End Of Competition, The: The Impact Of The Network Economy. C N A Molenaar

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      Uber and Airbnb also experience a great deal of opposition from the traditional suppliers and legislators. Uber is popular as a taxi business due to its good service, reliability and transparency, both in terms of price and route. Traditional taxi businesses, which work with licenses, feel threatened because customers prefer to use the Uber ride. Does it then not make sense that traditional taxi companies should also integrate these useful functionalities: an app, transparency, clear routes and automatic payments? The unwillingness to compete with the new entrants (Uber) is a typical response; ban the competition rather than adapt to change. However, considering the preference shown by customers, participating with the Uber concept is the only possibility for successful competition.

      Airbnb is facing similar opposition. This hospitality platform where private individuals can offer lodgings to other individuals is now immensely popular due to its small scale, low costs and flexibility. Many tourists no longer want the luxury of a hotel but prefer a place to stay without all the bells and whistles. The popularity of Airbnb is leading to more tourists visiting popular cities such as New York, London, Amsterdam and Barcelona. But as the homes of private individuals are used for lodging, this also leads to resistance.

      Limited legal restrictions can be appropriate at times; however, stringent regulations, or even bans, simply serve to resist the inevitable change. The resistance primarily comes from the strong lobby from hotels, which are seeing some of their profits disappear. But what we don’t see is a change in the business strategy in response to the wishes of the customers. This is even leading to Airbnb (probably) being banned in New York because hotels regard this as unfair competition. These tourists bring in money and help to stimulate employment and the economy. This leads to an extra financial impulse among private individuals who rent out a room or apartment. It is a double-edged sword; it is not the large hotels that profit from the tourists but private individuals and small and medium-sized businesses. The traditional providers, such as hotels, can still offer customers what they have always provided when it comes to ‘all the bells and whistles’ if that’s what they want. But for them, too, it is advisable to consider one’s own proposition and come up with a vision of the new structure. After all, that’s what the ‘guests’ want.

      Tourism is becoming an evermore important economic motor for employment and prosperity. In Amsterdam, some 70,000 people work in tourism. The network economy is not only technical but also physical. People travel more and look for new experiences. The Internet and the real-world influence one another; the network economy and the individualisation in society are parallel developments, both influencing one another. Hotels are hindered not only by Airbnb but also by booking sites such as Booking.com and Trivago. If hotels use these sites for reservations, they have to pay a fee; it becomes increasingly difficult to compete independently. However, competition is actually possible on a platform such as Booking.com. Here the supply is presented on the basis of search criteria entered by the customers. For hotels it all comes down to being able to offer something distinctive. For this service, i.e., mediation and marketing, you have to pay a margin, but you do get (many more) customers as a result. The platform in effect becomes the ‘market’. You compete on the platform, not with the platform. Platforms acquire a dominant market position, but within the platform, the competition between the suppliers is open.

      The following are just a few examples of developments that are possible due to the network economy:

      • bundling supply;

      • facilitating interactivity;

      • taking advantage of the technological possibilities.

      Particularly the strength of the so-called multisided platforms, which mediate between supply and demand on the basis of needs, ensures for different competitive relationships. These occur on a global scale where local markets are connected directly, not on the basis of geography but on the basis of users, suppliers or customers. It used to be inconceivable that local shops would have to compete with shops in America or China or that we would be able to have direct contact with our friends anywhere in the world, and even be able to have direct visual communication with them through various types of video-streaming services.

      A platform is a collaboration between parties, and the various types of platforms are as follows:

      • demand-driven platforms, the mediator between demand and supply;

      • aggregators (the bundling of supply) whose aim is to sell on behalf of various parties;

      • information platforms whose aim is to provide specific objective answers to questions (for example, regarding science, health or tourist information);

      • communication platforms that set up the communication between visitors, for example Facebook, as well as video platforms such as YouTube.

      In a platform business model, value is created by the owner of the platform as an independent intermediary, by matching two (or more) mutually dependent parties, as well as connecting them and facilitating the direct interaction between these parties.

      This network economy forms the basis for many changes. Some changes, such as the above-mentioned platforms, can already be seen and are leading to disruption in markets. Other applications have just been introduced or are yet to be introduced (such as blockchain). These will have a disruptive impact, but what can you do as a traditional supplier? Nothing, change or join other successful parties? The forces involved are quite considerable — from suppliers in Silicon Valley with plenty of money to consumers who adopt quickly. The decision is actually taken for you, with the market leaders becoming more dominant than they ever were. We can see the end of competition in its traditional form. But is that a bad thing? Are the advantages of traditional competition such that it should be maintained or will competition take place at other levels and in different ways? Old legislation from another era stands in the way of progress. Perhaps it is a good idea to see what has happened in the past and to examine the greatest drives behind the changes.

      How Did We Get Here?

      Traditional society is based on an analogue approach, often on physical principles. Society has changed slowly, and only major shocks have had any impact on the circumstances. Wars (such as the Second World War) have led to changes, but it is particularly the application of technology that has resulted in major societal changes. Technological developments continued to form the basis for not only change but also the foundation for economic growth, efficiency in the production process and international trade.

The First Industrial Revolution¹ in the 18th century, with the steam engine and mechanisation, resulted in the emergence of factories and subsequent major social demographic changes. The infrastructure was adapted, too, in order to enable train traffic (initially in England). The agricultural society changed, with many nouveau riche emerging (factory owners) as well as new dependants (the workers). This divergence led to undesirable situations such as poverty and dependency. The largest motors behind this change were transport, logistics and machinery (first powered by water and then later steam). International trade started to flourish (with England leading the way), and the technological foundation (factories) ensured for a more efficient production process and growth (albeit limited) of prosperity. This prosperity was, however, unfortunately not evenly distributed among the various population groups.

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