Transcription

Benefits of onlineplatformsPrepared for GoogleOctober 2015www.oxera.com

Benefits of online e platforms: a definition2.12.22.3Defining online platformsTaxonomies of online platformsThe economic role of online platforms3Value of platforms to consumers andconsumer choice3.13.23.3Consumers use platforms for a variety of purposesDo consumers use multiple platforms for the same purpose and, ifso why (if not, why not)?What effects do platforms have on consumers?4Benefits of platform use to businesses4.14.24.34.44.54.64.7Overview of approach and resultsSelection of case studiesBusiness case studiesE-commerceMarketingRecruiting staffFunding11121619232426303636363738414346Oxera Consulting LLP is a limited liability partnership registered in England No. OC392464, registered office: Park Central,40/41 Park End Street, Oxford, OX1 1JD, UK. The Brussels office, trading as Oxera Brussels, is registered in Belgium, SETROxera Consulting Limited 0883 432 547, registered office: Stephanie Square Centre, Avenue Louise 65, Box 11, 1050 Brussels,Belgium. Oxera Consulting GmbH is registered in Germany, no. HRB 148781 B (Local Court of Charlottenburg), registeredoffice: Torstraße 138, Berlin 10119, Germany.Although every effort has been made to ensure the accuracy of the material and the integrity of the analysis presented herein,the Company accepts no liability for any actions taken on the basis of its contents.No Oxera entity is either authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority.Anyone considering a specific investment should consult their own broker or other investment adviser. We accept no liability forany specific investment decision, which must be at the investor’s own risk. Oxera 2015. All rights reserved. Except for the quotation of short passages for the purposes of criticism or review, no part maybe used or reproduced without permission.

Benefits of online platformsOxeraFigure 2.1Figure 2.2Figure 2.3Figure 2.4Figure 2.5Figure 3.1Definitions of multi-sided platformsBases for a taxonomyTaxonomy of platforms based on consumer activitiesPorter’s value chainTaxonomy of platforms based on business activitiesTasks performed by EU Internet users in the previous threemonths, 2014Figure 3.2 Types of platform used by consumers in the past monthFigure 3.3 Usage frequency by platform type and by countryFigure 3.4 Multi-homing per platform typeFigure 3.5 Multi-homing with regard to selected tasksFigure 3.6 Reasons for single-homing across selected tasksFigure 3.7 Reasons for multi-homing across selected tasksFigure 3.8 Consumer perceptions of benefitsFigure 3.9 Consumer perceptions of benefitsFigure 3.10 Consumer concernsFigure 3.11 Reasons why consumers do not use certain platform typesFigure 4.1 E-commerce platform benefit1417171818242525272829303132343540

Benefits of online platformsOxera

Benefits of online platformsOxera1SummaryThere has been increasing political and regulatory interest in the role ofplatforms in Europe’s digital economy. In May 2015 the European Commissionpublished its strategy to develop a Digital Single Market for Europe, built onthree pillars: better access for consumers and businesses to digital goods and servicesacross Europe; creating the right conditions and a level playing field for digital networks andinnovative services to flourish; maximising the growth potential of the digital economy.As part of the second pillar the Commission has committed to analyse the role ofonline platforms.1 This work will consider the degree of transparency, use ofinformation, and competitive practices.In this context, Google asked Oxera to consider how online platforms could bedefined, and to assess how both consumers and businesses interact with, andbenefit from, online platforms.This report contributes to this debate by answering two key questions: what is the definition of an online platform? what value do online platforms provide to European consumers andbusinesses?To date, these questions do not appear to have been examined fully in thepublic policy discussions on Europe’s digital economy.To answer these questions, Oxera has undertaken primary research in theform of a survey of European consumers and a series of interviews withEuropean businesses. These are supplemented by a detailed review of theliterature on the subject.Definition and taxonomy of online platformsThe role of online platforms is key in delivering benefits to consumers andbusinesses: ‘online platforms’ are bringing together consumers and producers,allowing trades that would otherwise not happen.Also, the diversity of online platforms in terms of activity, sector, businessmodel, and size is striking but there is no apparent commonality between them.There is currently no single definition of an online platform that captures theplurality of the online ecosystem. When a rigorous definition is needed (e.g. ina policy context), the generic notion of ‘online platform’ does not seem fit forpurpose.The Commission’s definition, in its recent consultation,2 is too broad to beuseful as a new category for regulation. Additionally, it is not clear how it differs1Communication from the Commission to the European Parliament, the Council, the European Economicand Social Committee and the Committee of the Regions (2015), ‘A Digital Single Market Strategy forEurope’, COM(2015) 192 final.2‘an undertaking operating in two (or multi)-sided markets , which uses the Internet to enable interactionsbetween two or more distinct but interdependent groups of users so as to generate value for at least one ofthe groups. Certain platforms also qualify as intermediary service providers.’ European Commission (2015),

