Why the Dynamics of Competition for Online Platforms Leads to Sleepless Nights But Not Sleepy Monopolies

37 Pages Posted: 3 Aug 2017 Last revised: 25 Aug 2017

See all articles by David S. Evans

David S. Evans

Berkeley Research Group; Market Platform Dynamics

Date Written: July 25, 2017


Recent claims that online platforms have secured permanent monopolies, protected by barriers to entry from network effects and stockpiles of data, and should be the focus of intense antitrust and regulatory scrutiny, are inconsistent with the economics, technology, and history of online competition. Online platforms face dynamic competition as a result of: disruptive innovation that provides opportunities for entry; competition from online platforms that have secured a toehold in one area but compete across multiple areas; the fragility of category leadership resulting from the fact that network effects are reversible and entry costs are low; and the prevalence of ad-supported models which result in seemingly disparate firms competing for consumer attention and advertiser dollars. The last two decades of online platform competition demonstrate that category leaders are often toppled, unexpectedly, through some combination of technological change, business model innovations, and cross-platform rivalry. The palpable threat of displacement prevents online platforms from taking their customers for granted. The history of online platform competition also provides empirical refutation of the proposition that data on users protects platform leaders from competition or puts an insurmountable obstacle before entrants. All this points to online platforms facing sleepless nights since any online platform that tries the quiet life of monopoly risks catastrophe.

Keywords: Online Platforms, Internet Giants, Dynamic Competition, Attention Markets, Digital Economy, Antitrust for Digital Economy, Competition Policy for Digital Economy, Competition Policy for Online Platforms, Indirect Network Effects, Multisided Platforms

JEL Classification: D21, D22, D42,D43, K21, L12, L13, L26, L41, L42, L86, L96, O31

Suggested Citation

Evans, David S., Why the Dynamics of Competition for Online Platforms Leads to Sleepless Nights But Not Sleepy Monopolies (July 25, 2017). Available at SSRN: https://ssrn.com/abstract=3009438 or http://dx.doi.org/10.2139/ssrn.3009438

David S. Evans (Contact Author)

Berkeley Research Group ( email )

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Boston, MA 02110
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HOME PAGE: http://davidsevans.org

Market Platform Dynamics ( email )

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