According to new research, the amount of distinctive sources and voices on the internet is proving to be in long-term decline.
A paper titled ‘Evolution of diversity and dominance of companies in online activity’ published in PLOS One scientific journal has shown that between 60% to 70% of all attention on prominent social media platforms in different market segments is focused on just 10 popular domains.
In contrast, new competitors are hustling to survive against these dominant players, with just 3% of online domains created in 2015 still active today, compared to nearly 40% of those formed in 2006.
The researchers stated that if they were organic lives, the infant mortality rate would be regarded as a global crisis.
Paul X. McCarthy, co-author of the paper and Adjunct Professor from UNSW Sydney’s Engineering faculty said ‘The internet started as a source of innovation, new ideas and inspiration, a technology that opens up the playing field, But it is now becoming a medium that actually stifles competition, promotes monopolies and the dominance of a small number of players.’
‘The results indicate the end state of many new industries is likely to be more concentrated than in the analogue economy with a winner-takes-most outcome for many.’
‘It means that there’s not as much natural competition in established domains. For example, in retail with Amazon or in music with Spotify. This may lead to non-competitive behavior by market leaders such as price discrimination and the use of market power to control suppliers and stifle potential future rivals.’
‘That is why some see a new role for market regulators to step in here.’
The research team which included Dr. Marian-Andrei Rizoiu from UTS, Sina Eghbal from ANU, and Dr. Daniel Falster and Xian Gong from UNSW, performed a large-scale longitudinal study to quantify the distribution of attention given in the online environment to competing organizations.
Over 6 billion user comments were examined from Reddit, dating back to 2006, while the Twitter data comprised 11.8 billion posts published since 2011. Overall, 5.6 terabytes of data were evaluated from over a decade of global activity online— a dataset more than four times the size of the original data from the Hubble Space Telescope.
The results proved that over the long run, a small amount of competitive giants are likely to dominate each functional market segment like search, retail and social media.
The paper notes: ‘If there are too few competitors or a small number of players become too dominant within any economic sector, there emerges the potential for artificially high prices and constraints to supply. Even more importantly, in the long-term, this gives rise to constraints on innovation.’
The review of data by the research team enabled them observe some specific dynamics which plays out when a new online market or function starts to flourish.
Initially, there is a great wave of diverse businesses appearing and attempting to serve the market. After that is a development phase when the amount of competitors peaks and then begins to reduce.
The last phase is the maturity phase where there is a significant decrease in diversity as users converge around an individual dominant organization— like Google for web searching and Amazon for online shopping.
Co-author Dr. Daniel Falster said ‘As with the natural environment, we can see the birth, growth and survival patterns of companies online when we look at them on a large enough scale.’
‘Now we can see consistent patterns of competitive dynamics that are becoming clearer and clearer. The loss of diversity is a cause for concern.’
Regardless of the findings, Prof. McCarthy says there are still opportunities for new businesses to emerge and succeed.
‘Businesses looking to grow and expand in the online world should be focused on innovation and collaboration— two salient features of many of the biggest winners in the digital economy,’ he said.
‘This new research—inspired in part by ecology— illustrates that while “species diversity” is in decline, there are also many new functional opening continually emerging in the jungle with global potential.’
By Marvellous Iwendi.
Source: UNSW Newsroom