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Driver of Change: The Internet Economy

There is a general expectation that markets will change substantially over the next ten years through continued innovation in Internet business models and technology, the Internet of Things, and artificial intelligence.  This may bring about, as one participant suggested, the possibility of a new industrial and technological “Renaissance.”   Yet, participants are also concerned that there may be a steep increase the market power of Internet platforms and a growth in commercial fragmentation and walled gardens, which could imperil the future of innovation and entrepreneurship.

The potential for rapid technology change is recognized as shaping economy in both positive and negative ways, from increasing efficiencies, personalization, and entrepreneurship on the one, hand to increasing unemployment on the other.  There are fears for the welfare of society, traditional jobs, and local economies if Internet and technology-driven changes to industry and the marketplace outstrip the ability of societies and government to adapt to the rapid pace of change.

Some question the powerful role of large Internet platforms and companies, which some believe have may have a disproportionate influence on society and the economy in the future, shaping the way individuals and society shops, votes, and thinks.   A recurring question is whether the most widely-used on-line services and platforms retain or deepen their market position or face competition and possible replacement by new players in the future.

Many are concerned that market consolidation by Internet service and access providers in the future could spur the growth of so-called “walled garden” platforms, which restrict or make it difficult for users to access content and services located elsewhere. In addition to a loss of consumer choice, it may lead to “less independence, less incentives to innovate, and slow [infrastructure] development,” as one commenter noted.  

At the same time others note, however, that innovation and new services on the Internet often develop and move faster than predicted. Many large players and favourites of the past are now merely footnotes in the history of the Internet. They note, however, that continued success and perceived value of open, interoperable standards and permissionless innovation will be to realizing a dynamic and innovative future Internet.

For many there is clearly a crossroads ahead: will the future Internet be dominated by closed platforms and proprietary ecosystems or spurred on by open services, open standards, and multi-platform ecosystems? 

It also remains to be seen whether new tech such as Bitcoin and other potentially market shaping innovations will thrive.  And, if, as one participant suggested, the Internet experience becomes dominated by smartphone apps and social media what will the impact be on "permissionless" innovation and the availability of investment and opportunity?

Key Challenges and Uncertainties  Raised by our Community 

  • Market consolidation and growth of “mega players” and the implications.
  • Commercial fragmentation and the development of walled garden services and platforms.
  • Cheap money in the financial markets incentivizing “quick-flip” Internet ventures over longer-term business and technology investment.
  • Economics of data and value of personal information potentially deepening business models that exploit user information and behaviour.
  • New technologies and services that challenge existing institutions and industries (such as Bitcoin challenging financial markets, disruption of traditional businesses).

Questions from our Community:

  • Is platform-based consolidation (where the big get bigger) an inevitable end?
  • What impact will government reactions to the changing dynamics of the market and economy have on the industry in the future?
  • As players seek to leverage their scale in a hyperconnected world, what is the appropriate role for governments in addressing competition concerns?