COMMISSION STAFF WORKING DOCUMENT Online Platforms Accompanying the document Communication on Online Platforms and the Digital Single Market
Date: 2016-05-25
Institutions: Directorate-General for Communications Networks, Content and Technology, European Commission
Subjects: approximation of laws, computer applications, cross-border cooperation, data protection, digital technology, electronic commerce, information technology applications, innovation, regulation of telecommunications, single market

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 25.5.2016  SWD(2016) 172 final   COMMISSION STAFF WORKING DOCUMENT Online Platforms Accompanying the document Communication on Online Platforms and the Digital Single Market {COM(2016) 288 final}  
 
 
Table of Contents 

I. 

Introduction .................................................................................................................................... 1 

II.  Characteristics of online platforms ............................................................................................. 1 

2.1 Economics of online platforms .................................................................................................. 1 

2.2 Europe’s position in the platform economy .............................................................................. 8 

2.3 Increasing economic and social role of online platforms .......................................................... 9 

III. 

Online platform business models ........................................................................................ 16 

3.1 

Marketplaces and e-commerce platforms ..................................................................... 16 

3.1.1 General description .............................................................................................................. 16 

3.1.2 Business models ................................................................................................................... 16 

3.1.3 Main players ......................................................................................................................... 17 

3.1.4 Impact ................................................................................................................................... 18 

3.2 

Mobile ecosystems and application distribution platforms .......................................... 21 

3.2.1 General description .............................................................................................................. 21 

3.2.2 Business models ................................................................................................................... 23 

3.2.3 Main players ......................................................................................................................... 25 

3.2.4 Impact ................................................................................................................................... 26 

3.3 

Internet Search Services .................................................................................................. 26 

3.3.1 General description .............................................................................................................. 26 

3.3.2 Business model ..................................................................................................................... 27 

3.3.3 Main players ......................................................................................................................... 28 

3.3.4 Impact ................................................................................................................................... 30 

3.4 

Social media and content platforms ............................................................................... 32 

3.4.1 General description .............................................................................................................. 32 

3.4.2 Business models ................................................................................................................... 33 

3.4.3 Main players ......................................................................................................................... 35 

3.4.4 Impact ................................................................................................................................... 36 

3.5 

Online advertising platforms ............................................................................................ 37 

3.5.1 General description .............................................................................................................. 37 

3.5.2 Business models ................................................................................................................... 39 

3.5.3 Market players ...................................................................................................................... 40 

3.5.4 Impact ................................................................................................................................... 40 

IV. Summary ........................................................................................................................................ 44 

4.1 Increasing role in the digital economy of online platforms ..................................................... 44 

4.2 Diversity of online platforms .................................................................................................. 45 

4.3 Promoting online platform innovation in Europe .................................................................... 46 

 
 
 
 
 
 
 
I. 

Introduction 

The purpose of this Staff Working Document is limited to providing a factual overview of the 
main characteristics of online platforms and their social and economic contribution in Europe. 
As such this document does not provide a legal assessment or impact  analysis of potential 
problems  that  may  be  associated  with  online  platforms.  It  is  part  of  a  broader  assessment 
included  a  public  consultation, 
conducted  by 
Eurobarometer studies, and scientific workshops focusing on the impact of online platforms.    

the  European  Commission  which 

Online platforms (e.g. search engines, social media, e-commerce platforms, app stores, price 
comparison  websites,  ad  networks)  play  an  ever  more  central  role  in  the  online  world  and 
hence in social and economic life. They enable consumers to find online information and they 
allow  businesses  to  exploit  the  advantages  offered  by  e-commerce.  By  2015,  the  largest 
listed "online platform" companies worldwide had a market capitalization of USD 3.9 trillion.1 
Online  platforms  lead  the  list  of  the  most  accessed  websites  in  the  world2,  with  search 
engines,  social  media  and  e-commerce  as  the  most  visited  types  of  platforms.  The  growth 
and importance of online platforms has been widely recognised, and their role in society has 
been the subject of in-depth assessments by regulators across the European Union.3  

In  the  Digital  Single  Market  Strategy  Communication,  the  Commission  announced  a 
comprehensive assessment of the role of platforms, including in the sharing economy, and of 
online  intermediaries,  covering  issues  such  as  (i)  transparency  e.g.  in  search  results,  (ii) 
platforms'  usage  of  the  information  they  collect,  (iii)  relations  between  platforms  and  users, 
(iv)  constraints  on  the  ability  of  individuals  and  businesses  to  move  from  one  platform  to 
another4, and (v) how best to tackle illegal content on the Internet.  

Effectively stimulating innovation in the Digital Single Market, while adequately protecting the 
legitimate  interests  of  consumers  and  other  users,  is  an  important  challenge  that  the  EU 
faces  today  in  terms  of  securing  its  future  competitiveness  in  the  world.  The  General  Data 
Protection Regulation which modernises and provides technology neutral rules to protect the 
fundamental rights and legitimate interests of individuals and which at the same time reduces 
administrative  burdens  on  business  and  promotes  innovation,  is  an  example  of  the  type  of 
balance  that  has  to  be  achieved  to  create  a  favourable  environment  for  platforms:  it  both 
ensures there is trust by consumers and promotes economic growth. 

Chapter  II  of  the  Staff  Working  Document  provides  an  overview  of  the  characteristics  of 
online platforms. Chapter III presents several of the most popular business models of online 
platforms in more detail. A summary with key takeaways follows at the end. 

II.  Characteristics of online platforms  

2.1 Economics of online platforms 

Platforms  are  generally  known  as  "two-sided"  or  "multi-sided"  markets  where  users  are 
brought  together  by  a  platform  operator  in  order  to  facilitate  an  interaction  (exchange  of 
information, a commercial transaction, etc.). In the context of digital markets, depending on a 
platform's business model, users can be buyers of products or services, sellers, advertisers, 
software developers, etc.  

Multi-sided platforms are not exclusive to the online world and also exist in the off-line world. 
Throughout  history  businesses  have  organised  themselves  as  platforms.  The  simplest 
examples  are  markets  or  newspapers:  both  gather  sellers  and  buyers  in  a  common  space 
thereby  facilitating  contact  between  two  sides  that  would  otherwise  be  unlikely  to  interact. 
Nevertheless,  'real  life'  platforms  were  usually  limited  physically  and  geographically  (the 
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merchandise  had  to  be  transported  and  stocked,  a  paper  had  limited  circulation  and 
advertisements had to be location specific etc.)   

The Internet revolution and ubiquitous connectivity (better networks, connected devices, the 
smartphone  revolution)  has  led  to  an  unprecedented  expansion  of  the  platform  business 
model.  

As  discussed  in  subsequent  sections  and  in  the  JRC  report5,  there  is  no  consensus  on  a 
single  definition  of  online  platforms  as  a  clear-cut  definition  would  likely  be  too  narrow,  or 
conversely apply to a very wide range of Internet services. However, many online platforms 
share the following important characteristics: 

  capacity  to  facilitate,  and  extract  value,  from  direct  interactions  or  transactions  between 

users;  

  ability  to collect,  use  and  process  a  large  amount  of  personal  and  non-personal  data  in 
order  to  optimize,  inter  alia,  the  service  and  experience  of  each  user.  This  data 
aggregation capacity ("economies of scope") gives platforms an informational advantage 
over individual platform users and causes information asymmetry; 

  capacity  to  build  networks  where  any  additional  user  will  enhance  the  experience  of  all 

existing users – so-called "network effects"; 

  ability  to  create  and  shape  new  markets  into  more  efficient  arrangements  that  bring 
benefits to users but may also disrupt traditional ones. The ability to organise new forms 
of civil participation based on collecting, processing, altering and editing information; and 

 

reliance on information technology as the means to achieve all of the above. 

2.1.1 Multi-sided markets 
As opposed to the conventional "pipeline" business model where value is generated by the 
supplier  of  a  product  or  a  service,  a  large  part  of  the  value  derived  by  users  of  an  online 
platform's  is  created  by other  users.  The  effects  that  one  user  of  a  good  or  service  has  on 
their value to other users are known as "network effects". The concept of network effects in 
online platforms is further discussed in the section "Network effects". 

A  platform  operator  can  facilitate  transactions  by  reducing  transaction  costs.  For  instance, 
platform operators often provide a convenient way of matching the two sides of an interaction 
(e.g.  search  or  recommendation  function),  a  physical  or  virtual  space  to  interact,  a  code  of 
conduct,  dispute  resolution  mechanisms,  instruments  that  increase  trust  (e.g.  reviews, 
identity  checks),  methods  of  payment  or  certain  units  of  measurement  to  which  both  sides 
agree. Platforms' role as facilitators of interactions was brought to light in early literature on 
multisided  markets  which  emphasised  the  role  of  an  intermediary  in  the  coordination  of 
interests of the two sides of an interaction6.  

Certain  authors  propose  a  classification  that  distinguishes  between  three  types  of  online 
platforms7:  market  makers,  audience  makers,  and  demand  coordinators.    Market-makers 
bring  together two distinct groups that are interested in trading, increase the likelihood  of a 
match,  and  reduce  search  costs.  Audience  makers  match  advertisers  to  audiences. 
Meanwhile  demand  coordinators,  such  as  software  platforms,  operating  systems,  and 
payment  systems  coordinate  demand  between  different  user  groups  (for  example  card 
holders and merchants, developers and smartphone users).8   

One can also distinguish between transaction and non-transaction platforms9. Some sides in 
the  latter  type  of  platform  can  participate  without  engaging  in  a  transaction.  Membership 
externalities in non-transaction markets arise from simply joining the platform, for instance by 
placing an advertisement in a newspaper, possessing a payment card, having a point-of-sale 

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terminal  or  attending  an  auction.  Usage  externalities  arise  from  using  the  platform,  for 
example  by  paying  or  accepting  payment  with  a  card,  or  selling  or  buying  a  product  at  an 
auction.   

2.1.2 Platforms, resellers and service providers 
Some  experts10  propose  an  additional  factor  to  distinguish  multi-sided  platforms  from  other 
types  of  markets:  direct  interactions  between  two  or  more  sides.  A  reseller  buys  products 
from  the  supplier  and  acquires  control  rights  (over  pricing,  promotion  campaign,  sales 
conditions,  etc.).  By  taking  over  control,  the  reseller  also  assumes  the  largest  share  of  the 
risk in case the product is faulty. 

Figure 1: Multi-sided platforms vs. alternative business models 

Source: Hagiu & Wright (2015) 

In  its  purest  form,  an  online  platform  simply  offers  a  (virtual)  transaction  space  where 
suppliers  and  consumers  can  meet.  The  platform  does  not  intervene  in  the  transaction, 
except  by  asking  for  a fee  from  one  or  multiple sides of  the  transaction  in  order  to make  a 
profit.  A  platform  does  not  take  control  over  the  object  of  the  transaction,  meaning  that  it 
cannot  dictate  a  product's  price,  but,  on  the  other  hand,  it  bears  less  risk  compared  to  a 
reseller. 

Such  differentiation  significantly  narrows  down  the  scope  of  online  platforms  and  excludes 
pure resellers and online service providers from the category of online platforms. However, 
the difficulty with basing the definition of online platforms on the degree of control companies 
have over the interaction is that there are various degrees of such control and it is difficult to 
measure. A definition limited to only those cases where no control at all is exercised by the 
platform operator would risk being too narrow.         

It is also important to note that many companies adopt a hybrid business model, choosing to 
act  as  a  platform  operator  mediating  between  different  market  participants  in  one  area  of 
activity and as a reseller, or a vertically integrated firm, in another. There is also a spectrum 
of  business  models  that  fall  somewhere  between  these  two  categories  depending  on  the 
extent of control they exert over transaction parameters and direct contact between users.  

2.1.3 Economics of online platforms' business models 
Most online platforms make money by recruiting one set of users and offering them access to 

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another set of users. In this context, users are the 'raw material' that the platform uses in its 
business  model.  For  multi-sided  platforms  one  group's  demand  for  the  platform's  service 
depends  on  the  other  group's  demand.  By  facilitating  interaction  between  different  user 
groups - who could engage in a valuable exchange - multi-sided platforms reduce transaction 
costs and create value for all sides involved. 

Traditional business models are regarded as linear. In order to provide a product or a service 
to  a  customer,  businesses  go  through  R&D,  manufacturing  (in  the  case  of  goods), 
distribution and sales. A business model can be vertically integrated to complete all of these 
functions,  or  any  of  these  functions  could  be  sourced  from  other  producers.  In  any  case,  it 
can be generalised that value is created upstream and is flowing downstream to be delivered 
to the consumer.11 

Unlike  traditional  businesses,  multi-sided  businesses  are  not  linear.  Platforms  provide  a 
medium  in  which  one  set  of  platform  users  delivers  value  to  another  set  of  platform 
customers, as well as to the platform itself. 

As  a  result,  interdependencies  may  exist  between  platform  customer  groups  such  as  (inter 
alia):  (i)  producers  of  complementary  products  (e.g.  app  developers)  and  end  consumers 
(gamers),  (ii)  advertisers  and  readers,  (iii)  shoppers  and  sellers,  (iv)  job  seekers  and 
recruiters,  (v)  accommodation  providers  and  accommodation  seekers,  (vi)  transportation 
providers and passengers.  The demand of the different customer groups for the platform is 
related to the supply of other platform customer groups and vice versa. 

2.1.4 Network effects 
In economics and business,  a network  effect is  the  effect  that  one  user  of  a good or 
service has on the value of that product to other people.  

When positive network effects are present, the value of a product or service increases with 
the increasing number of other users. Direct positive network effects apply to the same group 
of users (e.g. the more users join a telephone network, the more it  makes  it  worthwhile for 
others to join). In the online world, this is the case with users of social networking platforms 
(e.g. Facebook). For users of those platforms, the value of using the platform grows as other 
participants with whom they can interact start joining.  

Indirect  positive  network  effects  exist  where  users  of  one  group  benefit  from  an  increased 
presence of users from a different group (e.g. sellers on an online marketplace benefit from a 
higher  number  of  buyers).  Economic  models  of  platform  markets  or  multi-sided  markets 
emphasize 
feature 
that  relatively  strong 
distinguishing platforms from one-sided markets.12  

indirect  network  effects  are  an 

important 

For example, the presence of more traders at an online marketplace increases the value of 
the  online  marketplace  for  shoppers.  In  that  way,  individual  stores  benefit  indirectly  by  the 
addition of other stores due to increased website traffic. This process also works conversely: 
the  presence  of  more  shoppers  increases  the  value  of  joining  for  sellers.  Consequently, 
shoppers  benefit  indirectly  from  the  interest  of  other  shoppers  in  the  marketplace  as  the 
increased  number  of  potential  customers  attracts  more  sellers  resulting  in  wider  choice  for 
each shopper. Similarly, the presence of a wide selection of hotels on a travel marketplace, 
for example, attracts more accommodation seekers to the platform. This then increases the 
value  of  the  platform  for  hotels  and  leads  to  even  more  hotels  joining,  thereby  resulting  in 
higher customer interest.  

Indirect network effects can have asymmetric intensities on the various sides of a platform. 
For example, a social media platform is at first interested in getting as wide a user base as 
possible.  However,  this  does  not  translate  to  higher  profits  for  the  platform.  In  order  to 
monetize its activity, the platform needs to attract advertisers to whom it can sell access to its 

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existing  user  base.  Advertisers  may  be  much  more  interested  in  accessing  the  users  than 
users are in receiving advertisements (the indirect network effect generated by the users is 
bigger than the indirect network effect generated by the advertisers).  

The  asymmetry  of  indirect  network  effects  is  lower  in  the  case  of  classical  marketplaces 
(both  sellers  and  buyers  benefit)  and  higher,  for  example,  in  the  case  of  advertising  based 
platforms  where  both  positive  (supply  of  content)  and  negative  indirect  network  effects 
(advertising)  are  present.  A  number  of  experts  conclude  that  it  is  not  necessary  for  the 
existence of a multi-sided market that indirect network effects be positive and act with equal 
strength in both directions.13 

Cross-subsidization  may  lead  to  the  growth  of  the  overall  number  of  platform  users  and 
benefit  both  sides.  This  explains  why  offering  free  services  to  some  platform  users  might 
make  perfect  business  sense,  and  why  “free”  services  for  consumers  are  a  prevalent 
business model in the modern platform economy.14  

Due to the presence of network effects, such as preferential attachment, and the benefits of 
customer  aggregation  for  saving  transaction  costs,  platforms  need  a  critical  mass15  of 
customers  on  all  sides  to  survive.  Start-up  platforms  are  faced  with  a  “chicken  and  egg 
problem” - it is the presence of customers on side '1' that attracts customers on side '2', and 
the  presence  of  customers  on  side  '2'  attracts  customers  on  side  '1'.  Thus,  each  entrant 
platform,  which  usually  has  no  customers  on  either  side  initially,  needs  to  find  ways  of 
motivating both sides of the platform to join.  

It is not only the number of customers that join that matters, but also attracting customers on 
both sides of the platform in the right proportions. If the platform attracts too many customers 
on side '1', without there being sufficient customers on side '2', then those on side '1' might 
choose  to  leave  as  using  the  platform  would  not  bring  them  much  value.  Their  exit  would 
render  the  prospect  of  attracting  customers  on  side  '2'  even  more  difficult,  and  could 
ultimately result in a negative feedback loop. If a platform cannot reach this critical mass both 
in  terms  of  scale  and  balance  between  the  different  customer  groups,  it  will  not  be  able  to 
survive in the long-run. 

2.1.5 “Single-homing” and “Multi-homing” 
Customers may use one or more platforms for the same purpose. Customers 'single-home' 
when  they  only  use  one  platform  and  therefore  restrict  themselves  to  interacting  with 
customers on the other side of that platform (e.g. most people use one operating system on 
a single device). Customers “multi-home” when they use two or more platforms and therefore 
can  access  customers  on  any  of  the  platforms  they  use  (e.g.  most  people  have  more  than 
one payment card).  

A  platform  aiming  to  develop  a  'single-homing'  business  model  will  try  to  ensure  that  a 
customer spends as much time as possible on that platform. This is strongly related with the 
phenomenon  of  economies  of  scale  and  scope  in  data  collection  discussed  in  the  next 
section.  A  platform  operator  has  a  strong  incentive  to  adapt  its  service,  through  e.g. 
diversification,  acquisition  so  that  its  offer  goes  beyond  a  simple  service  and  becomes  an 
'experience'  or  'ecosystem'  encouraging  the  customer  to  stay  on  the  platform  as  long  as 
possible. 

