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The Economic Impact of Online Intermediaries

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The Responsibilities of Online Service Providers

Part of the book series: Law, Governance and Technology Series ((LGTS,volume 31))

Abstract

Given the severe lack of sufficiently detailed data, there is very little measurement or quantification of the contributions by online intermediaries in the academic literature. Intermediaries and platforms are loosely defined by lawmakers and national statistics for any meaningful analysis; available data suggests online intermediaries do not yet interact with many of the sectors often mentioned as adversely affected by digitalisation, while available data on productivity and trade leads to counterintuitive conclusions. We examine to what extent the economic impact of intermediaries may differ in the US and the EU – two markets with comparable set up of market institutions and actors – and conclude that the impact is similar in terms of input, outputs, productivity and trade. Yet the online intermediaries have created different incentives in the US and the EU. Conclusion is the political economy of advertising: Online advertising continues to grow at the expense of TV, magazines and newspapers. Europe is the only geographic area in the world that has seen the advertising expenditures fall (– 0.8 % compared to +0.6 % in North America). Furthermore, traditional media is the most important supplier of inputs to online intermediaries in the US, which turned a zero-sum game between into a condition of co-dependence.This redistributive mechanism – where online intermediaries channel profits back into traditional media through advertising – could not be confirmed to exist in the EU. This lack of co-dependency is one possible determinant to why stakeholder interests are differently aligned in the EU compared to the US.

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Notes

  1. 1.

    European Commission, A Digital Single Market Strategy for Europe, 2015.

  2. 2.

    Copenhagen Economics, The impact of Online Intermediaries on the EU Economy, 2012; revised 2013.

  3. 3.

    See Bauer, Lee-Makiyama, van der Marel, Verschelde, ‘A Methodology to Estimate the Costs of Data Regulation’, International Economics, 2015; also Bauer, Lee-Makiyama et al, The Cost of Data Localisation, ECIPE, 2014; The Economic Importance of Getting Data Protection Right, US Chamber of Commerce, 2013.

  4. 4.

    Robinson, Duncan, Concerns grow over EU digital rules targeting American companies, Financial Times, 26 July 2015.

  5. 5.

    Nocera, Joe, GAFA: Europe’s Term for America’s ‘Evil’ Internet Empire, New York Times, 28 April 2015.

  6. 6.

    Swisher, Kara, White House. Red Chair. Obama Meets Swisher, <Re/Code>, February 2015 accessed at: http://recode.net/2015/02/15/white-house-red-chair-obama-meets-swisher/

  7. 7.

    See note 1.

  8. 8.

    van Gorp, Nicholai, Challenges of Competition Policy in a Digitalised Economy, European Parliament, 2014.

  9. 9.

    Directive 2000/31/EC, On Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce (E-Commerce Directive).

  10. 10.

    ibid., art.14.

  11. 11.

    Van Eijk, Niko, Digital platforms: An Analytical Framework for Identifying and Evaluating Policy Options, TNO report R11271, 9 November 2015, pp. 12–13.

  12. 12.

    Chibber, Kabir, American cultural imperialism has a new name: GAFA, Quartz, December 01, 2014.

  13. 13.

    Krol, Lee-Makiyama, Macyra, International Services Agreement: From an European Vantage Point, ECIPE, 2012.

  14. 14.

    World Input-Output Database, 2013; Trade in Value-Added (TiVA), OECD-WTO, 2015.

  15. 15.

    European Commission, Have Your Say on Geo-Blocking and the Role of Platforms in the Online Economy, Press Release, 24 September 2015.

  16. 16.

    European Commission, List of NACE codes, March 2010, accessed at: http://ec.europa.eu/competition/mergers/cases/index/nace_all.html

  17. 17.

    ibid., Information and communication service statistics, NACE Rev. 2, April 2013.

  18. 18.

    Based henceforth on activities relating to what NAICS defines as internet publishing, broadcasting and search portals.

  19. 19.

    Scuro, Giorgio, Automotive industry: Innovation driven by electronics, Embedded-Computing, 2012.

