android, the operating system that drives the bulk of our mobiles.

Facebook, the other major monopoly in the digital platform market, chose a different route.  It created a space where people could put up content about themselves, and connect to their friends or relatives.  Today, Facebook has 2.27 billion active users, making it the biggest social media network.  It has also acquired the messaging platform, WhatsApp, and Instagram, a picture and video-sharing social network.  This allows Facebook to create our profiles from who our friends are, what we like, or what we read or write.  These profiles are used to generate audience demographies, which then can be sold to advertisers as audience commodity.

WeChat and Weibo are social media platforms in China, while Baidu is the Chinese search engine.  These also have similar business models as the US based social media monopolies.

The chart of media ad spending shows how digital ad revenue is slated to overtake all other forms of ad revenue combined in the near future.  Google and Facebook are increasingly taking over the advertising space from other media companies.  The bulk of their revenues comes from selling targeted advertising, which has a higher rate of conversion than the ads that the traditional media companies carry.  There is a bigger bang for the buck for advertisers using targeted advertising.

The enclosure of data

While World Economic Forum extolls the new, inexhaustible resource called data, the reality is that creating audience demographies out of user data is, economically, a new form of enclosure.  Earlier, personal data was not a commodity.  It is enclosing this data – including the data of people’s social interactions, and processing it into audience demographies – that converts data into commodity.  While intellectual property as an enclosure of the commons has been widely discussed, particularly in the environmental and free software movements, the enclosure of data commons has received much less attention.  Even those arguing against enclosure of user data tend to focus on how it can be monetised by the users, rather than looking at it as a part of the commons that cannot be privatised either by companies or individuals.

Some mistake the advertising model as the only model for digital monopolies.  As we have shown, Microsoft and Apple, digital monopolies based on intellectual property, continue to flourish and figure in the top 5 global companies by market capitalisation.

The enclosure of personal property

Is there a third model that digital monopolies are adopting?  For example, how do we look at Uber, Didi and Airbnb?  Or the new food apps?  Evgeny Morozev shows[5] how the new platform monopolies that are now being created use the help of venture/finance capital, the same ones that helped Google, Amazon and Facebook build their monopolies.  Their business model helps these platforms to enclose the informal sphere of the economy.  Uber and Airbnb convert individual vehicle and house owners to what they believe as independent contractors, but in reality are glorified serfs!  The sharing economy is the enclosure of personal property by digital monopolies and creating new forms of casual labour.

Amazon occupies a special place in this scheme.  It started as a combination of digital equivalent of brick and mortar shopping chains/supermarkets.  Unlike the traditional chains such as Walmart, it not only holds inventories in its warehouses, but also sells goods that it does not store.  The inventory of such goods is held by the either the producers or the distributors.  Alibaba operates on a very similar model.  It is possible to think of these monopolies as creating platforms that enclose shops owners and distributors warehouses.  Or as double-sided monopolies, a monopoly to their suppliers and monopoly to their buyers, similar to Walmart.  The economies of scale ensure that Amazon can make monopoly profits on both sides, the way Walmart did or still does.

It will be wrong to think that the growth of digital monopolies will taper off as the existing areas of their operation get saturated.  This view misses out the fact that digital monopolies are now branching out into newer areas.  Will the existing car manufacturers then become the Foxconns of the automobile industry as Google maps and autonomous vehicle software take over the car market?  Will most factories shut down to make way for new ones with 3-D printing and flexible manufacturing?  Will it create new monopolies over knowledge and design that will replace older monopolies based on manufacturing infrastructure?

As long as internet connectivity and processor speeds increase, the expansion of the digital monopolies will continue, with newer and newer areas of the economy coming under their control and disrupting existing business.  The future of capital lies in the ability of capital to finance new digital monopolies.  It is the relationship between finance capital and the new digital monopolies that we need to examine.  The knowledge economy, social media, sharing economy – all these are different faces of contemporary capitalism.  This is the task before us today: understand digital monopolies so that we can fight them better.

Prabir Purkayastha is Editor Newsclick.in and Co-convenor of JustNet Coalition. 

Acknowledgement: The charts have been prepared with the help of B.Srujana, who has also helped research and develop some of these concepts.