2.1.6 Economies of scope in data collection and analysis 
As the number of users on a platform increases, the benefits for a user of a growing number 
of other users on the platform depend on the efficiency of matching mechanisms developed 
by the platform operator. The raison d'être of online platforms is their capability to efficiently 
match a large number of users in a market in order to facilitate an interaction16.  The sheer 
volume of information available on the Internet and the constantly growing number of users 

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of  platforms  creates  a  matching  challenge.  Online  marketplaces  can  carry  many  more 
products  than  off-line  stores  can  ever  manage.  The  indexes  of  search  engines  contain 
billions of web pages.  

The  key  role  of  online  platforms  is  to  help  users  of  different  sides  of  the  market  (sellers, 
buyers,  social  media  users,  advertisers,  software  developers,  etc.)  to  find  what  they  are 
looking for.  

The  connected  world  is  producing  personal  and  non-personal  data17  at  an  ever  increasing 
rate. Less than a decade ago, the International Data Corporation estimated that the size of 
'the digital universe' was about 130 exabytes18. By 2013 that had grown to an estimate of 4.4 
zettabytes19  and  accumulated  data  keeps  growing  40%  a  year20,  expanding  to  include  not 
only the increasing number of people and enterprises doing everything online, but also all the 
“things” – smart devices – connected to the Internet, unleashing a new wave of opportunities 
for businesses and people around the world. What differentiates data from other input factors 
is that data is virtually non-finite. It can be reused again and again without necessarily losing 
its value and it can be reused in multiple ways for achieving different results (personalisation, 
statistics,  identifying  trends,  etc.).  The  EU  has  recently  reformed  its  data  protection  rules, 
providing more control by individuals over their personal data and incorporating the principles 
of  'data  protection  by  design'  and  'data  protection  by  default'  which  motivates  architects  of 
Big Data analytics to use techniques like anonymisation, pseudonymisation, encryption, and 
protocols  for  anonymous  communications,  so  as  to  ensure  appropriate  data  protection 
settings and safeguards. 

This is also the rationale why online platforms have become some of the main actors in the 
emerging  area  of  "Big  Data"21.  Big  Data  refers  to  extremely  large,  dis-aggregated  datasets 
that  may  be  analysed  in  order  to  reveal  patters,  trends  and  associations.  Big  Data  is 
commonly described with  three "Vs": volume (ever increasing), variety (every consumer is a 
data  point,  with  data  being  collected  on  novel  types  of  variable  such  as  transactions,  likes, 
searches, geolocation, messages, etc.) and velocity (data is acquired in real time and needs 
real  time  processing).  Sometimes  a  fourth  "V"  is  added  for  veracity  referring  to  the 
trustworthiness of data. 

Big data helps platforms adapt their services to better match the preferences of consumers, 
optimise  their  business  processes,  reduce  costs  and  identify  new  market  trends  or 
opportunities. It has been referred to as a management revolution in business22. Big data has 
the potential to radically change our lives23. When open, it can be used for scientific research 
that  allows  deeper  insight  into  economic  or  socio-demographic  trends.  Personalized 
information  feeds,  improved  search  results,  and  various  recommendation  engines  are 
constantly improved based on data collected. This is achieved with the use of self-improving 
algorithms  that  are  good  at  discovering  complex  patterns  in  relatively  unstructured  large 
datasets  that  are  beyond  the  cognitive  capacity  of  humans  to  handle.  In  general,  when  the 
appropriate  processing  tools  are  available,  the  larger  the  volume  and  variety  of  data,  the 
more  insight  can  be  achieved  into  the  consumers'  behaviour  and  preferences24.  Applying 
machine  learning  algorithms  to  smaller  datasets  separately  may  be  more  costly  and  would 
not produce the same quality of insights.  

Certain  online  platforms  are  well  placed  to  take  advantage  of  Big  Data  due  to  significant 
economies  of  scope  (variety  of  data)  and  scale  (volume  of  data)  associated  with  data 
collection  and  analysis.  They  facilitate  and  collect  data  about  billions  of  interactions  each 
day.  As  the  number  of  users  and  functionalities  of  online  platforms  expands,  it  leads  to  a 
dramatic accumulation of data. For example, Facebook has nearly 1.6 billion active monthly 
users (more than 50% of all Internet users) and reached 1 billion daily active users in August 
2015  (1  in  7  people  on  Earth)25,  each  generating  a  considerable  amount  of  personal  data. 
Many online marketplaces are now able to track in real time what users look at, what options 
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they prefer or discard and what is purchased.  Upstream, they are constantly monitoring the 
logistics chain, with real-time inventories and delivery. An extra layer of added value comes 
from  combining  the  data  around  the  sale  itself  with  elements  regarding  customer 
preferences, demographics, advertising, credit history or social media interaction.  

Online platforms are also among the most visited websites in the world. A small number of 
platforms are currently the main starting pages for browsing the Internet (in 2001, the top 10 
websites accounted for 31 % of all U.S. page views, but by 2010 they accounted for 75 % of 
them.26  Virtually  all  top  10  global  websites  by  Alexa  monthly  online  traffic  operate  online 
platforms27). 

In  addition  to  the  scope  and  scale  of  data  collected  by  online  platforms,  the  main  market 
players  make  significant  investments  in  hardware,  software  and  human  resources.  For 
example,  Amazon  has  28  total  sets  of  data  centres  across  the  world,  with  a  typical  facility 
containing 50,000 to 80,000 servers (estimates range between 1.5 million and 2 million).28 In 
2013 both Google and Microsoft had data centres running more than 1 million servers.29 The 
largest  companies  invest  billions  of  USD  each  quarter  in  computer  infrastructure.30  This 
infrastructure  can  also  be  accessed  by  other  companies  through  Amazon's,  Google's  and 
Microsoft's cloud services.31  

2.1.7 Platforms and risk management 
One of the major differences between platform business models and resellers relates to the 
management  of  ex-post  risks  associated  with  a  transaction.  While  a  reseller  controls  most 
aspects of the transaction (including the quality of the offered product or service), the role of 
many online platforms is to facilitate a transaction for others. When platforms match demand 
and supply bringing together consumers and suppliers but are not involved in the underlying 
provision of goods or services, certain risk factors arise which they do not control. However, 
in addition to the need to comply with all legislation that is applicable to them, also when they 
are  not  involved  in  the  underlying  provision  of  goods  or  services,  operators  of  online 
platforms  are  aware  that,  in  order  to  attract  users,  they  need  to  provide  a  transaction 
environment that helps to mitigate ex-post risks associated with platform transactions. Most 
platforms  and  intermediaries  described  in  section  II  internalise  the  management  of  some 
risks  through  self-regulation  based  on  community  codes  of  conduct,  user  reviews,  ex-ante 
control of suppliers' credentials, dispute resolution, insurance schemes, etc. 

Online  platforms  are  well-placed  to  proactively  reduce  the  amount  of  illegal  content  that 
passes  through  them.  Many  platforms  have  already  voluntarily  put  in  place  some  proactive 
measures  which  go  beyond  their  legal  obligations.  Measures  range  from  various  filtering 
technologies  (e.g.  PhotoDNA  hashing  technology  for  child  abuse  content  or  fingerprinting 
technology  for  music  files  in  course  of  upload,  with  their  own  tools  such  as  Youtube's 
ContentID or with commercial solutions such as Audible Magic), blocking (e.g. URL blocking 
based on black-list of Internet Watch Foundation), moderation of content by algorithms, staff 
or  community  (e.g.  manual  checking  of  algorithmically  flagged  comments  in  the  discussion 
forums),  enforcement  of  termination  policy  (e.g.  toward  users  who  repeatedly  infringed 
rights), implementation of terms of service or of community guidelines (e.g. quality standards 
for customers), improved notice submission systems (e.g. by establishing "trusted flaggers" 
or  by  allowing  direct  removal  of  counterfeiting  offers),  degradation  of  service  to  users  or 
repeat 
industry  (e.g.  Memoranda  of 
Understanding  regarding  anti-counterfeiting  efforts).  In  particular,  such  voluntary  measures 
can  prevent  that  the  same  illegal  content  which  has  been  once  notified  is  uploaded  or 
indexed again after being removed.  

infringers  and  voluntary  agreements 

the 

in 

7 

 
 
 
 
2.2 Europe’s position in the platform economy  

Europe  has  a  potential  to  be  a  leading  digital  player  in  the  world,  benefiting  from  well-
developed  digital  infrastructure,  a  well-educated  population  increasingly  using  the  Internet, 
combined with a culture of creativity and innovation, as well as a solid industrial base. The 
EU has a strong competitive position32, with many of the Member States ranking highly in the 
technological readiness index – i.e. economies that can easily adopt existing technologies to 
enhance the productivity of their industries. Europe has the highest percentage of individuals 
using the Internet worldwide, with over 77% of the population - significantly above the world 
average.33 This translates to a strong European performance in key digital market indicators, 
such  as  percentage  of  e-commerce  in  total  retail  sales,  social  media  usage,  or  the  overall 
size of the app economy. E-commerce has experienced substantial growth in recent years.34 
EU  companies  made  around  17.5%  of  their  turnover  from  electronic  sales  in  2015,  an 
increase by 2.5% compared to 2014.  

In  terms  of  social  media,  over  50%  of  European  citizens  have  been  participating  in  social 
networks  as  of  2015,  with  29%  of  them  uploading  self-created  content on  such  networks.35 
On  the  business  side,  61%  of  European  SMEs  mentioned  that  they  used  social  media  in 
2013, with the majority of them using social media for developing their company's image.36 

In terms of the app economy, Europe is a significant global actor. It is estimated that in 2013 
EU developers accounted for 42% of global consumer app revenue (before payment of fees 
due  by  app  developers  to  platform  providers  on  revenue  earned).37  EU  developers  earned 
EUR  17.5  billion  in  revenue  in  2013  (including  not  only  consumer  app  revenue  comprising 
app sales, in-app purchases and advertisement, but also contract labour), and it is forecast 
that  figure  will  increase  to  EUR  63  billion  in  five  years.38  On  the  consumer  side,  Europe 
comes second to China and before the US in terms of the number of app downloads. 

Figure 2: Smartphone and Tablet App Downloads (billion)  

Source: Digital Agenda Scoreboard 2015 – Use of Internet39 

While  Europe  is  very  good  at  inventing  new  technologies  and  digital  concepts,  it  struggles 
with the commercial exploitation of these ideas, i.e. creating the necessary aggregates that 
combine these concepts in a usable form and extracts  value out of the ideas. The clearest 
example is the creation of the World Wide Web, which was invented by Sir Tim Berners-Lee, 
a British computer scientist based at CERN in Switzerland, but it was only when the concept 
was taken up and commercialized in the US that the Web started being monetized. 

The  fact  that  Europe  struggles  with the  commercialization  of  ideas, including  in  the  area  of 
8 

 
 
 
online platforms, is noticeable when looking at the number of European platforms compared 
to other parts of the world, especially North America and Asia.  

Figure 3: Geographical distribution of start-up platforms 

Source: A. Gawer and P. Evans (2015). The rise of platform enterprises, CGE white paper, using CB Insights, 
Capital IQ and CrunchBase, 2015 
A study on the rise of the platform enterprise40 highlights how out of the total 176 platforms41 
studied,  only  25  (or  15%)  were  European,  accounting  for  a  little  over  4%  of  market  value. 
The study categorizes online platforms in transaction, innovation, investment and integrated 
platforms. Europe is absent from the integrated category and present with only one platform 
in the innovation group. The two categories are particularly important, as these are the types 
of platforms that attract the most value. 

A  2012  Report  for  the  European  Commission  Joint  Research  Centre  on  ICT  innovation 
concludes  that  the  EU  is  particularly  poorly  positioned  in  the  area  of  platform  providers.  At 
the  same  time,  the  report  finds  that  in  ICT  ecosystems  power  has  shifted  to  platform 
providers  and  that  platforms  have  significant  potential  to  generate  growth.  The  report 
highlights that "the lack of a large integrated digital market in Europe and poor capability and 
skills  to  commercialize  technological  innovations"  are  important  impediments  for  European 
ICT firms to grow into world leading innovators.42 

2.3 Increasing economic and social role of online platforms 

Online  platforms  with  their  growing  role  in  social  and  economic  life  are  important  to  the 
functioning of the digital economy. By enabling consumers and businesses to make the most 
of  the  opportunities  provided  by  the  digital  economy,  they  are  key  drivers  of  growth, 
innovation and competition. 

The  online  platform  business  model  continues  to  lead  to  the  creation  of  high-value 
companies.  Since  the  largest  online  platforms  are  some  of  the  biggest  companies  in  the 
world, one could argue that the online platform business model is the most successful one in 
the Internet economy. Moreover,  70% of the highest value start-up  firms in 2015 (so-called 
"unicorn"  companies  with  valuations  of  USD  1  billion  or  more)  are  online  platforms.43 
Alphabet is valued at around EUR 475 billion, while Facebook is valued at close to EUR 300 
billion.  The  chart  below  illustrates  the  geographical  distribution  of  start-up  platforms  across 
three continents. 

Online  platforms  are  active  in  a  wide  array  of  sectors,  offering  or  facilitating  access  to 
information,  exchange  of  goods  or  services,  as  well  as  allowing  users  to  communicate 
amongst themselves and with wide audiences. They play an active role in shaping  the way 
the Internet works and are often the main portal to the Internet for a wide variety of users.  

Furthermore,  the  role  of  online  platforms  in  the  economy  and  society  will  likely  continue  to 

9 

 
 
 
increase  in  the  future.  This  growth  is  expected  to  come  from  increased  mobile  activity  and 
B2B  transactions  gradually  moving  to  open  online  platforms.44  Amazon's  B2B  e-commerce 
marketplace  is  said  to  already  today  offer  businesses  access  to  "hundreds  of  millions  of 
products".45  

The  number  of  global  users  of  mobile  phones  is  growing.46  Worldwide  mobile  broadband 
subscriptions  have  quadrupled  in  the  past  five  years  to  over  3.5  billion  in  2015.47  A  larger 
proportion  of  the  EU  population  now  accesses  the  Internet  via  mobile  phones  than  via 
laptops or other devices. This trend is particularly pronounced among the younger generation 
(aged 16-29) as can be seen from the chart below. 

Figure 4: Use of mobile phone/tablet computer, EU28, 2015 (% of people aged 16-74) 

Source: Eurostat (online data code: isoc_ci_ifp_pu)48 

Increased  Internet  and mobile  activity  of  consumers  is  also  reflected  in  business  behaviour 
and  revenues.  For  example,  growth  in  advertising  revenues  in  the  EU  is  driven  by  the 
expansion of the online and mobile segments. Notably, mobile advertising revenue in the EU 
grew  by  55%  (EUR  +1.4bn)  in  2014,  while  online  advertising  revenue  increased  by  12.5% 
(EUR  +2.7bn).49  Advertising  revenues  are  an  important  source  of  income  for  many  online 
platform business models (as demonstrated in Chapter II). 

Favourable trends in the growth of high-speed mobile Internet penetration are likely to further 
foster the growth in the use of online platforms in the EU. 

Figure  5:  EU  4G  mobile  communications  network  coverage,  %  of  households  (left), 
broadband penetration (right) 

10 

 
 
 
Source: Digital Agenda, Eurostat (fixed broadband takeup) 

2.3.1 Benefits for consumers 
Consumers value a wide range  of benefits of online platforms. Platforms' potential to make 
information  more  accessible;  make  communication  and  interaction  easier;  create  new 
markets or business opportunities; and increase choice of products and services are among 
the most often cited benefits. 

Figure 6: Perceived benefits of online platforms50 

Source: Public Consultation: Regulatory environment for platforms, online intermediaries, data and cloud 
computing and the collaborative economy, 2015 

Online  platforms  enable  consumers  to  easily  compare  competing  offers  based  on  price, 
quality, delivery or other attributes.51 
Consumers draw concrete financial benefits from the advantages provided by platforms. Due 
to the complexity of both online platforms and the nature of the benefits, accurate figures of 
these financial benefits are hard to determine. Nevertheless, several estimates exist, such as 
the impact of online platforms on prices which was calculated at a total value of EUR 1 billion 
in  reduced  prices  for  European  consumers.52  Overall,  the  estimated  value  of  purchases 
made  by  final  consumers  (i.e.  households  and  public  sector)  is  valued  at  EUR  270  billion, 
which corresponds to 2.5 per cent of the total final consumption in the EU28-countries.53 

Looking  more  broadly  at  the  benefits  brought  to  consumers  simply  by  making  products 
available, an estimate for the niche book market showed that consumer benefits can reach 
EUR 4 to 5 billion.54 Valuations of the consumer surplus (welfare gains from free products on 
11 

 
 
 
  
 
the  Internet)  vary  from  about  EUR  1,100  per  individual55  to  an  overall  benefit  of  EUR  135 
billion.56 Moreover, online search platforms bring an estimated EUR 140 billion in time saved 
for European consumers.57 

In  a  nutshell,  benefits  for  consumers  arise  from  online  platforms'  offerings  of  a  range  of 
services that ensure: 
  consumer convenience (time saving, accessible at any hour of the day, personalization, 

 

 

simplified transaction system, home delivery) 
reduced  information  asymmetry  (through  rating  systems,  comparison  tools,  simplified 
terms and conditions) 
improved awareness (ads promoting goods and services that the user was unaware of, 
more accessible product information) 

  greater choice (diversity of products and sellers) 
  monetary  benefits  (offering  packages  of  goods  and  services,  promoting  deals,  reducing 

costs of access to information) 

  additional  sources  of  income  (consumers  can  sell  their  products  on  marketplaces,  offer 

services through sharing economy platforms) 

On  the  other  hand,  online  platforms  have  also  been  shown  to  raise  some  concerns  for 
consumers. As mentioned in the Digital Single Market Strategy Communication, issues that 
need  to  be  assessed  include  transparency  e.g.  in  search  results  (involving  paid-for  links 
and/or  advertisement),  platforms'  usage  of  the  information  they  collect,  relations  between 
platforms and suppliers, constraints on the ability of individuals and businesses to move from 
one platform to another and how best to tackle illegal content on the Internet.   

Some  of  the  above  concerns  are  already  covered  by  existing  EU  law.  For  example,  EU 
consumer and marketing law deals with transparency of online platforms in order to assure 
they do not mislead consumers, for example as regards sponsored search results and online 
rating  and  review  systems.  Additionally,  the  EU's  General  Data  Protection  Regulation58 
requires  online  platforms  to  respond  to  privacy  concerns  by  effectively  informing  users  of 
what data is collected and how it is shared and used.    

2.3.2 Benefits for businesses 
In relation to the benefits online platforms bring to companies, the most important factors are 
cost  reduction  and  the  promotion  of  business  opportunities,  as  these  are  the  two  main 
characteristics that lead to business growth.   