  20. 20.

    Borga, Maria, Trends in Digitally-Enabled Trade in Services, US Bureau of Economic Analysis (US BEA).

  21. 21.

    Description taken from OECD, Compendium of Productivity Indicators, April 2008.

  22. 22.

    Mitchell, Alastair, Facebook at Work’? There’s Certainly Some Work to Be Done, WIRED, November 2014.

  23. 23.

    US BEA, 2007; EU KLEMS Growth and Productivity Accounts, 2010.

  24. 24.

    Van Ark, Bart, Total Factor Productivity: Lessons From the Past and Directions for the Future, Working Paper No 271, National Bank of Belgium, October 2014.

  25. 25.

    Rentzhog, Magnus, The New Services Era – Is GATS up to the Task?, E15 Expert Group on Services Overview Paper, November 2014, p. 6.

  26. 26.

    UNCTAD, Information Economy Report: Trends and Outlook in Turbulent Times, United Nations, 2009, p. 77.

  27. 27.

    Hosuk Lee-Makiyama, Digital Trade in the U.S. and Global Economies, US International Trade Commission, 2014.

  28. 28.

    ibid.

  29. 29.

    C-362/14, Schrems v Data Protection Commissioner, European Court of Justice.

  30. 30.

    Messerlin, Patrick, The Transatlantic Trade and Investment Partnership: The Services Dimension, CEPS, 2015.

  31. 31.

    McKinsey & Company, Wilkofsky Gruen Associates, Global Media Report, 2014.

  32. 32.

    eMarketer, quoted through Chief Marketing Officer Council World Wide, Facts & Stats on Marketing Spending, November 2015.

  33. 33.

    Statista, Television advertising expenditure in Europe from 2007 to 2015, by region (in million U.S. dollars), accessed at: http://www.statista.com/statistics/428893/tv-ad-spend-in-europe-by-region

  34. 34.

    Net US Digital Ad Revenue Share (% of total media ad spending), based on eMarketer, 2014; IAB/PwC, 2014.

  35. 35.

    Consistently with previous sections, online intermediaries are approximated to ‘internet publishing, broadcasting and search portals’.

  36. 36.

    McGee, Matt, Report: Google Spent $213M Advertising Itself In 2011, Including $70M On TV Ads, Marketing Land, March 2012; Efrati, Amir, Once Shunning Ad Promos, Google Now Flaunts Itself, The Wall Street Journal, March 2012.

  37. 37.

    Nielsen Media Research, Marketing’s Top 100 Advertisers (UK), 2013; Durrani, Arif, Google becomes major UK advertiser after boosting spend by 50% in 2013, Campaign, April 2014.

  38. 38.

    Nielsen Media Research, Marketing’s Top 100 Advertisers (NL), 2013.

  39. 39.

    See CCIA, Understanding “Ancillary Copyright” in the Global Intellectual Property Environment, February 2015.

  40. 40.

    See Floridi, Should You Have the Right to Be Forgotten on Google? Nationally, Yes. Globally, No.

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Author information

Authors and Affiliations

  1. ECIPE (European Centre for International Political Economy), Brussels, Belgium

    Hosuk Lee-Makiyama & Rositsa Georgieva

Authors
  1. Hosuk Lee-Makiyama
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  2. Rositsa Georgieva
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Correspondence to Rositsa Georgieva .

Editor information

Editors and Affiliations

  1. Oxford Internet Institute, University of Oxford, Oxford, United Kingdom

    Mariarosaria Taddeo

  2. Alan Turing Institute, London, United Kingdom

    Luciano Floridi

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Lee-Makiyama, H., Georgieva, R. (2017). The Economic Impact of Online Intermediaries. In: Taddeo, M., Floridi, L. (eds) The Responsibilities of Online Service Providers. Law, Governance and Technology Series, vol 31. Springer, Cham. https://doi.org/10.1007/978-3-319-47852-4_18

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  • DOI: https://doi.org/10.1007/978-3-319-47852-4_18

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