Benefits of online platformsOxera2from Internet Society Services as laid out in the 1998 Directive.3 However,using the indicative list given in the platform consultation document, we haveinvestigated a set of intermediaries that might be considered platforms. Wehave identified key economic features that this loose grouping might be said toshare: platforms serve distinct groups of users (e.g. buyers and sellers, senders andreceivers); participation in one of the groups affects the benefits that the other groupsmay receive (e.g. the more buyers using a platform, the more a seller willwant to list on it; more senders on a platforms means more people to receivemessages from).We can also classify websites and applications into groups, depending onsome specific questions. The classifications vary according to whoseperspective is being considered: the consumer’s or the firm’s. To this end, wetherefore identify two families of taxonomies based on the consumers’perspective and the firm’s perspective, as summarised below.Bases for a taxonomythe consumer’sperspectivethe firms’perspectiveWhat doconsumers do ononline platforms?Where are onlineplatforms used inthe value chain?What are theservices deliveredto consumers byonline platforms?What businessmodel is theplatform basedon?Source: Oxera.Assessing the benefits of online platforms for consumersA survey of consumers’ use of platforms in France, Germany, Poland andSpainWe present the analysis of an online survey of 1,500 consumers in each ofFrance, Germany, Poland and Spain.4 This survey provides new empiricalevidence on: the activities for which consumers use online platforms, and how often; whether consumers use one or multiple platforms for specific tasks andwhether they perceive barriers to using more than one platform; the nature and strength of the benefits and concerns consumers perceive inrelation to online platforms;‘Consultation on Regulatory environment for platforms, online intermediaries, data and cloud computing andthe collaborative economy’, 24 September, p. 5.3Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down aprocedure for the provision of information in the field of technical standards and regulations and of rules onInformation Society services; OJ L 204, 21 July 1998.4These countries were agreed with Google. They are large EU economies, differing in terms of both Internetusage and the concerns expressed by public officials on online platforms.

Benefits of online platformsOxera3 the reasons why consumers do not use online platforms.The analysis distinguishes between different platform types based on the keyactivities that consumers perform on them, as illustrated below.Taxonomy of platforms based on consumer activitiesCommunicationplatforms communicate andstay in touch withfriends, family andother contacts meet and get toknow peopleEntertainmentplatforms Access and sharecontent such asmusic, videos orphotos, and onlinegamingOnlinemarketplaces buy, sell or shareproducts andservicesComparisonplatforms find, compare orreview productsand servicesInformationplatforms look up information search foropportunitiesNote: This study has focused on the main platform categories, but this list is not exhaustive.Source: Oxera.Main conclusions of the consumer surveyInformation and communication platforms are used most widely. Although theextent and frequency of use vary across platform types, the patterns are verysimilar across countries.Types of platform consumers have used in the past ermanyOnline Question: For which of the following activities did you use the Internet in the past month?Base: all respondents. Total respondents: 6,010 (Germany: 1,501; France: 1,505; Spain: 1,502;Poland: 1,502).Source: Oxera analysis.