In terms of cost reduction, one of the main impacts that online platforms have on companies 
is reducing transaction costs. Transaction costs are the costs associated with participating in 
a  market  place  and  can  include  the  search  or  information  costs  incurred  in  identifying 
relevant  opportunities,  negotiation  and 
transferring  costs.  Search  engines  have 
fundamentally  changed  the  way  that  companies  gather  information,  sort  it,  or  adapt  it  to 
market  trends.  Additionally,  companies  benefit  from  the  information  about  customers  they 
received through online marketplaces. Results from a new Eurobarometer survey show that 
almost  two  thirds  of  the  companies  using  online  marketplaces  agree  that  the  information 
about  the  behaviour  and  preferences  of  their  customers  they  receive  through  online 
marketplaces  is  useful  for  the  development  or  improvement  of  their  products  or  services 
(64%).59 

With regard to online marketplaces, one of the most important benefits of online platforms is 
offering businesses access to a wider market than they would otherwise reach through their 
own websites. This is especially the case for smaller companies that can use marketplaces 
to  target  market  segments  or  geographic  markets  otherwise  out  of  reach.  Moreover,  some 

12 

 
 
 
 
online  marketplaces  (for  example  Amazon  and  Etsy)  assist  their  sellers  in  dealing  with  tax 
and other legal implications of exporting to EU member states. A report estimates that 93% 
of  SMEs  using  eBay  engage  in  exporting,  compared  to  only  26%  of  traditional  companies 
which  engage  in  e-commerce  without  using  the  services  of  online  marketplaces.60  In  the 
period 2010-2014 SMEs operating online have increased their cross-border sales in the EU 
four times faster than those without an online presence.61  

Moreover,  by  analysing  sales  and  looking  at  customer  reviews,  online  platforms  can  help 
businesses  better  understand  a  market  and  adapt  their  products  to  consumers'  needs. 
Depending on the platform, a company can personalize its marketplace presence and ensure 
a better consumer experience by attracting and retaining customers. In some cases, sellers 
can  also  use  the  logistic  chains  set  up  by  marketplaces  to  dispatch  their  products  -  an 
essential characteristic for Europe where delivery costs can be significant. 

Furthermore, social networks can be an important tool for companies to promote themselves 
and  establish  direct  contact  with  their  customers.  Social  media  is  an  important  tool  for 
companies  to  raise  awareness  of  their  business  and  it  enables  them  to  create  marketing 
campaigns  at  a  fraction  of  the  cost  of  traditional  advertising.  Social  media  also  provides 
businesses with real-time feedback from customers that they can use in order to improve or 
adapt their goods and services, thereby improving customer retention and loyalty.  

Considering these advantages, it would appear that SMEs stand to benefit significantly from 
social  media  tools,  as  social  networks  reduce  the  cost  of  customer  interaction.  European 
SMEs  that  use  social  media  appear  to  be  doing  better  than  non-users,  with  29%  of  SMEs 
that are social media users claiming that their situation has improved over the period of 2010 
– 2013.62  

Figure 7: Financial position of users over last 3 years 

Source: Use of Social Media by European SMEs 

SMEs  can  also  benefit  from  using  social  media  in  their  external  interactions  with  suppliers, 
collaborators  and  investors  as  it  increases  the  speed  of  access  to  knowledge  and  experts, 
and reduces communication costs.  

13 

 
 
 
 
 
 
 
Figure 8: Benefits of using social media 

Source: Use of Social Media by European SMEs 

What  is  more,  online  platforms  provide  businesses  with  a  range  of  productivity-enhancing 
applications  with  back-office  functions.  Examples  include  low-cost  ways  of  processing 
payments,  simple  accounting  software  for  small  companies,  and  platforms  that  help 
businesses run events, among others.63  

On  the  other  hand,  online  platforms  can  also  raise  some  issues  referred  to  in  the  previous 
section  as  well  as  issues  relating  to  competition  and  misleading  marketing  practices. 
Competition addresses issues of competition between market players, while other EU rules 
prohibit misleading B2B advertising64. 

2.3.3 General economic and social benefits 
Much  of  the  impact  of  online  platforms  is  very  difficult  to  quantify.  Facebook  estimated  its 
global economic impact at over EUR 195 billion in 2014, deriving from its role as a catalyst 
for  economic  activity  in  ecosystems  including  marketers,  app  developers,  and  providers  of 
connectivity.65  Nevertheless,  it  remains  unclear  whether  it  is  possible  to  calculate  the 
economic impact of the role social networks play in ensuring freedom of expression in parts 
of the world where human rights are less observed. 

On  their  part,  search  platforms  have  opened  up  research  and  access  to  knowledge  on  a 
global scale. Coupled with the increasing rate of smartphone penetration, this could lead to a 
worldwide educational boom and improved standards of living. 

Furthermore,  online  platforms  bring  the  additional  benefit  of  facilitating  employment.  It  is 
estimated that online platforms can reduce the search costs for employers by 75% compared 
to  commissioning  external  recruiters.  As  many  professional  profiles  are  public,  companies 
can reach out to people even when they are not actively seeking a new work opportunity. A 
McKinsey  study  shows  that  75%  of  recruitment  occurring  through  an  online  platform  are 
passive recruits.66  

Not only do online platforms facilitate employment but also they contribute to more equitable 
distribution among different groups. For example, although the typical offline entrepreneur in 
the  UK  is  male  in  his  late  forties,  91%  of  UK-based  Etsy  sellers  are  women  and  61%  are 
under age of 45.67  

Finally,  over  the  past  decade,  we  have  seen  established  platforms  expand  into  new 
economic  sectors.  For  instance,  Amazon  started  out  as  a  book  selling  business,  and  then 
opened  its  platform  to  begin  trading  a  wide  range  of  goods,  as  well  as  establishing  a 
14 

 
 
 
marketplace for third-party companies. Amazon realized the importance of market data in its 
success  and  continuously  invested  in  acquiring,  storing  and  processing  large  amounts  of 
data.  Over  time,  this  has  spun-off  as  a  side  company:  Amazon  Web  Services  which  is 
currently the market leader in cloud computing. Similar developments happened with Google, 
which  expanded  in  enough  areas  for  Google's  search  engine  to  eventually  become  the 
component providing the revenue stream for a wider structure called Alphabet. 

However,  this  tendency  to  move  to  new  economic  sectors  is  not  limited  to  established 
platforms.  Start-ups  have  historically  tried  to  identify  market  inefficiencies  and  used  the 
power of mobile connectivity, social media, algorithms detecting market trends, and adaptive 
pricing in order to take over traditional sectors, such as organized travel (Priceline, Expedia), 
tourism  (Airbnb),  transport  (Uber,  Lyft)  and  business  communication  (Slack).  In  addition  to 
providing services at a lower cost, these online platforms, especially collaborative economy 
platforms,  can  potentially 
to  better  resource  allocation  and  more  sustainable 
consumption patterns.   

lead 

2.3.4 International dimension 
The global reach of the Internet makes it one of the most efficient and cost effective solutions 
for e-commerce and online platforms. Online  platforms provide opportunities  for companies 
of  all  sizes  and  customers  in  developing  countries  as  much  as  developed  ones,  wherever 
Internet  access  is  available.  Online  platforms  are  also  used  in  international  companies' 
production systems, as today's production is mainly done in fragmented and geographically 
dispersed  global  value  chains  (GVCs).  This  ability  to  split  up  production  driven  by  ICT  and 
access  to  the  Internet  is  spreading  across  the  world.  However,  for  global  value  chains  to 
operate  fully,  large  quantities  of  data  –  from  employment  data  and  customer  data,  to 
technical  product  data  and  data  produced  during  the  usage  of  a  product  –  must  be  moved 
across borders. 

The whole process of producing goods from raw materials to finished products is increasingly 
carried out wherever the necessary skills and materials are available at competitive cost and 
quality. Similarly, trade in services is essential for the efficient functioning of GVCs, not only 
because  services  link  activities  across  countries  but  also  because  they  help  companies  to 
increase the value of their products. 

The EU has recently levelled the playing field in respect of data protection rules, which are 
now  applicable  to  organisations  which  offer  their  goods  or  services  to  individuals,  or 
monitoring  the  behaviour  of  individuals  in  the  EU.  This  means  non-EU  platforms  targeting 
individuals in the EU will have to play by the same rules as EU based platforms. International 
trade  flows  depend  on  international  and  other  agreements,  like  the  negotiated  EU-U.S. 
Privacy  Shield,  to  guarantee  that  the  Internet  can  be  used  safely  as  a  means  of 
communications when buying and selling online. The size of the data flows between the U.S. 
and the EU are the largest globally; approximately 55% larger than data flows between the 
U.S. and Asia and 40% larger than data flows between the U.S. and Latin America.68 

The  amount  of  data  will  grow  as  manufacturers  move  into  more  advanced  production 
involving  sensors  and  intelligent  robotics,  and  the  introduction  of  3D  printing  into  their 
processes. A significant part of the data being moved is personal data. 

15 

 
 
 
 
  
 
III.  Online platform business models 

3.1 Marketplaces and e-commerce platforms 

3.1.1 General description 

Online  marketplaces  can  be  defined  as  online  platforms  on  which  direct  transactions 
between  sellers  and  buyers  of  goods  and/or  services  can  take  place.  In  particular,  EU 
legislation  regards  online  marketplaces  as  service  providers  which  allow  consumers  and 
traders to conclude online sales and service contracts on online marketplaces' websites.69 

Much like in the real world, an online marketplace is a central entity that offers 'virtual space' 
to  third-party  sellers  of  goods  and  services  in  exchange  for  a  commission  -  with  the 
marketplace offering tools to conduct the transaction. Clear examples of online marketplaces 
that would be encompassed by this definition are eBay, Amazon Marketplaces and Rakuten.  

Online  marketplaces  allow  transactions  going  beyond  the  sale  of  physical  goods.  Digital 
goods, such as computer games/software are sold on specialized platforms such as Steam, 
Unity, Origin or the marketplaces for the Xbox and Sony Playstation  game consoles. Other 
types  of  marketplace  platforms  aim  to  facilitate  the  supply  of  goods  and  services  between 
professionals  (B2B),  including  online  financial  trading  platforms,  energy  exchanges  (e.g. 
virtual natural gas trading hubs) or data exchanges (e.g. Factual, DataMarket).  

This  section  will  focus  on  those  online  marketplaces  that  involve  the  provision  of  goods  to 
consumers,  since  they  are  by  far  the  largest  category  in  terms  of  spending  on  online 
purchases  (representing  approximately  80%  of  average  spending  in  different  product 
categories in Europe). 

For  certain  categories  of  resellers,  marketplaces  can  reduce  transaction  costs  with  buyers 
beyond what could be achieved by the resellers themselves. The scale and efficiency offered 
by online platforms has moved both private and professional sellers to the online sphere.  

Sometimes online marketplaces can be difficult to distinguish from online resellers.70 Certain 
online marketplaces also exist where both the vertically-integrated platform operator as well 
as  third-party  sellers  are  active  in  the  sale  of  goods.  Amazon,  Bol.com  and  Zalando  are 
examples of such online marketplaces.71 

3.1.2 Business models 

The  core  function  of  online  marketplaces  is  the  provision  of  a  single  platform  on  which 
transactions between participating buyers and sellers can happen. For certain categories of 
participants, they lower transaction costs by, for example, bringing different sellers together 
in one place,  providing recommendation functionality for customers, setting  basic rules and 
codes  of  conduct,  providing  convenient  payment  methods,  etc.  In  this  respect,  they  share 
some of the characteristics of local weekly markets or shopping centres. However, due to the 
use  of  online  technologies,  they  can  operate  at  a  completely  different  scale,  collect  much 
more valuable data and provide new and valuable services to both buyers and sellers. 

Online  marketplaces  generally  'vet'  third-party  sellers  in  some  way  or  another  (e.g.  by 
awarding  certificates,  displaying  customer  reviews  or  requiring  authentication  measures), 
and given that they intermediate in the payment process (e.g. by prohibiting certain payment 
methods that are susceptible to fraud) they may increase the level of trust for consumers. 

Online  marketplaces  can  offer  additional  functionalities  to  all  sides  using  the  platform.  For 
improved  consumer 
consumers,  a  platform  can  have  built-in  auction  mechanisms, 
experience through suggestions  and consumer engagement, increased trust and consumer 
awareness through review systems or mechanisms to report fraud. Given the involvement of 
an  online  marketplace  as  a  professional  intermediary  in  transactions  between  buyers  and 

16 

 
 
third-party  sellers,  there  is  however  a  need  for  clarity  on  the  precise  responsibilities  of  the 
various  actors  involved,  including  in  terms  of  ensuring  respect  for  consumer  rights.  For 
businesses, an online marketplace can allow small companies to use the platform's logistic 
chain  to  ship  products  to  consumers,  provide  user  data  allowing  for  targeted  advertising, 
authentication  and  valuation  services  to  third-party  sellers  or  support  for  secure  payment 
methods.  

There is a wide variety  of online marketplace business  models. Many  of them specialise  in 
certain types of products or services. Some are relatively open with limited control over the 
type of offers (e.g. Craigslist) while others are relatively closed with the marketplace operator 
vetting the offer of the seller (e.g. Steam). In the former case the seller simply has to register; 
in  the  latter  the  operator  decides  who  may  or  may  not  be  included.  Some  online 
marketplaces  are  operated  by  a  company  which  is  also  a  merchant  (Amazon,  Alibaba, 
Pixmania, Zalando) while others are solely marketplaces (Allyouneed, eBay, Rakuten).  

Online  marketplaces  can  generate  revenue  in  a  variety  of  ways,  principally  through  fees 
charged  on third-party sales  but also through the sale of online advertising space. Amazon 
charges a 'referral fee' for each item sold as a percentage of its total sale price. This fee is on 
average  15%  but  varies  depending  on  the  product  category  (e.g.  for  video  game  consoles 
the  fee  is  8%  of  sales  price).  This  does  not  include  the  listing  fee  ($0.99)  and  a  variable 
closing  fee  ($1.35  for  media  products  but  based  on  item  weight  and  shipping  for  other 
products). Sellers using Amazon fulfilment services pay an additional 8-15% of the sale price 
of each item (on top of other Amazon fees) 72. Etsy, a marketplace for crafts charge 3.5% of 
the selling price and a listing fee (minimum $0.20)73. Catawiki charges 12.5% commission on 
each  winning  bid.74  EBay  charges  a  10%  commission  on  the  total  cost  for  the  buyer 
(including  shipping  cost)  of  each  item  sold  as  well  as  a  monthly  charge  for  listing  items 
('insertion  fee').75  Additionally,  eBay  offers  advertising  space  on  its  website  to  third-parties 
including advertising networks. 

Online  marketplaces  may  principally  compete  for  customers  with  bricks-and-mortar  retail 
outlets. This is regardless of whether the online platform operates also as a reseller of goods 
or only as a mere intermediary marketplace.  

3.1.3 Main players 

Major  examples  of  online  marketplaces  active  within  the  European  Economic  Area  ("EEA") 
include  eBay,  Amazon,  Allegro,  Spartoo76,  Zalando77  (online  marketplace  for  fashion  on 
which  both  Zalando  itself  as  well  as  third-party  sellers  are  active),  and  Chrono24  (global 
online marketplace for luxury watches). The top 20 online marketplaces in Europe based on 
website traffic can be seen below. 

Figure 9: Top 20 Online Marketplaces in Europe by Traffic78 

Rank 

URL 

Country 

Category 

1 

2 

3 

4 

5 

6 

amazon.de 

amazon.co.uk 

ebay.de 

ebay.co.uk 

allegro.pl 

amazon.fr 

DE 

UK 

DE 

UK 

PL 

FR 

Full range 

Full range 

Full range 

Full range 

Full range 

Full range 

17 

Run by 
seller / 
neutral 

Owner 

HQ 

S 

S 

N 

N 

N 

S 

Amazon 

Amazon 

eBay 

eBay 

Allegro 

Amazon 

US 

US 

US 

US 

PL 

US 

 
 
7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

leboncoin.fr 

amazon.it 

ebay-kleinanzeigen.de 

amazon.es 

ebay.it 

cdiscount.com 

mobile.de 

ebay.fr 

subito.it 

otto.de 

gittigidiyor.com 

fnac.com 

tesco.com79 

marktplaats.nl 

FR 

IT 

DE 

ES 

IT 

FR 

DE 

FR 

IT 

DE 

TR 

FR 

UK 

NL 

Full range 

Full range 

Full range 

Full range 

Full range 

Full range 

Automotive 

Full range 

Full range 

Full range 

Full range 

Full range 

Full range 

Full range 

N 

S 

N 

S 

N 

S 

N 

N 

N 

S 

N 

N 

N 

N 

Leboncoin 

Amazon 

eBay 

Amazon 

eBay 

Cdiscount 

eBay 

eBay 

Leboncoin 

Otto 

eBay 

Fnac 

Tesco 

eBay 

FR 

US 

US 

US 

US 

FR 

US 

US 

FR 

DE 

US 

FR 

UK 

US 

Source: Bundesverband Onlinehandel, Top 100 Online marketplaces in Europe, 2016 

The  increasing  importance  of  these  online  marketplaces  is  underlined  by  their  significant 
turnovers,  growth  rates  and  investor  interest  in  their  business.  The  successful  regional 
Benelux marketplace Markplaats.nl was acquired by eBay already back in 2004 for EUR 225 
million.80  PriceMinister,  an  e-commerce  site  in  France,  was  acquired  by  Rakuten  Japan  in 
2010 for EUR 200 million81. EBay, in turn, reported significant global net revenues of around 
USD  8.8  billion  for  its  marketplaces  business  in  201482  (up  from  around  USD  7.4  billion  in 
201283). This constitutes only a fraction of the volume of trades that occurred via its various 
online  platforms.  Even  a  specialised  online  marketplace  like  Chrono24.com  reported  EUR 
500 million of luxury watches having been sold via its website in 2014.84 Finally, Catawiki, an 
online  auction  marketplace  for  collectables  that  was  founded  only  in  2008  was  reported  to 
have been the fastest growing technology firm in the EMEA-region in 2015.85 

3.1.4 Impact 

According  to  the  European  B2C  eCommerce  Report  issued  annually  by  Ecommerce 
Europe86, the turnover of B2C e-commerce (online platforms and e-retailers included) in the 
EU28  is  estimated  to  have  grown  by  almost  14%  from  EUR  317.9  billion  in  2013  to 
approximately  EUR  370  billion  in  2014.87  While  it  is  difficult  to  pinpoint  how  much  of  this 
turnover is generated by resellers and how much by platforms, it is clear that online platforms 
play a significant role in all national markets. For example, Amazon is market leader in both 
share and unique visitors in Germany, the United Kingdom and France, the three biggest e-
commerce  markets  in  Europe  (Germany,  France  and  the  UK  account  for  over  55%  of  e-
commerce in Europe.) 

