Part IV What are the Risks if Competition Authorities Ignore or Downplay Big Data?, 14 Reflections on Data-Driven Network Effects

Subject(s):

Market power — Rights — Internet — Technology

This chapter addresses several competition issues raised by data-driven network effects as they tend to be difficult to enter and are easily susceptible by one or two firms. The data-driven network effects in online markets can amplify the stakes of gaining and losing users. Depending on the network effect, the loss of users can degrade the product’s quality and reduce the likelihood of attracting (and retaining) users, advertisers, or sellers. With each user the platform acquires relative to its competitors, a quality gap emerges. If the quality differences become apparent to users, the feedback loop can accelerate—attracting both new users and users of the competitors’ products. Another issue raised is the localization of data-driven network effect in some markets. Regarding search engines, companies may be unable to fully leverage the network effects across languages; users likely want the search results in their own language.