Benefits of online platformsOxera4Do consumers use multiple platforms for the same activity and why(not)?Almost two-thirds of consumers use two or more websites/apps for specifictasks.5 This is known as multi-homing, as illustrated below.Multi-homing with regard to selected tasks100%90%80%70%60%50%40%30%20%10%Communicating andstaying in touchUse one website/appBrowsing posts, videosand photosBuying products orservices from 'general'platformsUse two ceGermany0%Finding informationabout and comparingtravel productsUse more than two websites/appsQuestion: Which of the following websites/apps have you used in the past month to (specifictask)? Base: respondents who stated that they perform tasks of each type (11,368 responses, ofwhich Germany: 2,913; France: 2,640; Spain: 3,353; Poland: 2,462).Source: Oxera analysis.The results of the survey indicate that multi-homing is possible for mostconsumers and desirable to many, but not all. Multi-homing varies most acrosscountries for consumers who use online platforms to communicate and stay intouch.The majority consumers do not perceive significant barriers to multi-homing forthe tasks considered in the analysis regardless of whether they currently multihome. In particular, most consumers who use only one platform do so becausethey consider that platform to be most appropriate or find that their contactsuse the same platform, indicating strong network effects. A large majority ofthese consumers do not experience time, price, awareness of alternatives andcompatibility across platforms as barriers to also using a different platform.What effects do platforms have on consumers?Almost all consumers (97% of Internet users) think there are benefits fromdifferent types of online platform; a view that is consistent across countries.The most widely cited benefits relate to improved convenience, greater choiceand increased transparency, see below.5The tasks tested in the survey are : i) to communicate and stay in touch with friends, family and others; ii) tobrowse posts, videos and photos; iii) to buy products from ‘general’ marketplaces (those offering nonspecialist products); iv) to find information about and compare travel products and services.

Benefits of online platformsOxera5Consumer perceptions of reater choice ipsPolandQuestion: Thinking about the websites/apps shown below (list below consisting of platformsselected previously), to what extent do you agree or disagree with each of the followingstatements? Base: Total survey respondents (6,010).Source: Oxera analysis.Some types of online platform have more specific benefits. Our surveysuggests that quantified benefits of platforms vary across countries, but aresubstantial: 32% (France) to 57% (Poland) of consumers have met in person at least oneperson through a communication platform; on average,6 they got to know 1person (France) to 5 people (Poland) in this way; consumers estimate that, in the past month, information platforms have savedthem 50 minutes (France and Germany) and 100 minutes (Poland); consumers estimate that comparison platforms have saved them, onaverage, 127 (Poland) to 117 (Germany) in the past year.Despite the evident widespread use, most consumers also have concerns withregard to the different types of online platform asked about in the survey. Theprincipal concerns relate to confusing or inappropriate content, and privacy andsecurity issues. However, not many consumers cite these concerns as reasonsnot to use platforms: only 20% (France) to 30% (Spain) of responses toreasons for not using certain platform types make reference to these issues.Overall, consumers are more likely to perceive benefits from than to raiseconcerns about online platforms.Assessing the benefits of online platforms for businessesLiterature review and case studies about recruitment, funding, marketingand e-commerceTo assess the benefits of online platforms for businesses, we reviewed theevidence in economics and business studies, and arranged interviews with asmall set of businesses, which provided some case studies.67Unless otherwise stated, the average indicates the median value.Equivalent to 51 zloty.