Figure 10: Share of European B2C e-commerce market  

18 

 
 
Source: Ecommerce Foundation, 2015 

A  study  commissioned  by  EDiMA  (a  European  trade  association  representing  online 
platforms)  estimates  that  EU  households  and  governments  purchased  2.5%  of  their  total 
consumption via online platforms in 2014, which according to the study amounts to EUR 270 
billion.88 

Currently  in  Europe  there  are  over  50  companies  which  offer  more  than  335  online 
marketplaces  –  60  in  Germany,  30  in  France,  24  in  Italy  and  18  in  Netherlands  and  in 
Spain.89  Although  Amazon  is  the  largest  global  marketplace  with  more  than  2  million 
companies from over 100 countries selling via Amazon's market place90, local players have 
spread  out  in  Europe  and  have  increased  their  footprint  across  other  countries.  In  several 
European countries, online marketplaces on which a specific category of service or product 
is  sold  are  significant  market  players  at  national  level,  such  as  Zalando  (a  marketplace  for 
fashion  items)  and  AutoScout24  (a  car  marketplace).  Despite  the  rapid  growth  of  e-
commerce, overall its importance vis-à-vis bricks and mortar shops is still modest. However, 
some  forecasts  predict  that  by  2020,  the  main  online  marketplaces  may  account  for  up  to 
40% of the retail market globally.91  

The  impact  of  online  platforms  goes  well  beyond  turnover.  Online  marketplaces  have 
fundamentally  changed  entire  retail  sectors,  such  as  media  (books,  movies,  and  music), 
tourism,  fashion  or  consumer  electronics.  Clothes  and  sports  goods  are  the  most  common 
category  of  online  purchases  and  have  seen  remarkable  growth  in  recent  years.  Six  in  ten 
online shoppers (60%) bought such products in 2015 compared to 47% in 2010. Slightly over 
half  of  online  shoppers  have  bought  travel  and  holiday  accommodation  (52%)  while  about 
four 
for  events  (37%)  and 
books/magazines/e-learning material (36%)92. 

ten  have  bought  household  goods  (41%), 

tickets 

in 

According to a 2015 Eurobarometer survey, among the EU companies that sell online, 35% 
rely on small online marketplaces, 33% on large online marketplaces and 80% on their own 
websites or apps93.  

Given the existing scale of e-commerce in Europe and its potential for further growth94, online 
marketplaces are bound to increasingly impact consumers and businesses alike. Consumers 
gain  major  advantages  in  the  process;  the  ability  to  effectively  shop  cross-border  online 
allows  for  a  wider  choice  and/or  lower  prices.  Online  marketplaces  allow  consumers  to 
overcome  fundamental  barriers  to  exploiting  the  full  potential  of  the  EU's  internal  market 
(including lack of trust and language barriers).95 In order for this business model to develop in 

19 

 
 
 
 
the future, consumers' trust is likely necessary.96 

Businesses, in turn, benefit from online B2C marketplaces that offer a wider target audience. 
Online marketplaces such as Amazon or Etsy provide support for sellers looking to sell in a 
different EU Member State. As a consequence, almost half of Amazon Germany’s third-party 
retailers are foreign traders.97 

Online marketplaces (C2C, B2C and B2B), therefore, have a crucial role to play in enabling 
growth  and  innovation,  as  the  potential  for  efficiency  gains  combined  with  increased  price 
competition will favour innovative firms and increase research and development spending. 

3.1.4.1 Collection and processing of personal data and non-personal data 
Online  and  e-commerce  marketplaces  rely  on  considerable  amounts  of  personal  and  non-
personal data in order to ensure that they provide a holistic shopping experience. For online 
platforms each user, whether company or customer, can be considered a very valuable data-
generating  source.  Big  data  technology  is  then  used  to  ensure  personalization  of  offers, 
setting prices or maintaining inventories. This use of data fosters innovation and adds to the 
efficiency  gains  generated  by  online  market  places.  Data  can  also  better  protect  consumer 
rights by ensuring that consumers receive all the relevant product information and are better 
protected from unreliable traders.  

Consumers  are  generally  aware  of  the  fact  that  their  personal  data  is  being  gathered, 
processed and stored by online marketplaces, even though they might not be aware of the 
levels  of  data  collection  or  how  well  websites  can  get  to  know  a  consumer's  habits  and 
preferences.  Online  marketplace  platforms  usually  offer  the  possibility  of  downloading 
historic order histories which may go back to the date of registering on the platform. These 
types  of  reports  may  not  contain  all  information  that  online  marketplaces  have  on  users. 
According  to  Privacy  Notices  published  by  major  online  marketplaces,  in  addition  to  order 
history,  online  marketplaces  may  collect,  store  and  process  data  relating  to  the  user's  IP 
address, browser type, the full clickstream to and from the platform site, including date and 
time, product views  and searches, location information  when  mobile apps are used (unless 
the location services on the mobile phone are disabled), and session information relating to 
user behaviour online, such as length of page visits, information about page interaction (such 
as scrolling, clicks, mouse-overs), and methods used to navigate away from the page. 

A  Special  Eurobarometer  Survey  431  from  2015  shows  that  only  20%  of  the  respondents 
considered that they were  always informed about the conditions  of personal data collection 
and  further  uses  of  their  personal  data.  Consumers  are  generally  concerned  about  their 
personal data when buying online. According to the 2015 DSM consumer survey, over 30% 
of consumers indicate that they fear their personal data might be misused and 26% fear that 
their  payment  card  details  might  be  stolen.  The  new  EU  rules  for  personal  data  protection 
require  better  transparency  and  information  to  be  provided  to  individuals,  increases  their 
control  over  their  personal  data  while  allowing  data  controllers  to  operate  on  a  risk-based 
approach.  Transparency  and  accountability  can  contribute  to  increasing  individuals'  trust  in 
online services. 

An  online  platform  will  always  have  more  information  than  each  of  the  sides  using  the 
platform, since it is the central point where all the data is gathered. Platforms can use all the 
information  to  better  connect  the  sides  (via  ranking  and  recommendations),  to  attract  new 
participants to the platform or to sell the gathered data to advertisers. Where this information 
consists of personal data, any processing must be in compliance with the EU data protection 
rules. 

Online  platforms  may  in  specific  cases  make  use  of  collected  data  to  understand  market 
trends, dynamics and the position of players. In particular, they may have an interest to do so 

20 

 
 
where  vertical  integration  exists,  i.e.  where  the  platform  directly  competes  with  third-party 
companies selling through the platform.  

Information asymmetry can also play a role in dealing with consumers. An online platform is 
able  to  determine  where  a  customer  comes  from  and  depending  on  the  operating  system 
used history of purchase or type of payment and based on consumer trends understand what 
the financial bracket of a customer is. It can then differentiate among consumers and adapt 
pricing. 

3.1.4.2 Dynamic pricing 
Online marketplaces are able to apply dynamic pricing, prices adapted to the characteristics 
of  an  individual  consumer.  Each  retailer  has  different  practices  when  it  comes  to  dynamic 
pricing.  

Retailers (and implicitly online marketplaces) are free to set their own prices and the notion 
of  dynamic  prices  is  not  illegal  in  itself.  Nevertheless,  there  is  a  debate  about  how  much 
consumers  are  aware  of  this  practice  and  to  what  extent  setting  prices  on  the  basis  of 
customer information may lead to discrimination in particular when prices are established on 
the  basis  of  factors  like  nationality  which  may  not  be  seen  as  a  justifiable  means  to 
distinguish prices. Under certain circumstances, which must be assessed on a case-by-case 
basis by national authorities and courts, dynamic pricing practices could also be contrary to 
EU consumer and marketing law.   

3.1.4.3 Distribution of risk 
Online marketplaces and e-commerce websites generate a significant amount of traffic and 
sales  activities. This  also means that they  are becoming an  important target for distributing 
counterfeit  goods.  At  global  level,  the  OECD  estimated  that  in  2007,  international  trade  in 
counterfeit  and  pirated  goods  could  have  accounted  for  up  to  USD  250  billion,  which  is  an 
amount that is greater than the national GDPs of the bottom 150 economies in the world98. 
The International Chamber of Commerce estimated that the upper bound of the global value 
of counterfeit and pirated products could reach USD 1.77 trillion by 2015. 

Statistics published on 27 October 2015 by the European Commission show an increase in 
Europe  in  the  number  of  shipments  suspected  of  violating  intellectual  property  rights.  In 
2014,  more  than  95,000  detention  cases  were  registered  by  customs.  Small  parcels  and 
express  and  postal  traffic  resulting  from  Internet  sales  make  up  a  significant  proportion  of 
detentions.  As  far  as  the  over  35  million  detained  articles  are  concerned,  the  value  of  the 
equivalent genuine products is estimated to be just over EUR 617 million99. 

In  response  to  that,  major  online  platforms  have  set  up  programs  to  self-police  their  own 
respective marketplaces and take upon themselves the risk of potential third-party counterfeit 
goods.  For  example,  Amazon's  policy  (A-to-Z  Guarantee)  ensures  that  consumers  can 
replace  products  that  are  suspected  to  be  counterfeit.  Sellers  on  Amazon  have  the 
responsibility to source and sell authentic products or they will be removed from the platform. 
EBay runs the VeRO100 system, a subscription service allowing IPR holders to check items 
being  sold and notify eBay if  they  are counterfeit, in which case eBay  will then remove the 
listing. 

3.2  Mobile ecosystems and application distribution platforms 

3.2.1 General description 

In  recent  years  a  rapid  shift  of  online  activity  patterns  has  taken  place  from  PCs  to 
smartphones. Applications ("apps") for smartphones and tablets play an important role in this 
regard. Today, Android and iOS smartphones alone are outselling PCs 5 to 1, not counting 
tablets, and this ratio is predicted to rise to 10 to 1 in the next few years.101 Therefore, mobile 

21 

 
 
has  become  the  key  new  market  ecosystem  and  led  to  the  development  of  important 
marketplaces for software and digital content. Whether looking at the rise of the "internet of 
things"  (IoT),  wearables,  in-car  systems,  or  the  reinvention  of  the  more  traditional  desktop, 
app stores will play a key role in the future.  

App stores, such as Google Play (Android) and App Store (iOS) are important components of 
mobile ecosystems enabling users to download apps to mobile  devices. It is estimated that 
there  are  more  than  1.5  million  different  apps  available  to  consumers  in  Google  Play 
(Android)  and  App  Store  (iOS).102  Whatever  can  be  done  using  a  mobile  device,  it  is  likely 
that "there is an app for that". 

Between 2008 and 2015 the proportion of time spent online using mobile devices increased 
from 12.7 percent to 54.6%103 and approximately 85% of that time is spent in native apps104. 
In  Europe,  it  is  estimated  that  the  share  of  mobile  commerce  in  online  spending  doubled 
between 2014 and 2015 and now reaches 25%.105 Mobile is becoming the dominant revenue 
source for Internet-based service providers. For example, Facebook earned 78% of its global 
advertising  revenue  from  mobile  in  2015  Q3106  compared  with  14%  in  2012  Q3.107    These 
trends are expected to continue.108  

3.2.1.1 Emergence of mobile ecosystems and application distribution platforms 
The  advent  of  modern  smartphones  (with  the  introduction  of  Apple's  iPhone  in  2007)  has 
revolutionized mobile phone design, transforming the mobile ecosystem structure and started 
the convergence of traditional mobile telephony, Internet services, and personal computing. 
New services have sprung up, transforming the very nature of ‘core services’ for carriers, as 
voice, text and later video communications got embedded into apps.  

The  evolution  of  devices  has  been  accompanied  by  rapid  improvements  in  wireless 
communication  technology  with  expansions  of  cellular  networks  across  Europe  –  4G 
coverage  continues  to  grow  rapidly109  -  and  computing  power  of  mobile  devices.  These 
advances  have  opened  a  vast  opportunity  for  mobile  devices  to  become  much  more  than 
simply a communication device and expanded the possibilities to download and install third-
party software.  

Mobile platform ecosystems created the conditions and incentives for third-party developers 
to come up with applications for the underlying technology and participate in a wide variety of 
value creation experiments. 

Currently, Europe has a growing and globally successful community producing mobile apps, 
hardware and IoT devices. App store revenues attributable to European developers are 30% 
of  the  global  total110  and  European  app  developer  revenues  are  projected  to  reach  EUR11 
billion  by  2020.111    Additionally,  there  are  a  number  of  European  businesses  developing 
hardware extensions to mobile apps, including fitness and payment systems.112  

Figure 11: Global smartphone sales to end users from 1st quarter 2009 to 4th quarter 
2015, by operating system (in million units)113 

22 

 
 
Source: Gartner; ID 266219 

3.2.1.2 Mobile ecosystems and the solutions stack 
The solution stack encompasses the key elements of the mobile ecosystem. It has evolved 
along  with  the  transition  from  basic  mobile  phones  to  smartphones  and  has  grown 
progressively more complex with the addition of services, OS features and content. Its main 
elements are114: 

-  Hardware, which includes the sub-components that go into a mobile phone like display, 

camera, memory, microprocessors or a graphical processing unit (GPU). 

-  Device is the actual end-user equipment, which integrates the hardware components and 

the software components like the OS and apps. 

-  Software includes the OS and other capabilities that form the OS like the user interface. 

-  Services  component  includes  the  services  available  to  the  users  that  enhance  the 
functionality  of  a  mobile  phone  like  cloud  storage  and  backup,  navigation,  voice 
commands or natural language input and so forth. 

-  Content includes apps making use of the services. 

The  solution  stack  is  currently  highly  complex,  with  the  devices  integrating  more  hardware 
components, such as faster microprocessors, near field communication (NFC) chips and the 
OS  evolving  to  accommodate  them.  The  OS  vendors  created  some  of  these  services  and 
included them as a part of the platform, while other services were launched as apps but were 
later absorbed into the platform. 

3.2.2 Business models 

A mobile OS is responsible for identifying and defining mobile device features and functions. 
It  primarily  manages  the  wireless  variations  of  local  and  broadband  connections,  access  to 
cloud resources, mobile multimedia and various input methods. 

The  existing  ecosystems  in  the  mobile  phone  market  are  built  on  top  of  smartphone  OS 
platform and provide the capability to run apps and services for the ecosystem participants. 
OS developers provide the supporting infrastructure like software development kits (SDKs), 
app  stores,  support  forums  and  payment  mechanisms,  needed  for  development  of  these 
apps and services. 

There are three main types of mobile operating systems: 

23 

 
 
 
 
II. 

I.  Manufacturer-built  proprietary  operating  systems  where 

the  operating  system 
developer is also the hardware manufacturer. Examples include Apple's iOS and the 
BlackBerry OS. 
Third-party proprietary operating systems where the operating system developer will 
license its operating system, usually for a fee, to third-party hardware manufacturers 
(Original Equipment Manufacturers or OEMs). An example of this model is Microsoft's 
Windows OS. 

III.  Open  source  operating  systems  where  the  operating  system  developer  will  release 
the operating system via the open source license method. Examples include Google 
Android and Symbian 

Firms  developing  smartphone  OSs  include  Google  (Android),  Apple  (iOS),  Microsoft 
(Windows Phone) and Blackberry (BlackBerry OS). While Apple and BlackBerry are vertically 
integrated  with  their  own  handsets,  OSs,  and  app  stores,  Google  and  Microsoft  focus  on 
licensing their OSs to multiple partners. 

3.2.2.1 Indirect network effects – the growth engine of mobile ecosystems 
By connecting users to developers, ecosystems may create network effects. In other words, 
they may drive demand between users and developers: the more users, the more handsets, 
and  therefore  the  more  developers,  the  more  apps  and  so  the  more  users.  It  is  a  positive 
feedback  loop  resulting  in  nonlinear  growth  properties  which  outdo  traditional  linear 
economies of scale. 

Successful  ecosystems  have  managed  to  attract  a  large  number  of  users,  advertisers  and 
app  developers.  Each  group  benefits  from  the  presence  and  growth  of  the  other.  Users 
benefit  from  a  growing  choice  of  apps  and  developers  benefit  from  a  growing  number  of 
potential customers. These 'indirect network effects' make a mobile ecosystem viable when it 
has managed to attract a significant number of users and advertisers. It also contributes to a 
significant supply of apps. 

The two main mobile ecosystems (Android and iOS) offer developers ways to monetize their 
apps.  The  app  stores  running  on  iOS  and  Android  facilitate  payments  and  transactions, 
collect  feedback  from  users  and  reduce  the  search  costs  for  consumers.  Along  with 
launching  SDKs  for  developers,  Apple  and  Google  set  up  online  mobile  app  stores,  virtual 
marketplaces where the users could buy apps and content. They also provided a centralized, 
simplified  monetization  framework  for  the  developers  to  charge  the  users  for  their  apps, 
making transactions easier and increasing revenue potential for mobile app developers.  

Figure 12: Monetisation of Apps 

24 

 
 
Store fee 

iOS 
$99  
yearly fee 

Sales  
commission* 

Payout  
schedule** 

Payout  
threshold 

30% 
excluding physical services  
external to any app 
More than 30 days  
after the month is over 
$10  
$150  
other currencies 
EUR, CAD, CHF, GPB,  
HDK, JPY, SEK, SGD,  
USD currencies 

Google Play 

$25  
one time fee 

30% 

Within a few days  
after the month is over 

Other  

Only specific price tiers are allowed  
(from $0.99 to $999.99) 

* An unofficial industry standard for how much in-app stores take is 30% for app, in-app products, and  
subscription services. There are app stores that withhold less but usually they could not guarantee high  
traffic 
** Many app markets pay within 30 days after the end of the month 

Sources: Prepared by the European Commission  

Operators  of  mobile  ecosystems  exercise  a  varying  degree  of  control  over  the  apps  and 
content sold through their app stores. However, they all require apps to be subject to some 
kind of a vetting process.  

3.2.2.3 Direct network effects  
Mobile  ecosystems  may  also  be  characterized  by  direct  network  effects  between  actors  at 
the same side  of  the market or  at  the  same level in the value chain. Direct network effects 
between  players  at  the  same  sides  of  the  app  ecosystems  can  materialize  among  handset 
manufacturers,  network  operators,  end  users  and  developers.  For  example,  users  of 
messaging apps gain directly from more widespread adoption of the app.  

3.2.2.4 Application distribution platforms (app stores)  
Apps  are  a  key  element  of  the  mobile  ecosystem  solutions  stack  and,  depending  on  the 
system,  an  app  store  is  the  only  or  main  way  for  consumers  to  download  apps  on  their 
devices.  

