Digital economy

Digital transformation is a truly cross-cutting issue that affects all sectors of the economy. In a way, the economy has reinvented itself. Entirely new business models have emerged (such as search engines) and existing business models have been moved into the digital space (such as social networks or trading platforms). Some companies or platforms have become very large due to phenomena such as network effects or practices such as the collection of data, which play an important role in the digital economy.

That is right, but users still “pay” by spending time on the website while their data are collected and ads are displayed. Paid subscription or premium models are, of course, also available. In the case of platforms that bring together multiple sides of the market (for example, retailers/buyers, hotels/customers), it often happens that only one side of the market pays money.

Network effects are one of the reasons why platforms on the internet have become so large. This could be described as a snowball effect: if many people already use a platform, others will want to be there too (to communicate with others or get to know new people). Users attract other users, who in turn attract even more users. A similar principle applies when more than one side of the market is involved: more retailers attract more buyers, and more buyers attract more retailers.

Data are one of the key drivers of market power in the digital economy. Data can be used to gain a lot of useful information (to improve products or services, for example) or for advertising purposes and they can be combined to learn even more about people. The more data a company has, the faster it collects data and the better it can combine data from different sources, the more powerful it will become.