Benefits of online platformsOxera6As with the consumer survey, the businesses selected for the case studies useonline platforms. In addition, the businesses were chosen to capture a widerange of experience in the digital ecosystem. To this end, we identified fourprocesses that are central in the daily life of companies, as illustrated below.Taxonomy of platforms based on where in the value chain the onlineplatform is usedNote: This study has focused on the main platform categories, but this list is not exhaustive.Source: Oxera.We then spoke to 14 businesses, each of whom had experience using onlineplatforms in the context of these processes.Main conclusions of the business case studiesThe case studies and literature review identified several themes: online platforms reduce the effects of geographic barriers—interviews inall four business processes indicated instances of online platforms allowingthe business to conduct activity across traditional geographic borders, tovarying degrees. This was also supported by evidence from the literature; with respect to funding, online platforms can support new and differenttypes of businesses—online platforms allow some projects to access amarket of investors who are motivated by a variety of returns funding. Closelyrelated to the reduced impact of geographic barriers, online platforms makeunique businesses more viable by expanding the potential customer base; online platforms change the cost structures of businesses—our casestudies indicated that platforms can reduce costs, particularly those incurredin targeting search efforts (i.e. for potential customers or staff). A caveatindicated in some of our case studies is that when online platforms are usedfor other benefits (brand value, or expanding the customer base), they oftenhave associated time and monetary costs.Findings specific to different business processes are discussed below.RecruitmentProfessional networks such as LinkedIn are now standard tools in therecruitment profession. These platforms increase the pool of candidatesavailable, bringing in candidates from a wider area and those not activelylooking for a job.The cost of advertising is much lower on online platforms and more flexiblethan printed media.

Benefits of online platformsOxera7FundingCrowdfunding platforms broaden the funding market, and allow different typesof investor to finance projects. Crowdfunding can enable projects wherereturns on investment are less certain, such as projects of primarily artistic orcultural benefit, to obtain funding. As a result, projects that may not have beencandidates for traditional financing may become viable through platforms. Thiswas the case for one of our interviewees and is supported by the literature.The literature suggests that crowdfunding platforms not only expand the typesof investor available, but also the amount of potential funding for projects. Ourinterviewees reported that their existing networks of customers/investors werealso critical, although fundraising through the platform could speed up theprocess. One interviewee said that securing funding would have taken aboutthree times longer through other channels.E-commerceThe key benefit of e-commerce platforms such as online marketplaces andapps stores is enabling businesses to reach a wider market. According to theinterviewees, this ranged from a small increase in sales to being essential tothe business.Online platforms also provide a low-cost channel for gathering customerfeedback. This benefit was cited by a number of interviewees, some of whomwere able to use this for product development or marketing.The impact on operating costs is varied depending on the alternatives. Someusers of e-commerce platforms would prefer to sell directly to avoid the feescharged by the platform. However, e-commerce platforms are much cheaperthan bricks-and-mortar stores.Marketing benefitsReaching a wider audience seems to be a key benefit of using onlinemarketing platforms. According to our interviewees, niche products might notexist without the ability to market through online platforms.More targeting of advertising spend increases sales—one interviewee reporteda doubling of the conversion rate for targeted adverts. Businesses were alsoable to measure the effectiveness of their marketing.Feedback from social media can itself have an impact on sales. Usinganecdotal evidence from our interviews and empirical estimates from literaturesuggest that a new article could increase sales in the long term by 0.5%.

Benefits of online platformsOxera8ConclusionsGiven the breadth of use and differing models, our analysis suggests that thereis no single definition of an online platform that is useful from a policymakingperspective. The common notion of ‘online platform’ seems to assimilateapplications and websites that are too dissimilar and that operate in verydistinct markets. Furthermore, it is not fit for purpose in a regulatory or antitrustcontext.Platforms serve important roles in bringing people and/or businesses together.They help facilitate social and commercial exchanges of goods, services andinformation which would not otherwise happen. We have tested some of thesebenefits to consumers and businesses and the results suggest that thesebenefits are experienced widely across both groups.