App stores have simplified distribution issues previously faced by developers by reducing the 
overhead  of  managing  user  acquisition,  payment,  invoicing,  after-sales  service,  etc.  App 
stores  are  popular  among  developers  for  simultaneously  reducing  the  time  needed  for 
making an app available for download from the moment of submission (time to shelf), and for 
reducing the time within which the payment of the customer reaches the developer (time to 
payment).115 Moreover, apps have grown rapidly since the launch of app stores in 2008, with 
developer revenues reaching close to EUR 30 billion in 2015.116  

Being a gateway to app discovery can create a competitive advantage. (Kincaid, J., 2011a). 
This  explains  why  not  only  OS  developers  (Apple,  Google,  Microsoft),  but  also  OEMs  (LG, 
Samsung),  as  well  as  mobile  carriers  (Verizon,  China  Mobile,  SFR)  and  content  providers 
(Amazon) have rushed to create their own app stores. 

3.2.3 Main players 

Android  is  the  most  widespread  mobile  OS  with  an  82.8%  share  in  Q2  2015.  iOS  comes 
second with 13.9% of the market, and Window Phones third with 2.6%. Google Play and the 
Apple  App  Store  are  the  two  main  platforms  for  app  distribution  worldwide.  Both  platforms 
are  in  rapid  expansion,  whether  measured  in  terms  of  app  downloads  or  in  revenues 

25 

 
 
 
 
therefrom.117  

Along with the makers of the OS(s), there are numerous other players that may be involved 
at every level of the solution stack. Their role and freedom of action differs depending on the 
level  of  openness  of  the  mobile  ecosystem.  Companies  controlling  the  ecosystems  made 
different  choices  as  to  which  parts  of  the  mobile  solutions  stack  to  keep  full  control  of  and 
which parts to open to third-party partners providing complementary products or services.  

The  two  biggest  players,  Google  and  Apple,  have  adopted  differing  approaches  to 
ecosystem openness, as well as different models of monetizing their operating systems and 
governing their app stores. Apple maintains full control over the solution stack including key 
hardware components, design of the device, operating system, app store, a number of apps 
and  associated  services  (music,  books,  maps,  mail,  calendar,  cloud  storage,  messaging, 
video  calls).  At  the  same  time,  although  the  Android  operating  system  is  free  and  open-
source,  much  of  the  software  that  vendors  have  to  install  in  order  to  sell  smartphones 
certified  by  Google  and  containing  Google's  app  store  (including  Google's  own  apps  and 
vendor-installed software) is proprietary. 

3.2.4 Impact  

A study by Gigaom for the European Commission found that in 2013 EU developers took in 
EUR 17.5 billion in revenue and it was forecasted to increase to EUR 63 billion in 2018. In 
addition to EUR 6 billion from in app sales, in-app spending for virtual goods and advertising, 
EU  developers  recognized  EUR  11.5  billion  in  2013  from  contract  labour.  However  the 
overall EU trade balance of the app economy is negative (-EUR 128 million). This is mostly 
due to the app platform fees that EU developers pay on revenue earned. 

The study estimated that the EU app-developer workforce would grow from 1 million in 2013 
to  2.8  million  in  2018  with  additional  support  and  marketing  staff  resulting  in  total  app 
economy  jobs  of  1,8  million  in  2013,  growing  to  4.8  million  in  2018.  By  comparison,  the 
European film industry employs over 373 000 people, and reached revenues of some EUR 
60  billion  in  2011.  A  recent  study  from  Plum  Consulting  shows  that  App  store  revenues 
attributable to European developers are 30% of the global total.118 

The  industry  is  likely  to  experience  further  dynamic  growth  as  app  stores  move  beyond 
smartphones and mobile operating systems or their adapted versions are increasingly used 
to run other devices from smart TVs to in-car systems and smart wearable devices.  

3.3 

Internet Search Services 

3.3.1 General description  

Internet  search  engines  are  services  that  help  internet  users  find  the  relevant  answers  to 
their search requests from among tens of billions of web pages on the internet. They facilitate 
direct interaction  between internet users seeking  information, website operators seeking  an 
audience  for  their  content,  and  online  advertisers  targeting  potential  customers.  The 
fundamental purpose of a search engine is to make it easier for users to find information on 
the  internet.  Given  the  fact  that  the  number  of  web  pages  is  constantly  increasing 
(approximately  46  billion  indexed  and  searchable  pages  in  March  2016119)  and  that  the 
random  assignment  of  web  addresses  (URLs)  does  not  provide  any  practical  way  of 
identifying  their  contents,  a  search  for  information  would  be  impossible  without  technical 
assistance.   

Most modern search engines typically operate in three steps: crawling, indexing and serving 
results:120  

"Crawling" is the process, by which a search engine automatically accesses a large amount 
of publicly available websites on the internet, collects and stores the information about each 

26 

 
 
website.  In  order  to  do  so  search  engines  use  software  programs  called  'web  crawlers'  to 
visit web pages and follow links on those pages  

"Indexing"  is  the  process  by  which  a  search  engine  archives  the  information  found  on  the 
websites  in  a  logically  and  analytically  organized  index  which  makes  it  possible  to  look  up 
information on billions of websites within milliseconds.  

"Serving" is the process by which the search service provides a user with a result from its 
index  which  best  corresponds  to  the  user's  search  query.  When  a  user  enters  a  search 
query, which consists out of a search algorithm, a set of computer processes and formulas 
is applied to select the most relevant websites stored in the search index in an appropriate 
sequence ("ranking").  

A large number of factors play a role in determining the ranking, meaning the order in which 
the results are shown is mouldable. The search algorithms of modern search engines rely on  
unique signals or 'clues' that attempt to match the URLs from the index with the information 
in the best way, according to what the user is looking for. These signals take into account, for 
example,  the  words  used  on  websites,  links  with  other  websites,  the  publication  date  of 
content, location of the user, personal data such as search history and potentially other data 
available on the user.  

The search results selected by the search algorithm are referred to as "organic results". It is 
worthwhile  mentioning  that  search  engines  often  employ  various  techniques  to  exclude 
certain URLs from the results pages, where the content of web pages does not comply with 
the  ethical  guidelines  of  the  search  engine  or  the  law.  Examples  include:  removing  pirated 
content  from  results;  removing  web  sites  with  information  about  individuals  pursuant  to  the 
"right  to  be  forgotten";  and  removing  websites,  where  operators  apply  "black  hat"  search 
engine optimization techniques.121 

Historically  search  engines  have  covered  the  entirety  of  the  internet.  Due  to  the  growing 
amount  of  information  available  and  the  increasing  usage  of  internet  these  engines  face 
certain  challenges  nowadays.  For  example,  web  crawlers  (the  software  that  brings  back 
material  to  a  database)  do  not  crawl  the  Web  in  real  time.  Although  the  major  search 
services  are  improving  the  turnaround  on  re-crawling  and  adding  pages  to  the  search,  the 
process  of  indexation  or  updating  of  information  may  not  be  in  a  timely  manner  or  at  a  in-
depth level.  

Besides general search engines that allow users to search for any type of information over 
the whole web, there are also specialised engines. These "specialized search services" can 
therefore  also  be  described  as  vertical  search  engines.122  Specialized  search  services  may 
distinguish  themselves  from  general  search  engines  by  employing  subject  specialists  who 
actually gather, rank and annotate links, instead of using algorithms.123 

A definition of "general search" and "vertical search" can be found below: 

  "General  search"  engines  provide  search  results  covering  any  category  of 

information on the web.  

  "Vertical  search"  engines  provide  search  results  for  specific  categories  of 
information  on  the  web.  For  example,  results  may  be  limited  to  certain  type  of 
information  (people,  weather,  news,  shopping,  flight  information  etc.)  or  format 
(photos, videos, map).   

3.3.2 Business model 

The first search engines were developed in an academic environment and used the concept 
of  peer  review  to  evaluate  and  determine  the  importance  and  relevance  of  the  web  pages. 
They did not have a profit motive and typically offered their services  free  of charge. As the 

27 

 
 
complexity  and  the  amount  of  unorganized  information  on  the  World  Wide  Web  increased, 
the  hardware  and  software  costs  of  operating  a  search  engine  (crawling,  indexing  and 
serving) grew rapidly.  

One of the first commercial search engines, Alta Vista was created by the Digital Equipment 
Corporation in 1995. It was followed by other search engines developed by companies such 
as  Excite,  Infoseek,  Goto,  AOL,  iWon,  Inc.,  Looksmart,  Ltd.,  Microsoft  and  Terra  Lycos.  At 
the  time  different  commercial  strategies  were  used  to  monetize  search  services.  These 
included  strategies  based  on  the  "pay  for  placement  model",  where  sponsored  links  were 
included among organic search results, and where the ranking depended on the fee paid by 
the advertiser.124  

In 1998 Google was launched, using a combination between the standard index identifying 
websites  based  on  words  and  PageRank,  an  algorithm  which  ranked  the  importance  of 
pages  based  on  the  number  of  other  highly  cited  pages  that  cited  them.  Google  initially 
earned  revenue  by  licensing  its  search  engine  to  other  companies,  such  as  Netscape  and 
Yahoo, but later developed a strategy, which soon became the dominant business model for 
general search engines, consisting of the following elements: (i) search services were funded 
through  advertising;  (ii)  paid  links  were  displayed  in  different  locations  on  the  results  page 
than organic search results; and (iii) advertisers paid when users clicked on their links (rather 
than just for number of views as was common before).   

As of 2016, most of the main general search services are free of charge and general search 
services  earn  money  through  advertising.  In  the  case  of  Google,  the  main  search  engine 
used  in  the  EU,  advertising  has  contributed  to  more  than  90  percent  of  Google’s  total 
revenue within the last decade. 

In a "pay per click" model adopted by the main general search engines advertisers pay each 
time  a  user  clicks  on  the  link  to  their  web  page.  Advertised  links  can  be  displayed,  for 
example,  above  or  below  organic  search  on  the  search  results  page.  The  price  paid  by 
advertisers in this model is the product of the number of times users click on the ad times the 
price per click, which is determined in a competitive bidding process.  

Strong  branding  and  partnerships  with  web  portals  or  internet  browsers  also  play  an 
important factor in attracting users. Privacy and data protection has also emerged as a factor 
influencing users' choice of search engines.125   

Search  engines  compete  for  advertisers  by  offering  them  better  tools  for  reaching  a  large 
group  of  potential  customers  and  controlling  the  parameters  of  their  advertising  campaign, 
allowing them to  target their  advertisements to a specific keyword, geographic  location and 
demographic  group,  and  providing  a  superior  ROI  ("return  on  investment")  on  their 
advertising spend.  

Search  engines  give  content-providers  visibility  on  the  internet.  Website  operators  are 
encouraged to improve the quality and structure of their websites by applying search engine 
optimization ("SEO") techniques to make them easier to crawl and index by specific search 
engines.  

3.3.3 Main players 

The  graphs  below  represent  distribution  of  search  queries  within  the  EU  Member  States 
(Figure 16) as well as in selected non-EU countries (Graph 2).126 Furthermore, according to 
Alexa,  a  source  of  web  statistics  data,  there  are  three  search  engines  among  the  top  five 
most  visited  web  sites.127  Google  is  the  most  visited  site,  followed  by  Yahoo,  YouTube, 
Facebook, and Bing.  

Figure  13:  Distribution  of  search  queries  on  Google,  Bing  and  Yahoo  within  EU 

28 

 
 
Member States 

Source: StatCounter Global Stats <gs.statcounter.com> for 2014 

Google  is  the  most  frequently  used  search  engine  in  most  EU  countries  where  it  handles 
about 90% of search queries.  

3.3.3.1 Economies of scale  
In the case of search services cost-related economies of scope and scale play a major role. 
The industry is characterized by significant costs for creating the web index, developing the 
search  algorithm  and  building  computing  centres.128  At  its  minimum,  search  engines  are 
required  to  invest  in  a  substantial  server  infrastructure  to  be  able  to  crawl  and  index  the 
internet  in  order  to  closely  match  results  to  search  queries.  Furthermore,  finance-intensive 
R&D  activities  are  required  to  maintain  and  constantly  improve  the  quality  of  search  and 
advertising  tools.129  Google  being  the  market  leader  has  spent  nearly  $11  billion130  on  real 
estate purchases, production equipment, and data centre construction and $10.5 billion131 on 
research and development in 2014 alone. It operates more than a million servers to respond 
to more than a billion search requests per day.132  

This allows search engine providers to extract actionable information from the large amounts 
of  historical  data  from  search  queries  submitted  by  users  as  well  as  other  types  of  activity 
conducted  by  the  users  of  the  platform  (email,  use  of  maps,  video,  operating  systems, 
internet browsers). This argument is applicable for targeted advertising as well.  

3.3.3.2 Network effects 
Network effects in the area of web search are also relevant to the economies of scale. From 
the point of view of users, advertising consumers, and content providers network effects are 
indirect and may differ in their nature. Users benefit from search engines being used by other 
users because search engines collect aggregate data about the relevance of search results 
to particular queries and use this information to improve results for subsequent queries.  

Indirect  network  effects  are  most  likely  to  arise  given  that  the  more  users  a  search  engine 
has,  the  more  attractive  it  becomes  from  the  point  of  view  of  content-providers  and 
advertising customers. At the same time, advertising customers compete against each other 
in  a  bidding  process  for  advertising  space  and  for  users'  attention  in  a  similar  manner  as 
content  providers  compete  for  users'  attention.  Higher  revenues  from  advertising,  the  main 
revenue stream for search engines, result in higher investments in the infrastructure in order 

29 

 
 
 
to crawl and index an increasing number of pages133 with increasing frequency and provide 
more pertinent search results to users with increasing speed.  

3.3.4 Impact  

Given  the  volume  of  information  that  is  currently  available  on  the  internet,  search  engines 
have assumed a major role as an information intermediary. This function of search services 
to locate content on the internet is likely only to grow stronger as the internet evolves towards 
a ubiquitous communication and business medium containing a virtually limitless amount of 
information.134  

To  avoid  misleading  consumers,  EU  consumer  and  marketing  law  requires  search  engines 
and  comparison  tools  to  clearly  distinguish  a  natural  search  result  from  advertising135.  The 
purpose  of  such  disclosures  is  to  inform  consumers  when  they  are  being  solicited  as 
opposed to being impartially informed. 

3.3.4.1 Easier access to information 
Search  engines  play  an  important  role  in  several  types  of  situations:  (i)  navigation-oriented 
search queries where the user already knows the website they want to access and typing its 
name  in  a  search  engine  is  more  convenient  than  typing  the  entire  URL  in  a  browser,  (ii) 
information-oriented search queries where the user seeks for general information, often in a 
sequence  of  searches  targeting  specific  information  and  (iii)  transaction-oriented  search 
queries where the user looks for specific product, service or supplier.  

Statistics also show that 86% of consumers learned something new or important from using 
a  search  engine,  which  in  the  end  helped  them  increase  their  knowledge.136 For  local 
searches  (involving  the  search  for  financial  services  and  insurance,  automotive,  retailers, 
travel, casual dining, business services) nearly 40% of users start with a search engine.137 It 
is therefore unsurprising that for the majority of internet users, a typical online session starts 
with a search query being sent throughout a search engine138. 

In addition, using a search engine may represent significant time savings. Researchers have 
found that an online search is on average three times faster and significantly more likely to 
produce  a  satisfactory  reply  to  a  general  search  query  than  an  off-line  search  in  a  well-
equipped university library.139 It is difficult to associate an exact monetary value with the time 
saved. Nevertheless, researchers estimate a saving worth of EUR 130 billion. 

3.3.4.2 Greater transparency 
With  the  help  of  general  and  specialised  search  engines,  such  as  price  comparison 
platforms,  consumers  can  easily  compare  products  and  services,  and  access  reviews. 
Search  engines,  and  price  comparison  platforms,  in  particular,  bring  transparency  to  the 
market.  In  comparison  with  a  purely  off-line  shopping  experience  search  engines  bring 
concrete  benefits  in  terms  of  improved  matching  of  products  and  services  with  consumer 
preferences, wider choice, better quality and lower prices.  

3.3.4.3 Convenience of reaching consumers 
Search engines can bring significant benefits to companies. With the use of search engines 
companies can reach consumers with more precision and with greater convenience. Figuring 
prominently  in  organic  search  results  is  free  of  charge  (not  including  the  costs  of  search 
engine optimization). The ability to target paid-for advertising only to consumers interested in 
the  advertised  product  or  service  can  also  mean  significant  savings  when  compared  with 
advertising  campaigns  directed  to  the  general  public  (traditional  newspaper  or  TV 
advertisements). As a result, the cost-per-click ("CPC") in a number of popular segments is 
quickly rising, reaching as high as $60 for certain keywords. A budget of USD 300.000 per 
month for search engine advertising is not uncommon for large companies.140 

30 

 
 
3.3.4.4 Role in access to information about products / services / politics 
Online search engines have specific and personalized data on individual users and they use 
the may use that information to tailor the order of display of search results. Some studies find 
that,  as  a  consequence,  search  engines  could  even  influence  policy  debates  and  voting 
(deliberately or not).141 

To  improve  ranking  and,  thus,  affect  visibility  of  their  site,  businesses  implement  SEOs 
techniques.  Many  companies  rely  on  Web  visitors  that  arrive  as  a  result  of  using  search 
sites. The main search engine players are responsible for about three-quarters of the overall 
search  engine  traffic  sent  to  Web  sites.  However,  they  regularly  update  their  rankings  to 
reflect changes in their methods or changes in the Web's link structure and content.142  

transparency;  non-distortion  of 

3.3.4.5 Search Neutrality concept 
The above-described effects have prompted some experts to advocate the concept of search 
neutrality. However, what exactly constitutes  search neutrality remains  a contentious issue. 
Many  principles  have  been  proposed  by  the  literature  on  the  topic  as  a  potential  basis  for 
sound  regulatory  framework  on  search  engine  results.  They  include:  equality;  objectivity; 
traffic;  non-
relevance; 
manipulation and pursuit of self-interest.143 These principles are often broadly defined and if 
considered together may even contradict each other. For example: it is hard to say when a 
search  result  is  objective  and  neutral.  On  the  one  hand,  algorithms  can  never  be  neutral, 
because they are based on assumptions and involve a ranking. On the  other, a completely 
neutral result would show links in an order that would not fit the interests of the searcher and 
thus render the search meaningless. Some argue useful search results have to be relevant. 
Although search is generally about relevance, it  is also about user autonomy; users expect 
diversity  so  they  can  make  their  own  choice  about  what's  relevant  or  not.144  Otherwise, 
search  engines'  algorithms  unintentionally  can  act  as 
that  reinforce 
discrimination in some communities.145 

landscape  and 

filter  bubbles 

information 

3.3.4.6 Vertical integration of main players  
Similar  to  ‘bricks-and-mortar  firms’  search  engine  providers  rely  on  vertical  integration  to 
improve efficiency and reduce transactional costs. The main players expand their businesses 
into areas that are at the different point of the “supply chain” - from writing operating systems 
and  designing  components,  to  building  server  computers,  to  acquiring  specialized  search 
and pricing systems. 

