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Data Monopoly Really Exist

The acquisition of AOL from Time Warner and the acquisition of aQuantive by Microsoft, which drove these data-driven mergers and acquisitions, rather than enhancing their competitive advantage. In contrast, start-ups stand out in digital industries that seem to require large amounts of data to survive. When Tinder landed an online dating battlefield in September 2012, it did not have any user data, but with a simple user interface and precise attention to consumer needs, Tinder quickly became the market leader and so far Tinder has witnessed 20 billion successful matching, becoming the world's most popular dating application.

Each of us dislikes monopolies, except monopolists. For the general public, monopolies often mean higher prices, poorer goods, and less well-served services. No wonder Jonathan Taplin, a tour manager who had worked for Bob Dylan, was quick to say “swift action to break the tradition: why culture is monopolized by Facebook, Google and Amazon and weaken democracy” The monopoly is worrisome and calls for a review of Amazon, Facebook and Google’s control over big data. Coincidentally, Margrethe Vestager, European Commission commissioner of commission known as “tech giant,” also said: “Data may be an important factor in how M & A affects competition, and we are exploring whether to get involved in mergers and acquisitions that involve significant value data, even if the company that owns the data does not have a high turnover. “The new academic and regulatory perspectives are all about” data monopolies, “but what exactly is a” data monopoly ” does it really exist?

Oil in the New Era: A Misunderstanding

The importance of data has been well-known since The Economist analogized the data to 21st-century oil. However, this analogy is misleading because it is not only reminiscent of Rockefeller’s Standard Oil or Mobil Oil, but also misinterprets that today’s data is as valuable as the oil in a hundred years ago rich products. However, the real scenario is: formal data trading market did not form, let alone in the data market do anything they want. The truth is simple: the data is not real oil.

executive of the future_1536x1536_OriginalThe data is not scarce. A limited amount of oil is firmly in the hands of a handful of oil-producing nations such as OPEC and Russia. In contrast, data is ubiquitous and endless. As the Internet, the Internet of Things and smart terminals evolve, new data is generated every minute of every second, and as long as the users of the Internet are online, numerous and varied “electronic footprints” are recorded and collected. As the IDC report shows, in the past few years, the global data volume has been increasing at a rate of 58% per annum. By 2020, the total amount of global data will exceed 40ZB (equivalent to 4 trillion GB), reaching the total data of 2011 22 times the amount. Not only that but because data can be produced and distributed at zero marginal cost, there is virtually no obstacle for companies to access data from different sources, such as themselves or third parties.

The data is not exclusive. Oil can only be owned and consumed by a particular business, and the data is different. It is collected by a business and not used at the expense of exclusion. As Internet users, we can accept different network services provided by different enterprises, or even the same type of services, such as Baidu. This network economy, called “multiple attributions,” spreads our data across network platforms so that no company can monopolize all its data. Non-exclusive also means that even if an organization has specific data, it does not prevent others from getting the same data elsewhere. Because of this, in the Sina microblogging anti-improper disputes, the vein will defend that the relevant data is its use of “collaborative filtering algorithm” is not obtained from the microblogging department to prove their legitimacy of the data.

The data value is not permanent. Although oil is not a “permanent and forever pass” diamond, it does not have a deadline, it is hard to reduce the value is indisputable fact. Just as long as oil is stored for a long time, the value is quite different. The data is typically time-sensitive, old data is less valuable than new data, and as time goes by, the former is less and less valuable. Just as Wang Jian’s in his blog mention that big data is not so much a “big” data as it is real-time data. Therefore, the advantages that result from the accumulation of data can quickly disappear because the data have a limited lifespan and are worthless once they “die.”

images (3)Data has no legal owner. Hundreds of years, around the oil, has established a clear ownership, clear rules of the system, and data property is still a mess. Recently, around the European Commission’s “Opinion on Building a Data Economy in Europe,” European scholars on whether the establishment of data property rights and how to set up endless controversy. Based on pragmatism in the United States, the legislation simply regulates the collection, utilization, and circulation of data and does not talk about data attribution at all. For the first time, the “General Provisions of Civil Law” which took effect this year include the data. However, due to the lack of detailed rules, only the declaration of “the data is protected by law” is pointed out. More importantly, data and personal information, privacy and other personality-related rights are mixed, further affecting the establishment of data property rights. “clearly defined property rights are the preconditions for market transactions”. The “no” status of the data naturally makes the data market difficult to develop.

In sum, the saying that “data is a new generation of oil” is a successful slogan, but it is only half-truth and data-rich, but it is not oil by its nature.

Do the data determine the enterprises’ competitiveness

If the data is not the output of the enterprise, then we look for another perspective, the data can be used as input, which constitutes the source of competitiveness of enterprises around. At present, building a digital economy with data as the key factor has gained broad consensus around the world. How can we understand the role of data in the competition among enterprises?