Benefits of online platformsOxera19IntroductionThe Internet economy is essential in both consumers’ and firms’ dailyactivities.8 It is also becoming one of the major distribution channels for culturaland artistic content.9 Online platforms lie at the heart of this ecosystem. Theyprovide a key engine for growth and social development locally and globally.According to the European Commission, between 2001 and 2011 theinformation and communication technology (ICT) sector, of which onlineplatforms form a part, accounted for 30% of GDP growth in the EU comparedwith 55% in the USA. The Commission also expects the Digital Single Marketto provide between 1% and 2.1% of additional GDP in the long term.10In this environment, there has been increasing political and regulatory interestin the role of platforms in Europe’s digital economy. In May 2015 the EuropeanCommission published its strategy to develop a Digital Single Market forEurope, built on three pillars: better access for consumers and businesses to digital goods and servicesacross Europe; creating the right conditions and a level playing field for digital networks andinnovative services to flourish; maximising the growth potential of the digital economy.As part of the second pillar the Commission has committed to analyse the roleof online platforms.11 This work will consider the degree of transparency, use ofinformation, and competitive practices.In this context, Google asked Oxera to consider how online platforms could bedefined, and assess how both consumers and businesses interact with, andbenefit from, online platforms.²Our report contributes to this debate by answering two key questions: what is an online platform? what value do online platforms provide to European businesses andconsumers?To date, these questions do not appear to have been examined fully in thepublic policy discussions on Europe’s digital economy.To answer these questions, Oxera has undertaken primary research through asurvey of European consumers and series of interviews with EuropeanAccording to the Commission: ‘Online platforms (e.g. search engines, social media, e-commerce platforms,app stores, price-comparison websites) are playing an ever more central role in social and economic life.’See European Commission (2015), ‘A Digital Single Market Strategy for Europe’, Communication to theEuropean Parliament, the Council, the European Economic and Social Committee and the Committee of theRegions, COM(2015) 192 final.9A UK-based study shows that in creation and distribution, around one-third of organisations consider digitaltechnologies to be essential, although the picture varies by art and cultural form. See Digital R&D Fund forthe Arts (2013), ‘Digital Culture: How arts and cultural organisation in England use ent/uploads/2013/11/DigitalCulture FullReport.pdf10European Commission (2015), ‘A Digital Single Market Strategy for Europe – Analysis and Evidence’, p. rket/docs/dsm-swd en.pdf11European Commission (2015) ‘A Digital Single Market Strategy for Europe’, Communication from theCommission to the European Parliament, the Council, the European Economic and Social Committee andthe Committee of the Regions, COM(2015) 192 final.8

Benefits of online platformsOxera10businesses. These are supplemented by a detailed review of relevantliterature.The report is structured as follows: section 2 examines the notion of online platforms and outlines options for ataxonomy of platform types; section 3 outlines how European consumers use and perceive onlineplatforms. This analysis is based on new survey evidence of consumers inFrance, Germany, Poland and Spain, as well as economic literature andexisting empirical research; section 4 considers the benefits of online platforms to European businesses.We begin with a theoretical assessment of how businesses might useplatforms for different activities. We then present evidence from a series ofinterviews conducted with European businesses, alongside relevant literature,to test for the existence of these theoretical benefits.In each section and throughout the report, the main takeaway points arepresented in boxes.More detail on the approach and further analysis can be found in the technicalappendix.Appendices 1–3 present the extended results of the consumer survey,covering the use of platforms, multi-homing and effects of platforms onconsumers for the different platform types considered in the survey. Appendix4 gives an overview of the relevant economic literature and existing researchrelating to the consumer use of and benefits derived from online platforms.Appendix 5 presents the survey approach, including the survey design and thecountry-specific lists of platforms.Appendix 6 offers an overview of the framework we used to identify benefits ofplatforms to businesses. Appendix 7 provides a summary of the participants inour case studies on business benefits. Appendix 8 provides detailed interviewnotes from the business case studies. Appendix 9 provides a review of theliterature on the benefits of online platforms to businesses.The English transcript of the consumer survey is reproduced in a separatedocument.