3.3.4.7 Collection and use of data 
Some  search  engines  use  data  about  users'  online  behaviour  to  improve  their  services. 
Aggregated  data  is  used  to  improve  search  results  in  general,  while  disaggregated  data  at 
individual level is used, for instance, to provide more targeted advertising.146 The instruments 
used to collect data are, among others, internet cookies - small text files that a Web browser 
places  on  a  user's  computer  system  for  the  purposes  of  tracking  and  recording  that  user's 
activities on a Web site. The use of cookies is regulated and they should only be placed on a 
user's device after consent has been given. 

By  providing  their  personal  data  search  engine  users  gain  more  efficient  and  tailored 
services. On the other hand, they face the potential risks of inappropriate use of individuals' 
personal data.147 Thus, users encounter a dilemma in the face of a trade-off between ex-ante 
information  benefits  and  ex-post  risks.  Some  users  may  prefer  to  give  less  personal 
information, thus, reducing the ex-post risks but facing higher search costs.148 Irrespective of 
the dilemma offered to individuals, search engines should ensure the processing of personal 
data is in compliance with the EU data protection framework. 

31 

 
 
Many online search service companies are no longer pure search providers. Search engines 
have  changed  their  underlying  business  model  to  include  content  aggregation  as  well  as 
access to it, hence becoming an active player in the content market.  

With  the  help  of  data  from  a  wide  array  of  areas  a  search  engine  can  perform  a  market 
research,  launch  and  refine  its  offerings,  and  react  effectively  to  changing  market  trends. 
This  trend  sparks  a  bias-related  and  privacy  concerns  about  monitoring  in  the  commercial 
sector.149 

3.3.4.8 Role of search engines in tackling illegal content 
Search engines are naturally the usual "door of call" when reporting illegal content online, as 
they are also the main entrance door for that content. For instance, only in February 2016, 
Google  received  over  75  million  copyright  takedown  requests  (meaning  over  100,000  links 
each hour).150 In 2014, Google handled 345 million requests for the entire year. According to 
Google's  transparency  report,  the  company  regularly  receive  requests  from  courts  and 
government  agencies  around  the  world  to  remove  information.  These  requests  are  most 
typically related to privacy and security, drugs abuse, defamation and other reasons. 

3.4  Social media and content platforms 

3.4.1 General description 

Social media platforms ("SMPs") were first created in the late 1990s  – by the likes of AOL, 
ICQ,  classmates.com  and  sixdegrees.com.  These  SMPs  were  among  the  online  meeting 
places that allowed users to communicate with a central system where they could download 
files or games and post messages to other users. Sixdegrees.com, created in 1997, was one 
of the very first SMPs to allow its users to create profiles, invite friends, organise groups and 
surf  other  user  profiles.  Friendster  utilised  this  concept,  refining  user  groups  into  'circle  of 
friends'.  Within  a  year  of  Friendster's  launch  in  2002,  the  site  boasted  more  than  3  million 
registered  users,  generating  significant  investment  interest.  Aimed  at  the  young  adult 
demographic  with  its  feature-filled  environment,  mySpace  was  one  of  the  leading  SMPs  in 
the mid-2000s. The platform was, however, usurped by the subsequent success of Facebook 
(as were local European SMPs like Hyves in the Netherlands, which at some point boasted 
10 million users).  

Launched  in  2004  as  a  Harvard  University-only  exercise,  Facebook  quickly  grew  to  a 
valuation of USD 328 billion by 2016151 and remains the most popular SMP today. Crucially, 
894  million  of  Facebook's  global  users152  –  more  than  50%  of  the  total  –  now  access  the 
service exclusively through mobile devices. The development towards mobile platforms has 
had  a  marked  impact  on  social  networking.  Certain  photo and  video-sharing  apps,  such  as 
Snapchat and Instagram, exist exclusively on mobile.  

As  regards  the  question  of  what  precisely  constitutes  an  SMP,  it  is  noted  that  there  are  a 
plethora  of  definitions  used  in  the  literature  on  online  platforms.  Gebicka  and  Heinemann 
define  SMPs  as  "web-based  services  that  allow  individuals  to  construct  a  public  or  semi-
public profile within a limited forum, to articulate a list of other users with whom they share a 
connection  (‘friends’  on  Facebook),  and  to  view  and  traverse  their  list  of  connections  and 
those  made  by  others  within  the  system".153  Gillespie  argues  that  the  capacity  to  interface 
and  create  relevance  for  a  variety  of  actors  and  use  practices  is,  in  fact,  the  central 
characteristic  of  SMPs.154  Kietzmann  details  key  characteristics  of  SMPs,  or  functional 
building  blocks.  These  include  the  notions  of  identity,  conversations,  sharing,  presence, 
relationships, reputation and groups.155  

While recognising that no general definition of SMPs exists, in Facebook/WhatsApp merger 
decision  the  Commission  described  social  networking  services  as  "services  which  enable 
users  to  connect,  share,  communicate  and  express  themselves  online  or  through  a  mobile 
32 

 
 
app".156  This  definition  would  cover  both  "private"  and  "professional"  networking  services 
such  as,  respectively,  Facebook  and  LinkedIn.157  Twitter  also  shares  certain  key 
characteristics of SMPs, in addition to those of micro-blogging websites. Unlike other SMPs, 
its  service  allows  sharing  of  short  text  messages  -  'tweets'  -  with  anyone  who  decides  to 
'follow you', i.e. read what you post on your profile.  

Certain online platforms that principally serve to publicly share user generated content such 
as opinions (Twitter), videos (Youtube), images (Flickr), video games (Electronic Arts' Origin) 
and music (Soundcloud) also incorporate a 'social network' element, and it should be noted 
that  some  of  the  key  policy  questions  that  have  been  associated  with  SMPs  may  also  be 
relevant for "creative content outlets".  

Indeed,  many  of 
including  Facebook 
today's  app-based  communications  services, 
Messenger,  Whatsapp,  LINE,  WeChat,  Hangouts  and  Snapchat,  allow  the  sharing  of  text 
and  video  content  between  groups  of  users.  In  fact,  even  B2B  and  B2C  e-commerce 
platforms  can  facilitate  "social"  interactions  between  communities  (such  as  in  the  case  of 
Etsy or Adobe's "Bēhance"). In contrast, whereas Facebook primarily qualifies as an SMP, its 
users also engage in the sharing of creative content, while certain public profiles can also be 
'followed', meaning that it is also concerned with questions around, for example, the effective 
protection of copyright, or of minors from harmful content. Finally, although Wordpress' aim is 
to provide technical tools to ease direct access to the entire web for third-party pundits rather 
than to allow social interactions between members of a certain community, by providing the 
underlying platform it can also exercise editorial control over third-party content and therefore 
be  concerned  with  the  same  aforementioned  policy  questions  around  liability  for  third-party 
hosted content.  

In light of the fact that online platforms which allow social interactions between its users often 
offer  a  layer  of  services  (including  communications  services,  the  sharing  of  user-generated 
content  and  the  serving  of  advertisements),  and  given  that  these  share  certain  key  policy 
questions,  SMPs  and  creative  content  outlets  are  treated  together  in  this  section.  These 
services  are  understood  to  at  least  cover  online  platforms  such  as  Facebook,  Twitter, 
Instagram,  Google+,  Myspace,  Pinterest,  Snapchat,  Youtube,  Soundcloud,  Origin, 
Wordpress and Whatsapp. 

3.4.2 Business models 

As  covered  previously,  SMPs  are  generally  available  to  users  for  "free",  or  under  a 
"freemium"  model  (e.g.  LinkedIn  and  YouTube  use  this  model),  their  main  revenue  source 
being advertising income. The resale or internal re-use of user data can be another important 
source of value for  the SMP. Twitter  for example sells  its public  data, which can  add up  to 
about 500 million tweets each day.  

The  attractiveness  of  SMPs  for  advertisers  derives  from  the  richness  of  the  personal  data 
that these platforms hold on their individual users, as well as from their ability to derive trends 
and statistics from (processed) personal data. The size of SMPs' user bases combined with 
the  extent  to  which  they  are  able  to  collect  personal  user  data  are  indeed  key  competitive 
parameters in these ad-driven markets.  

The  fact  that  "free"  SMPs  tend  to  rely  on  an  extensive  collection  of  personal  data  has 
sparked a wider debate on how to achieve a balance between the further development of so-
called  "big  data"  markets  and  adequate  levels  of  data  protection,  privacy  and  consumer 
protection.  Indeed,  tailored  SMP  services  offer  huge  benefits  to  consumers  and  the 
opportunities  offered  by  the  exploitation  of  "big  data"  are  enormous.  However,  it  is 
questionable to what extent users actually do consent to the use of they must accept SMPs' 
privacy policies have to be accepted in order to use SMP services.  

33 

 
 
Besides  advertisement,  big  data  and  premium  subscriptions,  SMPs  can  also  generate 
revenue from allowing access to certain software applications in return for a commission. On 
the Facebook platform, application developers which are verified by Facebook pay them an 
access  fee  and,  potentially,  additional  advertising  fees.  In  addition,  Facebook  charges  a 
commission  on  in-app  purchases  which  are  processed  through  its  proprietary  payment 
service.  These  are  important  sources  of  income,  as  there  are  now  42  million  Facebook 
pages,  and  9  million  apps  and  websites  integrated  on  the  SMP.  With  respect  to  Twitter, 
application  developers  are  also  the  second  largest  potential  group  of  users.  To  the  extent 
that  applications  and  content  are  used,  application  developers  and  content  providers  can 
charge the users and pay a share to the social network providers or the networks can collect 
the  fees  and  distribute  a  percentage  to  the  application  or  content  providers.  This  same 
'platformisation'  can  be  observed  in  consumer  communications  services,  particularly  in 
Chinese  platforms.  Another  "business  model"  is  the  strategy  whereby  SMPs  try  to  gain 
significant  user  bases  without  monetizing  the  service,  with  the  aim  of  ultimately  being 
acquired by a competitor. 

Finally,  successful  SMPs,  such  as  Facebook,  which  started  out  as  standalone  content 
platforms,  may  also  have  an  incentive  to  try  to  integrate  both  horizontally  and  vertically,  in 
order to diversify and to protect their existing position. Their incentive to do so might be great 
in light of the particularly strong network effects that characterise the markets in which they 
operate (reference is in this regard often made to the example of MySpace being usurped by 
Facebook).  Facebook  has  for  example  acquired  a  company  producing  a  new  hardware 
application  (Oculus  virtual  reality  headset)  and  has  tried  to  introduce  a  layer  on  top  of 
operating systems (the Facebook Home overlay). Moreover, data collection and analysis in 
online  platforms  is  driven  by  economies  of  scope:    as  a  general  rule,  the  benefits  of  an 
aggregated dataset are higher than the sum of benefits of separate datasets.  That birds’ eye 
perspective on large datasets gives platforms an advantage over individual firms and users 
operating on the platform.  

3.4.2.1 Social login – social networks as third-party identification providers 
Many of the social networks (including Facebook, Google+, LinkedIn, Twitter, etc.) have built 
"social login" platforms around their login and authentication services. Social login is a single 
sign-on  ("SSO")  technology  that  allows  users  to  authenticate  themselves  on  various 
applications  and  sites  by  connecting  through  a  social  media  site  rather  than  typing  a 
separate ID and password on each website.  

When  users  navigate  to  a  website  offering  social  login,  they  can  register  in  a  conventional 
way  by  creating  an  ID,  a  password  and  other  required  information  or  log  in  through  an 
interface that allows the website operator to access their data on the selected social network 
platform.  The  social  login  information  is  then  exchanged  based  on  common  standards 
including OpenID158, Connect and OAuth159. 

Social  login  allows  users  to  provide  websites  their  identification  information  in  a  quick  and 
more convenient manner compared to a traditional login interface. Given that many potential 
users  of  websites  are  members  of  a  social  network  and  are  already  logged  in  on  their 
browser (there is no need for logging in again to a social network), the procedure of creating 
an account can be reduced to a few clicks. Users can rely on a single social network account 
to  create  accounts  on  multiple  other  websites.  At  the  same  time,  they  can  control  what 
information  stored  by  the  social  network  is  shared  with  the  third-party  website  (name,  age, 
photos, etc.). 

Using social login can also allow users to verify their relations with other users. For example, 
in  the  case  of  collaborative  platforms  (car  sharing,  apartment  rentals)  or  other  social 

34 

 
 
networks  (e.g.  dating  apps),  verification  of  a  user  profile  is  often  achieved  through  an 
association with an existing social network profile.  

For social networks, the use of social login by users and websites brings valuable data that 
can  be  used  for  improved  targeting  of  advertising  or  development  of  new  products.  Also, 
website developers who integrate a social network's social login functionality are more likely 
to use  some  of  the other  tools  offered  by  that  network,  like advertising  applications.160  In 
addition, the use by consumers of their social network credentials for logging into numerous 
other websites reduces the odds that the user will switch away from that social network.  

Website operators using social login along with the conventional login methods can increase 
user  registration  (thanks  to  greater  convenience)  and  minimize  barriers  to  site  entry  by 
reducing the need for usernames and passwords, allowing users to authenticate themselves 
through  their  existing  social  media  identities  and  pre-verified  accounts.  Website  operators 
relying  exclusively  on  social  login  can  avoid  building  their  own  login  and  authentication 
systems  altogether.  They  can  also  rely  on  the  security  and  data  protection  technologies 
implemented by the social login providers. In that case the username and password are only 
handled by the social login provider and not transmitted to the website during the third-party 
authentication process (only authorization token).  

Social  login  can  be  used  on  websites  and  mobile  applications.  According  to  a  survey 
conducted by an identity management provider, in 2015 88% of consumers have logged into 
a website or app using an existing social network account (up 11% from 2014).161  

There  are  more  than  35  global  identity  providers  (including  Facebook,  PayPal,  Microsoft, 
Yahoo, Amazon, Sina, Weibo, Tencent and others). The most widely used social login is the 
one offered by Facebook. More than 80% of the top 100 grossing apps on iOS and Android 
offer  Facebook  Login  as  a  sign-in  option.  Based  on  a  survey  conducted  by  JanRain,  an 
identity  management  provider,  Facebook  captured  a  45%  of  social  login  usage  in  Q1  of 
2015162. However,  the  figures  differ  depending  on  the  segment.  For  example  in  the  B2B 
context, the share of social login with LinkedIn rivals those of Facebook and Google.   

3.4.2.2 Related communication services 
Although  only  part  of  the  different  services  that  they  offer,  certain  SMPs  have  the  core 
function  of  facilitating  consumer  communications  and  are  therefore  perceived  to  compete 
with traditional electronic communications services providers. Although Facebook Messenger 
is  for  example  transforming  into  a  self-standing  online  platform  as  it  now  allows  direct 
interactions  between consumers  and third-party businesses163, its initial and  core service is 
consumer communications.  

3.4.3 Main players  

Active  user  accounts  on  SMPs  now  equate  to  roughly  29%  of  the  world's  population.  The 
average  social  media  user  spends  2  hours  and  25  minutes  per  day  using  social  networks 
and microblogs. At a global level, Facebook continues its market lead, claiming 1.65  billion 
active users (status 31 March 2016).164 Tencent extended its market leadership of Chinese-
language  social  networks,  with  Qzone's  629  million  active  accounts  leading  the  pack.  In 
addition, VKontakte retains the top social media spot in Russia – the latest data suggests the 
platform has around 100 million monthly active users. 

Within the EEA, Facebook would similarly be the largest SMP, with 333 million users (status 
31 March 2016).165  Other major EEA players are creative content outlets such as Youtube 

35 

 
 
(which has over one billion users worldwide) and Wordpress (which is used by around 25% 
of all websites present on the worldwide web).  

These  SMPs  and  creative  content  outlets  are,  virtually  without  exception,  'free'  to  use  and 
are therefore largely reliant on  advertising  income or on  the re-sale or use of personal and 
other data (although premium memberships are sometimes also offered). In cases where, for 
example,  the  absence  of  advertising  and  the  respect  for  user  privacy  are  a  key  part  of  the 
service's  attractiveness,  it  can  therefore  be  difficult  to  effectively  become  profit-making 
(something  that  Facebook  explicitly  acknowledged  with  regard  to  Whatsapp  in  its  annual 
report).  This  has  not,  however,  prevented  such  services  from  being  valued  at  high  levels. 
Whatsapp, which generated around USD 16 million in revenue during the first half of 2014, 
was  for  example  acquired  by  Facebook  for  USD  19  billion.  This  valuation  would  have 
resulted  from  a  value-per-user  ratio  of  around  USD  42,  in  line  with  similar  transactions 
(including  Rakuten's  acquisition  of  Viber,  Microsoft's  acquisition  of  Skype  and  Facebook's 
acquisition of Instagram).  

3.4.4 Impact 

Advancements  in  the  Internet  and  the  emergence  of  Web  2.0  along  with  SMPs  have 
empowered  customers.  General  availability  of  the  Internet  has  given  individuals  the 
opportunity to use social media, from email to Twitter and Facebook, and to interact without 
the  need  for  physical  meetings.  Consumers  have  social  interactions  through  social  media 
such as online forums, communities, rating, reviews and recommendations.  

Researchers have highlighted the linkages between social media and e-commerce.166 They 
argue  that  the  emergence  of  online  stores  has  turned  users  into  consumers,  with  social 
media providing a new channel to acquire product information through peer communication. 
By using social media, consumers have the power to influence other buyers through reviews 
of products or services used. The ability of SMPs to allow businesses to directly interact with 
potential  consumers  and  their  immense  popularity  has  revolutionised  marketing  practices 
such as advertising and promotion.  

SMPs allow businesses to improve their international market presence and reach a far wider 
group  of  potential  clients  across  the  globe,  which  means  that  they  are  increasingly  part  of 
firms' internationalisation strategies. In 2015, 88% of Fortune Global 100 companies based in 
Europe  used  at  least  one  social  media  platform  to  directly  communicate  with  customers.167 
SMPs  can  also  perform  an  important  market-research  function  for  firms  providing  detailed 
information about consumers preferences.168 

The  collection  of  user  data  is  often  part  of  the  business  model  used  by  SMPs  and  an 
important  source  of  insights.  A  recent  study169  has  shown  that  social  media  "likes",  can  be 
used to automatically and accurately predict a range of personal attributes including: sexual 
orientation, ethnicity,  religious  and political  views,  personality  traits,  intelligence,  happiness, 
use of addictive substances, parental separation, age, and gender.  

