Digital markets: how do these companies make money? What is social profitability?
New markets as a result of:
○ Computing power
○ Big data
○ Cloud-based systems
● Usually organised as platforms, a.k.a. ‘two-sided markets’:
○ A platform (network) makes it possible for two groups to interact
○ At least one of the two sides benefits from the size of the other side. Ex:
○ Newspapers: Advertisers benefit from readership (not the other way round).
○ App Stores: consumers and programmers benefit from each others size.
○ Social media, search engines (search data & advertising), etc
● Massive use by consumers & very high willingness to pay.Digital economy as new
engine growth. Makes it possible to match supply and demand at a global scale. Very
innovative firms.
● What are the changes?
1970s & 1980 liberalisation in the US
○ 1982: Antitrust case forces the break up of ATT in 7 regional companies.
○ They compete in the long distance market
○ Entry into local markets authorised in early 1980s
● US experience showed that competition increased efficiency
○ Development of new products (data transmission)
○ Elimination of cross subsidies
○ Competition and technical change created new services
● Europe starts liberalising telecoms in the 1990s
○ 1984: 2nd operator authorized in UK (Mercury)
○ Telefónica was fully privatised between 1995 and 1999.
○ Alternative firms progressively allowed to enter: 1995 (Airtel, bought by
Vodafone in 2001, mobile operator), 1998 (Retevision, fixed line operator).
○ Technological change allows convergence of fixed, mobile and data markets
● What is the importance of network?
The network is a relevant element of the telecoms industry, more than in other
New markets as a result of:
○ Computing power
○ Big data
○ Cloud-based systems
● Usually organised as platforms, a.k.a. ‘two-sided markets’:
○ A platform (network) makes it possible for two groups to interact
○ At least one of the two sides benefits from the size of the other side. Ex:
○ Newspapers: Advertisers benefit from readership (not the other way round).
○ App Stores: consumers and programmers benefit from each others size.
○ Social media, search engines (search data & advertising), etc
● Massive use by consumers & very high willingness to pay.Digital economy as new
engine growth. Makes it possible to match supply and demand at a global scale. Very
innovative firms.
● What are the changes?
1970s & 1980 liberalisation in the US
○ 1982: Antitrust case forces the break up of ATT in 7 regional companies.
○ They compete in the long distance market
○ Entry into local markets authorised in early 1980s
● US experience showed that competition increased efficiency
○ Development of new products (data transmission)
○ Elimination of cross subsidies
○ Competition and technical change created new services
● Europe starts liberalising telecoms in the 1990s
○ 1984: 2nd operator authorized in UK (Mercury)
○ Telefónica was fully privatised between 1995 and 1999.
○ Alternative firms progressively allowed to enter: 1995 (Airtel, bought by
Vodafone in 2001, mobile operator), 1998 (Retevision, fixed line operator).
○ Technological change allows convergence of fixed, mobile and data markets
● What is the importance of network?
The network is a relevant element of the telecoms industry, more than in other
