The past 150 years have brought a series of momentous shifts in the advancement of communication and commerce, each catalyzed by new technologies that have increased the power of media: the telegraph, the telephone, radio, television, the web, and, finally, the mobile internet. In each case, these new modes of communication brought the world fresh commercial opportunities, facilitating the exchange and promotion of goods and services that could reach an ever greater, and increasingly targeted, population.
Today, we are witnessing the next evolutionary leap: the assimilation of economic value into communication systems. Digital services such as chat, social media, and online payments have come to play a fundamental role in our daily lives, influencing not only our consumption behaviors, but also our discourse, politics, and methods of value exchange. Our digital communications platforms are becoming the most important media in the ongoing development of a global economy.
Through an accident of history, today’s dominant digital services have been organized largely around an attention-based economy and monetized through advertising. This fact can be explained partly by the “information wants to be free” ethos that characterized the early days of the internet, which encouraged content owners and communication platforms to provide their products and services without asking for payment. Inevitably, such companies would later sell the attention and data of their consumers to advertisers and marketers. The ad-based approach has also proven to be a reliable business model in the absence of universal and frictionless online payments solutions, which have only recently become available, let alone practical.
The reliance on advertising for digital media revenue has resulted in advantages for companies whose products reach mass audiences. Such companies can leverage network effects and economies of scale to apply intense pressure to smaller competitors, while also stifling competition by providing their services free of charge. As a result, large companies enjoy the compounding interest of incumbency, concentrating wealth and power in the hands of the few. This is often to the detriment of consumer privacy and user experience and almost always at the expense of new entrants to the sector.
In cases where digital communication providers have also been able to build meaningful businesses based on transactions, the trends are just as concerning. Again, the incumbents can use network effects and economies of scale to their advantage.
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