Given  their  very  significant  user  groups,  SMPs  also  play  an  increasingly  important  role  in 
society that goes beyond the provision of communication services. SMPs play a vital role in 
social interactions and expression, providing a platform that allows for the democratization of 
information.170  They  can  constitute  authoritative  sources  of 
publishing  content  and 
information, they effectively enhance oversight (human rights protections, fair elections, etc.) 
and they can be used to drive public opinion.  

SMP's  can  significantly  impact  individuals'  behaviour.  A  major  SMP  recently  acknowledged 
that  it  manipulated  users'  emotions.171  A  recent  study  found  that  civic  “go  vote”  messages 
that  were  targeted  through  users’  social  networks  resulted  in  a  statistically  significant 
increase in voter turnout among those targeted, compared with a similar “go vote” message 
36 

 
 
 
that came without being embedded in social ties.172 The ability to impact behaviours coupled 
with profiling could be extended in other ways to affect the economy and society at large173 in 
ways that could be undetectable.174 

SMPs  have the ability to command the attention  of a great number of  people, about whom 
they  have  highly  specific,  personalized  information.  As  a  consequence,  they  have  become 
essential players in politics and policy debates.175 Political campaign teams are also said to 
increasingly  use  (specifically  in  the  US)  the  ability  offered  by  SMPs  to  deliver  targeted 
advertisements to selected lists of individual voters.176  

3.4.4.1 Role of SMP in tackling illegal content 
SMPs  almost  exclusively  handle  user-generated  content,  be  it  comments  or  audio-visual 
content.  They  are  an  increasingly  important  communications  channel  and  allow  users  to 
exercise their right to freedom of expression.  

SMPs  are  typically  confronted  with  requests  to  remove  content  which  can  be  considered 
illegal  because  it  is  considered  hate  speech,  cyber-bullying,  copyright  infringements, 
defamation,  or  incitement  to  terrorism.  For  example,  after  Facebook's  managing  director 
based in Hamburg was subject to prosecution in Germany for the social platform's failure to 
remove hate speech Facebook, Twitter and Google agreed in Germany last 15th December 
2015 to delete hate speech from their websites within 24 hours177. Similar calls for action are 
seen at an EU level, with the Joint Statement issued by the extraordinary Justice and Home 
Affairs  Council  of  24  March  2016  on  the  terrorist  attacks  in  Brussels  underlining  that  "the 
Commission  will  intensify  work  with  IT  companies,  notably  in  the  EU  Internet  Forum,  to 
counter  terrorist  propaganda  and  to  develop  by  June  2016  a  code  of  conduct  against  hate 
speech online. 

As  regards  incitement  to  terrorism,  after  a  lawsuit  being  filed  against  Twitter  in  the  U.S. 
District  Court  for  the  Northern  District  of  California,  Twitter  informed  in  February  2016  that 
since the middle of 2015 alone, they had suspended over 125,000 accounts for threatening 
or promoting terrorist acts, primarily related to ISIS, and that they have increased the size of 
the  teams  that  review  reports,  reducing  our  response  time  significantly  and  cooperate  with 
law  enforcement  entities  when  appropriate178.  Efforts  in  the  same  direction  have  been 
reported  by  Facebook179.  Other  social  media  platforms,  such  as  Vkontakte  ("the  Russian 
Facebook"), defend a purely passive role without interferences with users' speech, be it legal 
or illegal.  

3.4.4.2 Personal data portability voluntary solutions implemented by SMPs 
While it is not the rule, some SMPs have implemented voluntary solutions for export of user 
data they hold. For example, Facebook offers a tool for downloading user information. Users 
are able to download not only the information that they have shared on their profile, but also 
other information that Facebook holds on them, including: 1) their activity log, which is visible 
to  users  when  they  log  into  their  profiles,  and  2)  information  that  is  generally  not  visible  to 
users  (such  as  ads  clicked  on,  IP  addresses  used  for  log-in,  ad  topics,  etc.).  Users  cannot 
select  to  download  only  certain  elements  of  the  information  and  need  to  download  the 
information file in its entirety.180 

3.5  Online advertising platforms 

3.5.1 General description  

Online advertising industry as a business model gained momentum by 2004 when a number 
of businesses launched their offerings to facilitate buying and selling of advertising space on 
web pages. What makes online advertising attractive is the wide range of new products and 

37 

 
 
 
 
services it offers. Not only does it allow for behavioural targeting, but also for performance-
based pricing. 

In the online world every platform, blog, or a website can be used as a forum for advertising. 
The  abundance  of  options,  however,  makes  it  difficult  for  companies  to  handle  their 
marketing  campaigns  online  without  the  help  of  an  intermediary.  Online  advertising 
platforms, thus, emerge providing a business solution. 

3.5.1.1 Types of advertising platforms 
There is a great variety of types of advertising platforms and new business models continue 
to emerge.181 Some of them offer solutions to advertisers and publishers with supply-side 
platforms ("SSP"), demand-side platforms ("DSP") and data-management platforms ("DMP"). 
SSPs provide publishers the tools needed to sell their advertising space via a single interface 
to multiple advertisers. SSPs are linked with several ad exchanges through which ad space 
is  sold.  DSPs  offer  a  single  interface  to  advertisers  to  manage  their  advertising  campaigns 
across  multiple  publishers.  DMPs  collect  user  data  from  multiple  sources  and  are  used  by 
advertisers  to  improve  the  targeting  of  their  campaigns.  DMPs  are  often  integrated  with 
DSPs.  All  of  these  tools,  along  with  advertising  networks  and  exchanges,  make  the  highly 
automated, real-time audience targeting and advertising possible.  

Figure 14: Network map of advertising platforms 

Source: Prepared by the European Commission on the basis of comprehensive assessment  

Advertising networks (Ad networks) can be described as "a two-sided platform serving (i) 
publishers (websites) that want to host advertisements, and (ii) advertisers that want to run 
ads on those sites".182  Thus, Ad networks bring together at least two groups of users in an 
online  environment  and  allow  those  user  groups  to  benefit  from  network  effects.  The 
operators  of  ad  networks  tend  to  aggregate  online  advertising  space  and  resell  this  to 
advertising  clients  and  also  provide  additional  services,  for  example  by  organising  the 
payment for websites that publish advertising space and by providing advertisers with online 
tools  to  monitor  the  effectiveness  of  their  campaigns.  Finally,  certain  ad  networks  also 
provide so-called hosted ad serving tools to either publishers of online advertisement space 
or  to  advertisers,  or  both.  These  tools  essentially  allow  the  delivery  of  personalized  ads  to 
consumers  within  the  correct  advertisement  space  of  a  website,  and  the  tracking  of 
consumer behaviour in order to improve the accuracy of this targeted advertising.  

38 

 
 
 
By  combining  hosted  ad-serving  tools  with  the  provision  of  intermediation  services,  ad 
networks  are  able  to  provide  their  different  user  groups  with  an  integrated,  seamless 
advertisement  service.  It  should,  however,  be  noted  that  hosted  ad-serving  tools  can,  in 
certain cases, also be deemed to constitute online platforms as certain of these tools allow 
online advertisement publishers to simultaneously target advertisers directly as well as via ad 
networks that can be accessed via the platform.183  

Ad  exchanges,  in  turn,  constitute  online  marketplaces  that  facilitate  auction-based  direct 
transactions  between  publishers  of  online  advertising  space  and  acquirers  thereof.  Ad 
networks can be active both as buyers and sellers on these ad exchanges. They exist both in 
an open (i.e. accessible to all) and private form. The large ad exchanges seem to be closely 
integrated  with  their  owners'  ad  networks.  For  example,  Google  and  Microsoft  previously 
acquired, respectively, the DoubleClick and AdECN ad exchanges. 

Finally, certain firms engage in the provision of general media buying services to advertisers, 
which services tend to cover different types of media including the Internet.184 Opposite to ad 
networks and ad exchanges, these firms cannot, as such, be considered to constitute online 
platforms. 

3.5.2 Business models  

Online platforms mostly use the traditional media broadcast model where they offer content 
and  services  for  free  and  finance  their  operation  by  providing  space  for  advertising  or 
branding/co-branding  messages.  This  model  generally  works  best  when  the  volume  of 
viewer traffic is very large. Advertising platforms offer different types of ads. On the basis of 
the  OECD  Report  on  The  Economic  and  Social  Role  of  Internet  Intermediaries,  online  ads 
can be categorized as follows:185 

-  Search advertising is based on advertiser bidding on keywords that affect the position 

of text ads on users' results page. 

-  Display ads are advertisements in text image or multimedia format (e.g. advertisement 
banners)  placed  on  websites.  In  some  cases,  a  process  known  as  “programmatic” 
advertising  is  applied  whereby  ad  servers  analyse  the  content  of  websites  and 
automatically deliver ads that they deem relevant to viewers.  

-  Classified ads consist of listings of products or services on a webpage (e.g. Craigslist) 
-  E-mail  advertising  uses  different  forms  of  advertisement  delivered  via  electronic  mail 
(e.g. links, banner ads or advertiser sponsorships placed within an e-mail message) 
-  Referrals  are  an  advertising  approach  whereby  advertisers  pay  fees  to  online 

companies which refer purchase requests or provide customer information. 

Many  online  advertising  platforms  operate  through  pay-per-click  advertising  channels.  Ad 
networks,  for  example,  generate  revenue  by  arbitraging  the  cost  of  advertisement  space 
against the price that advertisers are willing to pay for efficient access to aggregated types of 
advertisement  space.  Ad  networks  generally  offer  publishers  a  fixed  remuneration  per 
thousand  clicks/views  of  advertisements  published  on  their  website  and  sell  access  to  this 
space to advertisers at a profit.186  

In  addition,  publisher  and  advertiser  ad-serving  tools  also  tend  to  charge  a  commission  to 
those publishers and advertisers that do not have in-house ad-serving capabilities and sales 
forces.  For  directly  sold  ads,  these  have  been  mentioned  to  usually  amount  to  5  cents  per 
one thousand impressions served on the advertiser-side and to 7-8 cents per one thousand 
impressions  served  on  the  side  of  the  publishers.187  For  those  ad  networks  that  offer  ad-
serving capabilities as part of one integrated service, these charges can be part of an overall 
intermediation fee charged to their clients. 

39 

 
 
Ad  exchanges  similarly  derive  their  revenue  from  intermediation  fees  (in  the  form  of 
commissions on concluded transactions or, hypothetically, based on fixed subscription fees). 
One  ad  exchange  explained  that  it  indeed  charges  a  20%  commission  on  advertising 
revenue,  which  would  be  lower  than  the  commission  generally  charged  by  ad  networks.188 
The level of the intermediation fees charged by ad exchanges is likely closely related to the 
general cost of ad-serving tools and the 'commission' charged by ad networks, as publishers 
and  advertisers  tend  to  simultaneously  use  several  channels,  including  ad  exchanges, 
allowing  them  to  induce  competition.  As  with  other  exchanges,  ad  exchanges  do  require  a 
certain minimum level of liquidity in order to be able to sustain themselves and several have 
failed in this respect.189  

3.5.3 Market players 

Internet advertising is rapidly growing, both in terms of total revenues and in terms of share 
of the total advertising market. EMarketer estimates that in 2015 digital advertising reached 
USD 170.17 billion or a 29.9% share of the total global advertising market.190  

Since  2000s  there  has  been  a  wave  of  acquisitions  in  the  sector.  Zanox  was  for  example 
acquired by Axel Springer, AdLink Media was acquired by Hi-media and AOL unsuccessfully 
attempted  to  acquire  TradeDoubler.  Google,  Yahoo!,  Microsoft  and  AOL  respectively  have 
acquired  DoubleClick,  Right  Media,  AdECN  and  Millenial  Media.  Facebook  has  acquired 
LiveRail, a video advertising company.  

The firms active in online advertising generally seem to distinguish their services based on (i) 
types  of  ads  (search  ads,  classified  ads,  text  ads,  display  ads,  etc.),  and  (ii)  means  of 
connecting to the end consumer (mobile versus PC). As consumers spend more time online 
via  their  mobile  phones,  the  mobile  online  advertising  segment  is  experiencing  particular 
strong growth. AIB, the relevant industry body, estimated the global online mobile advertising 
revenue at EUR 24 billion (USD 31.9 billion) in 2014, out of which EUR 4 billion would have 
been  generated  in  Europe.191  In  this  mobile  segment,  display  ads  would  be  the  most 
commonly used type of advertisements and in 2014, the European mobile display advertising 
segment  would  furthermore  have  grown  by  70%.192  The  future  growth  in  the  digital 
advertising market will be fuelled by mobile ads.193  

3.5.4 Impact  

3.5.5.1 Main benefits 
From  the  point  of  view  of  the  advertiser,  online  platforms  offer  an  efficient  mechanism  for 
delivering ads to individual users and collecting information about these users to improve ad 
targeting.  Online  platforms  have  also  improved  the  process  of  matching  the  ads  with  the 
available  advertising  space.  This  is  done  increasingly  with  the  help  of  algorithms  and 
automated  exchanges.  Google's  keyword  bidding  system  used  for  search  and  contextual 
advertising  is  the  most  mature  example.  Online  advertising  has  led  to  economies  of 
specialization: traditional publishers provide content for attracting viewers and sell advertising 
space  to  advertisers;  online  publishers  are  increasingly  turning  the  selling  of  advertising 
space over to specialized advertising platforms. 

Moreover,  ad  networks  appear  to  play  a  key  role  in  allowing  websites  and  mobile 
applications  with  relatively  small  customer  audiences  (e.g.  start-up  companies  that  are  still 
building  up  their  audience  or  websites  that  target  a  very  specific  audience)  to  generate 
advertising  revenue.194  Targeting  ads  more  accurately  to  the  preferences  of  an  individual 
user reduces the noise of irrelevant advertising. 

40 

 
 
 
Benefits for advertisers: reduced advertising wastage  
Online  advertising  platforms  allow  businesses  to  market  their  products/services  to  selected 
audiences  by  enabling  interest-based  advertising  that  relies  on  users’  personal  data  and 
demographic characteristics. These characteristics include, for example, users’ age, gender, 
location and interests. Compared to traditional off-line advertising, the effectiveness of which 
was  difficult  to  measure,  online  advertising  provides  advertisers  accurate  targeting  and 
measurement methods. They increase the effectiveness of marketing spending ensuring that 
ads  are  shown  to  those  users  who  are  most  likely  to  purchase  the  advertised  product  or 
service. 

More  sophisticated  technologies  are  beginning  to  track  not  only  whether  individuals  clicked 
on an advertisement but whether it actually translated into a sale. In addition, with the use of 
innovative  tools,  users'  behaviour  can  be  tracked  across  different  types  of  devices.195  Data 
collection companies can detect when the same user logs onto the Web from a PC, tablet or 
smartphone,  or  purchases  a  product  in  a  retail  store,  based  on  their  browsing  habits  and 
other  clues.  They  can  then sell  that  information  to  marketers  who  want  to  show  the  same 
person advertisements on different devices and measure efficacy.  

Benefits for publishers: efficient monetization of content  
Targeted  Internet  advertising  in  theory  serves  a  useful  informational  role  for  consumers 
because they are able to see the ads that are related to their potentially unique interests. In 
other words, online platforms reduce the 'noise' of irrelevant advertising by enabling interest-
based advertising that is based on users’ personal data and demographic characteristics.196 

In addition to direct advertisements many website owners use affiliate programs or revenue 
sharing programs offered by the online platforms to monetize their sites. For example, eBay 
link will get a 7 day cookie and the website will receive 50%-75% (for US traffic) of the final 
value fees of any product that the user buys from eBay within the next seven days. Similarly, 
Amazon  gives  the  websites  hosting  the  ad  4%-8%  commission  depending  on  quantity 
shipped on a 1 day cookie. iTunes affiliate program is run through LinkShare, meaning that 
the website gets 10% of anything that users purchase on iTunes for the next year.197 

This provides a convenient way for website operators to monetize their content. Advertising 
networks  and  affiliate  programs  give  publishers  access  to  a  wider  pool  of  advertisers  and 
often provide advanced ad serving solutions.    

3.5.5.2 Collection and use of personal data 
The  more  information  advertising  networks  have  about  the  audience,  the  better  they  can 
target their ads. Moreover, if they can offer better targeting, they can charge more for adverts 
and  get  more  marketers  using  their  service.  In  order  to  achieve  this,  advertising  networks 
install cookies in users’ browsers to record the types of pages that users’ visit and associate 
users with certain interest or demographics, as a basis for targeted advertising. The use of 
'cookies'  is  regulated  under  the  ePrivacy  Directive.  Following  the  adoption  of  the  General 
Data  Protection  Regulation,  which  includes  provision  regarding  the  right  of  individuals  to 
object, including to direct marketing, there is a review of the ePrivacy directive, which must 
be in line with the new data protection rules. The value of personal data to online platforms is 
shown by advertising revenues per user (ARPU), which for Google in the first quarter of 2014 
was as  much as USD 45 on  average. Google has consistently earned ARPU of more than 
USD  40  on  average  since  the  fourth  quarter  of  2012.198  Facebook’s  worldwide  ARPU  was 
USD 9.45 in 2014199, 39 % higher than in 2013. 

It is important to look at  the different types of cookies  used by the websites and what  their 
main characteristics are. At the same time it should be noted that irrespective of the type of 

41 

 
 
 
cookies  used,  there  is  a  legal  requirement  to  obtain  the  user  consent  before  a  cookie  is 
placed on their device.   