Benefits of online platformsOxera211Online platforms: a definitionThe rapid growth of the Internet and the emergence of worldwide economicentities has captured the attention of public institutions, legislators andregulators. In the past few years, for example, the OECD has published tworeports dealing with the economic and social role of Internet intermediaries andwith the digital economy.12 In parallel, French CNUmm published a report onplatform neutrality,13 and, more recently, the European Commission publisheda consultation document on online platform.14This attention is being distilled into two main objectives: understanding (and measuring) the benefits brought by the digital world; providing a framework to build ‘an open and sustainable digital environment’that can support the economy in the long run.In such a policy context, it is important to understand which features of onlineplatforms are likely to provide benefits. This is the main objective of this study. Itis the first step to understanding more widely whether there are groups ofplatforms that are likely to present specific issues that require intervention(regulation); and how the behaviour of platforms might affect marketperformance and its potential to distort competition (antitrust). This is outside ofthe scope of this study.Given these objectives, a definition of online platforms is needed. However, aswe show in section 2.1, the generic concept of an online platform is too vague;online platforms encompass websites or applications that are not onlydissimilar but also operate in a variety of markets. Furthermore, adopting a‘working definition’ is made challenging by the fast-changing nature of Internetusage and the plurality of business models used by platforms in the digitalsector.We then present different ways of classifying websites and applications intogroups according to how comparable they may be (section 2.2), including thetaxonomies that support our assessment of the benefits for consumers andbusinesses (in sections 3 and 4). Lastly in this section, we review the economicrole of online platform (section 2.3), as this forms the basis of our assessmentof the benefits of the online ecosystem for businesses and consumers.In adopting a context-specific ‘working definition’ of ‘online platforms’, weneed to take into account the fast-changing nature of Internet usage and theplurality of business models used by platforms in the digital sector.There is no single method for defining and classifying digital platforms. Thegeneric notion of ‘online platform’ is not fit for purpose in a policy context.OECD (2010), ‘The economic and social role of Internet intermediaries’, 23.pdf; and OECD (2013), ‘The Digital Economy 2012’,February, onomy-2012.pdf13CNNUM (2014), ‘Platform Neutrality : building an open and sustainable digital t/uploads/2014/06/PlatformNeutrality VA.pdf14European Commission (2015), ‘Consultation on Regulatory environment for platforms, onlineintermediaries, data and cloud computing and the collaborative economy’, 24 forms-onlineintermediaries-data-and-cloud12

Benefits of online platformsOxera12The role of online platforms is key in delivering benefits to consumers andbusinesses: online platforms are bringing together consumers andproducers, allowing trades that would otherwise not happen.2.1Defining online platformsThe diversity of online platforms in terms of activity, sector, business model,and size is striking. Platforms range from small websites with a local reach toworldwide companies generating billions of revenues. They offer variedservices such as Internet search engines (Google, Yahoo, Bing), online marketplaces (eBay, Booking.com, Asos, Allegro, Amazon), video-sharing platforms(e.g. Dailymotion, Vimeo, YouTube), music and video platforms (e.g. Deezer,Spotify, Netflix, Canal Play), social networks (e.g. Facebook, Twitter),collaborative economy platforms (AirBnB, Uber, BlaBlaCar, Ulule, Crowdcube),online gaming (Steam), etc.Finding a commonality between these Internet players, apart from being part ofthe Internet, does not seem straightforward. Starting from the definitionrecently provided by the European Commission (section 2.1.1), we show thatthe concept of online platforms is not fit for purpose in the policy context. It istoo vague and does not provide the guidance necessary to ensure legalcertainty (section 2.1.2).2.1.1 The European Commission definitionIn its recent consultation,15 the Commission proposes a definition of onlineplatforms:an undertaking operating in two (or multi)-sided markets , which uses the Internetto enable interactions between two or more distinct but interdependent groups ofusers so as to generate value for at least one of the groups. Certain platformsalso qualify as intermediary service providers.First, the Commission refers to online platforms as ‘undertakings operating in[multi]-sided markets’, or multi-sided platforms as referred to in the academicliterature. Second, it specifies that the Internet ‘enable[s] interactions betweentwo or more [ ] gr

2 Online platforms: a definition 11 2.1 Defining online platforms 12 2.2 Taxonomies of online platforms 16 2.3 The economic role of online platforms 19 3 Value of platforms to consumers and consumer choice 23 3.1 Consumers use platforms for a variety of purposes 24 3.2 Do cons