First of all, we must admit that data is an important factor in the development of an enterprise. The technological revolution in the digital economy has revolutionized the traditional way of using data. Now businesses can improve their products and services through the learning effects of their data. For example, Youtube can collect per-user click information to refine and refine algorithms to attract more users. Businesses can also deliver customized products based on “portraits” of big data and set personalized prices based on their consumer capabilities and price sensitivity. In addition, businesses can reuse data and develop new business opportunities. Recently, the e-commerce website Meituan opened up a “U.S. taxi” business, which is a clear example.

However, the role of data can not be overestimated. Throughout history, businesses that have massive amounts of data fail to survive. This is primarily because the advantages of the data can easily be weakened. On the one hand, the data is separable and highly differentiated. Based on the long-tail theory, different consumers tend to lead to more accurate and more suitable network service providers in the fields of online shopping, online dating, social networking and online travel. So, successful businesses must tap into their niche markets rather than blindly follow the leader. Differentiated competition makes its own valuable data, may be of little use to other businesses. On the other hand, the data itself can be replaced. A company that embeds sensors in highways to collect data on traffic jams will soon find that data has become the second choice with technologies such as automated video analytics and mobile navigation.

Second, the data can not independently bring advantages. According to Hu Ling’s analysis, the competition in the network platform is carried out in four dimensions of “resources, data, algorithms and basic services”. Specifically, the ever-increasing availability of productive resources through the reduction of transaction costs via information technology, coupled with a large amount of data generated by the former’s activities, is then used by enterprises to dynamically analyze and forecast the data, ultimately improving basic services. Obviously, the data is only an intermediary link, it is not and cannot be decisive.

This also shows why data giants will fail: the acquisition of AOL from Time Warner and the acquisition of aQuantive by Microsoft, which drove these data-driven mergers and acquisitions, rather than enhancing their competitive advantage. In contrast, start-ups stand out in digital industries that seem to require large amounts of data to survive. When Tinder landed an online dating battlefield in September 2012, it did not have any user data, but with a simple user interface and precise attention to consumer needs, Tinder quickly became the market leader and so far Tinder has witnessed 20 billion successful matching, becoming the world’s most popular dating application.

Finally, the power of data is very fragile. The digital economy is a highly innovative industry, and even worse, its innovation is more biased towards the former than the latter, under the dichotomy of “Disruptive Innovation” and “Sustaining Innovation.” This means that in the ever-changing and rapidly-iterating competitive environment, the competitive edge of the data giants will turn out to be utterly unproductive competitors and business models, and may even be reversed. Even worse, the combination of such change and tipping effects often blunders the historical data-based decisions. MySpace and Facebook pass, AltaVista and Lycos lost to Google, Nokia give iPhone, Google + suffered Waterloo, Yahoo changed its name to “Altaba”, such an event is numerous.

images (2)In a recent article, economists Anja Lambrecht and Catherine E. Tucker carefully reviewed the view that data is the core competencies of companies, arguing that “there is little evidence in a volatile digital economy that merely with data that can fully exclude the supply of better products or services, the digital strategy should focus on how to use digital technologies to bring value to users in ways never before possible, in order to establish a sustainable competitive advantage. In this regard, the implication of “data is a new oil era” is that it implies that the possession of data is far less valuable than the development of data. Just as the great oil powers are often not economically powerful countries, this is not the alternative use of “resource curse.”

It is for these reasons that although regulators in the United States and Europe have expressed concern about data monopolies, they did not have a series of acquisitions such as Google’s acquisition of DoubleClick, TomTom’s acquisition of TeleAtlas, Facebook’s acquisition of WhatsApp, and Nielsen’s acquisition of Arbitron radical antitrust scrutiny on data, with the goal of undermining industry competition and infringing consumer rights. Of course, it goes without saying that the data giants’ collection and use of data pose challenges to the general public’s right to personal information and privacy, but that’s already a story outside the antitrust laws.

3 comments

  1. This means that in the ever-changing and rapidly-iterating competitive environment, the competitive edge of the data giants will turn out to be utterly unproductive competitors and business models, and may even be reversed.

    Liked by 1 person

  2. How can the data-based monopolies of some large corporations, and the ‘winner-takes-all’ economics associated with them, be addressed? … The Committee wants to use this inquiry to understand what opportunities exist for society in the development and use of artificial intelligence, as well as what risks.

    Liked by 1 person

  3. However, unlike a pure monopoly a natural monopoly arises “naturally” without the use of barriers to entry into the market. Therefore, the main difference between a natural monopoly and a pure monopoly is that, for a pure monopoly to exist there must be some barrier(s) preventing the entry and survival of a competing firm.

    Liked by 1 person

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