Figure 15: Characteristics of cookies 

 Source: Prepared by the European Commission on the basis of comprehensive assessment 

Session  Cookies  (1st  Party  Cookies)  are  a  useful  connection  between  users  and  the 
websites  they  visit.  The  information  gathered  through  3rd  Party  Cookies  is  used  as  for 
behavioral  targeting  as  for  measurement  and  attribution  across  digital  ecosystem  silos. 
Banning  third  party  cookies  would  give  protection  to  the  big  web/app  portals,  such  as 
Google,  Bing,  and  Facebook  through  Graph  Search.  They  will  have  the  option  to  gather 
information through 1st party cookie, user data, ad inventory, and third-party ad server while 
advertisers will find it difficult to measure audiences and grow their media investment across 
all digital channels (display, search, video, and social).200 

Flash  cookies  are  a  way  to  circumvent  deletion  of  cookies  by  the  user.  They  are  a 
mechanism  to  store  information  about  a  user's  preferences  for  websites  that  use  Adobe 
Flash, a multimedia platform for viewing videos. By restoring the value of the original cookie 
they nullify the deletion of the HTML cookies. Currently, many sites use Flash cookies. The 
UC Berkeley study found that in the US market Flash cookies were used on 54 of the top 100 
websites,  including  three  of  the  six  government  websites  analyzed.201  Nevertheless,  the 
latest versions of Google Chrome, Mozilla Firefox, and Microsoft Internet Explorer allows for 
control or deletion of Flash cookies through their browser’s settings.202  

Super  cookies,  also  called  zombie  cookies,  are  tracking  cookies  that  reappear  after  users 
have deleted them. An example of a company using this type of cookies is Turn, an online 
advertising  clearinghouse  relied  on  by  Google,  Yahoo,  Facebook  and  others.203  Some 
companies track computers of users without their consent, whether they are logged in to the 
service  or  not,  and  even  if  they  are  not  registered  users  of the  site,  by  using  social  plug-in 
content sharing cookies. Therefore, in Germany websites are required by law to warn users 
that  'liking'  the  website  on  Facebook  grants  permission  for  the  website  to  record  their 
customers' data and that they can withdraw their consent at any time.204 

Different  ways  users  rely  on  to  avoid  or  manage  cookies  are  often  outpaced  by  the 
development of ever new and technologically more advanced cookies: 

42 

 
 
 
  Opt-out: To opt-out means the user will not receive targeted advertising. It does not 
mean  that  the  website  will  cease  the  collection  of  data  or  ad  displaying.205  When 
opting out the user receives opt-out cookies from the website.  

  Browsing sessions:  

  Private/incognito browsing sessions. Cookies set during private browsing are 
deleted when exiting the session or when switching back to normal browsing. 
However super-cookies could still track users online even if they've enabled a 
privacy-cookie setting.206 

  Browsers with a "do not track" privacy setting, which automatically restrict 3rd 
Party  Cookies  by  default.  However,  some  online  advertising  networks  have 
been found to use a workaround to circumvent these privacy restrictions.207 

  Websites and add-ons offering an option to see and block tracking 3rd parties, such 

as ghostery.com, and www.mozilla.org/en-US/lightbeam. 

  Ad blocker: Nearly 200 million people worldwide regularly block ads and the number 
is  growing  fast,  increasing  41%  globally  in  the  last  year.  Adobe  and  PageFair,  an 
Irish  start-up  that  tracks  ad-blocking,  estimated  that  blockers  will  cost  publishers 
nearly  $22  billion  in  revenue  this  year.208  However,  companies  offering  ad  blocking 
services,  such  as  PageFair,  AdBlock  Plus  and  Ghostery,  are  also  developing 
innovative advertising mechanisms.209 

  Cookie  Clearinghouse  Initiative  by  Mozilla  and  Stanford  University  –  the  project 
tested a tool that would restrict, by default, tracking files from companies that users 
didn't interact with.210 However the project has been suspended.211  

In  recent  years,  privacy  concerns  have  come  to  the  fore  as  consumers,  government 
agencies and the media started focusing on the massive amount of personal data that online 
advertising companies were storing and using.  

Individuals  were  largely  negative  in  relation  to  the  degree  of  transparency  that  online 
platforms currently offer on their collection and use of personal and non-personal data. The 
sanctions provided for in the General Data Protection Regulation, which can be up to 4% of 
the  worldwide  annual  turnover  of  the  preceding  financial  year,  should  provide  incentive  for 
companies to ensure they are fully complying with the data protection rules.  As mentioned in 
the  previous  sections,  several  companies  have  been  found  to  track  computers  of  users 
without their consent212.  

Data  about  Internet  users  can  also  be  traded,  in  varying  degrees  depending  on  the 
jurisdiction. The third-party data marketplace has grown a lot in the recent years. Lotame and 
BlueKai  (recently  purchased  by  Oracle  for  400  million  USD),  eXelate  (acquired  in  2015  by 
Nielsen for 200 USD million) are only some examples of companies built on trading 3rd party 
data  (other  big  players  are  Acxiom,  Experian,  Neustar).  These  companies  manage  data 
exchanges  bringing  together  3rd  party  data  vendors  and  companies  willing  to  pay  for  that 
data, which can be used to improve products and service offerings and to improve targeting 
in marketing campaigns.  

A recent OECD report discusses in detail the risk of price discrimination, which is a possible 
way  of  exploiting  data  as  a  strategic  point  of  control.213  Some  respondents  to  the  public 
consultation also raised this issue.  

At  the  same  time,  respondents  to  the  public  consultation  mentioned  a  variety  of  measures 
that  could  regulate  the  use  of  information  by  online  platforms,  such  as  introducing  a 
requirement for online platforms to allow users to effectively 'opt-out' from data collection & 
use, developing  rules to minimize data collection  and retention, and introducing strict cyber 
security requirements. 

43 

 
 
3.5.5.3 High degree of automation 
The unique features of online advertising include the use of Internet-based technologies and 
advanced data collection and evaluation mechanisms to target and track specific individuals 
and to automate the buying and selling of advertising inventory. Like modern finance, online 
advertising  relies  heavily  on  advanced  economic  and  statistical  methods.  The  decisions 
regarding  which  advertisement  to  display  to  which  user  are  taken  very  quickly,  in  real-time 
with the use of advanced algorithms.  

IV. Summary  

4.1 Increasing role in the digital economy of online platforms 

The  Internet  and  ubiquitous  connectivity  (better  networks  and  connected  devices  e.g. 
smartphones)  have  led  to  an  unprecedented  expansion  of  the  online  platform  business 
model - one of the most successful business models of the Internet economy. Over the last 
two decades, online platforms have grown to become some of the biggest companies in the 
world. As consumer adoption of smartphones, connected devices and other types of mobile 
technology  increases,  online  platforms  are  set  to  play  an  increasingly  important  economic 
and societal role. Having said this, the future Internet cannot succeed without trust of users in 
online platforms,214 and without online platforms respecting all applicable legislation and the 
legitimate interests of consumers and other users. 

Platforms  bring  a  new  dimension  to  more  traditional  models  of  firms,  especially  to  SMEs. 
They  help  smaller  companies  achieve  “big  company”  benefits  from  digitalisation,  including 
easy  entry  to  new  markets  at  a  fraction  of  the  cost  that  they  would  incur  without  them. 
Additionally, the online platform business model continues to drive the creation of very strong 
and  highly  valued  companies  -  so  called  "unicorn"  start-ups.  As  such  online  platforms  are 
powerful engines of growth. They are, thus, interesting and valuable for their contribution to 
productivity  and  competition  in  the  wider  economy.  As  illustrated  in  Chapter  II,  online 
platforms' characteristics as well as their social and economic impact are extremely diverse. 
For  example,  search  platforms  offer  fast  and  organized  access  to  the  Internet's  vast 
information store; advertising platforms allow companies to reach a wide audience, to target 
their advertising and to measure the effectiveness of ad campaigns through data analytics; e-
commerce  marketplaces  offer  scale,  efficiency  and  additional  functionalities  to  private  and 
professional sellers; social media platforms allow users to interact and exchange information 
with  each  other  and  with  a  wider  audiences;  and  App  stores  and  mobile  ecosystems  offer 
app  developers  the  opportunity  to  develop  solutions  meeting  users'  needs  in  terms  of 
entertainment,  productivity  or  communication,  and  to  monetize  their  ideas  through  different 
strategies.  

However, beyond  these simple and intuitive benefits  relating to platforms' primary business 
financial  benefits,  productivity  and 
transactions,  online  platforms  provide  significant 
transparency  gains.  Financial  benefits  to  consumers  could  result  from  online  platforms' 
impact  on  prices,  including  welfare  gains  from  free  products  as  well  as  increasing  product 
availability. For businesses, the most important benefits are cost reduction and the promotion 
of  business  opportunities,  as  these  are  the  two  main  characteristics  that  lead  to  business 
growth.  Moreover,  online  platforms  bring  the  additional  benefit  of  facilitating  employment, 
education and knowledge sharing. It appears that online platforms contribute significantly to 
innovation, and notably reduce the time taken for innovation to reach end consumers. Lastly, 
online  platforms,  especially  collaborative  economy  platforms,  can  potentially  lead  to  better 
resource allocation and more sustainable consumption patterns.  

44 

 
 
 
Many  online  platforms  are  able  to  provide  the  above  benefits  to  a  large  extent  because  of 
their data gathering capabilities. Gathering, analysing and interpreting data to more efficiently 
match  supply  and  demand  and  guide  decision  making  is  at  the  heart  of  their  activity.  For 
these online platforms, each user - whether company or customer - is considered a valuable 
data  generating  source.  By  allowing  for  near  frictionless  participation  that  strengthens 
network  effects,  these  online  platforms  are  able  to  capture  and  analyse  vast  quantities  of 
data.  

Big  data  technology  can  help  businesses  better  understand  a  market  and  adapt  their 
products, prices, and inventories to consumers' needs. As the JRC report215 points out, there 
is  growing  information  asymmetry  between  large  platforms  with  virtually  unlimited  data 
collection  &  processing  capabilities  and  the  limited  cognitive  capacity  of  human  users216. 
Information  overload  and  complex  pricing  or  tariff  structures,  are  a  major  factor  in  causing 
consumer  harm  and  undermine  real  consumer  empowerment  and  their  rights  to  clear  and 
adequate information.217  On the other hand, as pointed out in the JRC report218, this form of 
information asymmetry may also lead to important economic benefits by enabling individuals 
to specialize and increase their productivity. 

Online  platforms  have  also  been  shown  to  raise  some  concerns  for  consumers.  As 
mentioned  in  the  Digital  Single  Market  Strategy  Communication,  issues  that  need  to  be 
assessed  include  transparency  e.g.  in  search  results  (involving  paid-for  links  and/or 
advertisement), platforms' usage of the information they collect, relations between platforms 
and  suppliers,  constraints  on  the  ability  of  individuals  and  businesses  to  move  from  one 
platform to another and how best to tackle illegal content on the Internet.   

4.2 Diversity of online platforms 

'real  world'  platforms,  online  platforms  are  not 

Online  platforms  take  various  shapes  and  sizes  and  are  continuously  evolving.  Unlike 
limited  physically  and 
traditional 
geographically.  Moreover,  from  a  theoretical  perspective,  due  to  the  existing  asymmetry 
between  the  network  effects  on  the  platform's  sides  they  are  able  to  employ  a  strikingly 
involves  cross-
different  pricing  model.  A  platform's  decision  on  pricing  structure 
subsidization,  where  one  group  of  users  pay  significantly  more  than  the  other  or  bears  the 
total cost of the other group's participation. It does not follow the theory for traditional firms in 
which the long-run price is always greater than marginal cost.  

However,  there  are  other  important  characteristics  which  may  distinguish  online  platforms 
from other businesses: their capacity to facilitate, and extract value, from direct interactions 
or transactions between users by building networks where "network effects" are at play; the 
ability to collect, use and process a large amount of data in order to optimize user experience 
or  create  and  shape  new  markets.  What  is  more,  the  combination  of  data  collection  and 
processing  capacity  with  established  network  effects  gives  online  platforms  unprecedented 
scope and scale allowing them to expand into new economic sectors. 

Therefore,  "online  platform"  is  a  broad  label  for  numerous  types  of  multi-sided  business 
models.  Even  at  a  theoretical  level,  depending  on  the  definition,  online  platforms  are  a 
flexible concept.  

Furthermore,  online  platforms  are  continuously  changing  and  developing  in  new  directions. 
They  are  at  the  forefront  of  developments  in  the  emerging  platforms  of  the  future:  virtual 
reality, connected and self-driving cars, Internet of Things, Big Data and Artificial Intelligence. 
Start-ups try to identify market inefficiencies and use the power of mobile connectivity, social 
media,  algorithms  detecting  market  trends,  and  adaptive  pricing  in  order  to  take  over 
traditional sectors. By bringing to the market innovative business models, they are having a 

45 

 
 
 
disruptive  effect  on  many  sectors  such  as  transport,  energy,  banking,  financial  services, 
mobile health and smart cities. 

in  platforms'  business  models  and  characteristics  have 

These  variations 
important 
implications  for  a  policy  analysis  of  online  platforms.  It  is  challenging  to  set  out  a  clear-cut 
definition  of  online  platforms,  especially  from  a  legal  perspective.  Doubts  have  been  raised 
during  the  stakeholder  engagement  process  over  whether  any  "one-size-fits-all"  definition 
would  be  feasible.  Such  a  definition  is  unlikely  to  be  future-proof  and  it  might  overlap  with 
other  definitions,  for  example  of  an  online  intermediary  and  information  society  service 
provider.219 JRC analysis supports this argument and states that a clear-cut definition would 
be  likely  to  miss  certain  online  platforms,  or  conversely  to  apply  to  a  very  wide  range  of 
Internet services.220 

4.3 Promoting online platform innovation in Europe 

As  discussed  in  Chapter  II,  there  are  many  important  factors  for  the  development  of  online 
platforms, such as access to finance and to IT and business skills, consumer trust, security, 
high  speed Internet  infrastructure, mobile  connectivity,  support  for  entrepreneurs,  clear  and 
predictable  regulatory  framework,  free  flow  of  data,  and  open  standards.  The  key 
determinants of a platform's success are economies of scale and economies of scope related 
to network effects.  

Platforms need a critical mass of customers on all market sides to survive. With a combined 
market of 500 million consumers, the European Union may offer a fertile ground for such a 
market,  based  on  economies  of  scale.  Thus,  fragmentation  of  the  EU  market  is  one  of  the 
most important impediments to the scaling up of online platforms in Europe.  
A  2012  Report  for  the  European  Commission  Joint  Research  Centre  on  ICT  innovation221 
highlights that "the lack of a large integrated digital market in Europe and poor capability and 
skills  to  commercialize  technological  innovations"  are  important  impediments  for  European 
ICT firms to grow into world leading innovators. While Europe is very good at inventing new 
technologies  and  digital  concepts,  it  struggles  with  the  commercial  exploitation  of  these 
ideas, i.e. creating the necessary aggregates that combine these concepts in a usable form 
and extracts value out of the ideas. Of particular importance, market fragmentation renders 
the  EU  less  attractive  for  large  players  in  the  platform  economy  and  poses  an  even  bigger 
challenge for innovative small platforms than for larger global players. 
The JRC report on the economic policy perspective of online platforms222 points out that the 
economics of platforms has gradually moved away from a focus on network effects only to a 
wider  picture  of  economies  of  scope  of  data  collection  and  use.  Platforms  can  collect  data 
and  aggregate  them  across  all  firms  and  consumers  on  the  platform.    The  aggregated 
information  has  more  value  than  the  individual  datasets  that  users  can  observe.  From  a 
societal  perspective,  economies  of  scope  are  a  source  of  economic  benefits  because  they 
generate cost savings (in data collection & analysis) and innovation. 

The expansion of individuals' digital footprints by companies and government agencies has 
become a source of concern and has impacted the development and competitiveness of the 
market in which platforms operate.  

Along with challenges associated with fragmentation of the EU market, legal uncertainty, and 
restrictions  on  data  flow,  online  platforms  are  confronted  with  other  difficulties  limiting  their 
growth  in  the  EU.  Lack  of  financing  for  promoting  existing  innovation  and  specific  digital 
entrepreneurship skills are among them. These difficulties may provide an explanation of the 
fact,  raised  in  Chapter  I,  that  many  European  economies  are  performing  below  average  in 
terms of how they employ digital technologies and innovation to drive growth. 

The  EU's  strategic  objective  is  to  set  the  optimal  innovation  environment  to  create,  attract, 
retain  and  grow  new  online  platform  innovators  within  Europe,  while  at  the  same  time 

46 

 
 
 
creating a regulatory framework that respects the legitimate interests of consumers and other 
users. 

Endnotes 

1 As shown by a recent survey including 69 worldwide public companies with a market capitalisation of over USD 1 billion 
Peter Evans and Anabelle Gawer, "The Emerging Platform Economy Series", Center for Global Enterprise (January 2016) 
p.13. Retrieved from: http://thecge.net/wp-content/uploads/2016/01/PDF-WEB-Platform-Survey_01_12.pdf, accessed on 
11 April 2016  
2 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 2016-
05, p.22, available at https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
3 Besides the European Commission, these include the UK's House of Lords, Germany's Monopolkommission, France's 
Conseil National du Numérique and the Dutch Ministry of Economic Affairs. 
4 Article 20 of the recently adopted General Data Protection Regulation, provides for the right of data subjects to receive 
personal data which he or she has provided, in a structured commonly used and machine readable format and have the 
right to transmit that data to another controller without hindrance from the controller to which the personal data has been 
provided, where the processing is based on consent under Article 6(1)(a), Article 9(1)(a) or on a contract under Article 
6(1)(b) and the processing is carried out by automated means. 
5 For a detailed discussion of different approaches to defining online platforms, see: Martens, B. (2016) "An economic policy 
perspective on online platforms". JRC/IPTS Digital Economy Working Paper 2016-05, available at 
https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
6 Rochet, J.-C., & Tirole, J. (2003), "Platform Competition in Two-sided Markets", Journal of the European Economic 
Association, 1(4), 990-1029  
7 Evans, D. (2003), "Some Empirical Aspects of Multi-sided Platform Industries", Review of Network Economics, 2(3), 2194-
5993 and Evans, D., & Schmalensee, R. (2007). The Industrial Organization of Markets with Two-Sided Platforms 
Competition Policy International, 3(1), 151-179 
8 See: David Evans, "The Antitrust Economics of Multi-Sided Platform Markets" Retrieved from: 
https://www.justice.gov/atr/single-firm-conduct-hearings-comment-david-evans-2, accessed on 4 May 2016 
9 Filistrucchi, L., Geradin, D., & Van Damme, E. (2013). Identifying Two-Sided Markets. World Competition: Law & Economics 
Review, 36(1), 33-60 and Filistrucchi, L., Geradin, D., van Damme, E., & Affeldt, P. (2014). Market Definition in Two-Sided 
Markets: Theory and Practices. Journal of Competition Law and Economics, 10(2), 293-339 
10 Hagiu, A., & Wright, J. (2015). "Marketplace or Reseller?", Management Science, 61(1), 184-203 
11 Sangeet Paul Choudary , "Why business models fail: pipes vs. platforms", Wired. Retrieved from: 
http://www.wired.com/insights/2013/10/why-business-models-fail-pipes-vs-platforms/, accessed on 3 May 2016 
12 Rysman, M. (2009). The Economics of Two-Sided Markets. Journal of Economic Perspectives, 23(3), 125-143 
13 Wilbur, K. C. (2008). A Two-Sided, Empirical Model of Television Advertising and Viewing Markets. Marketing Science, 
27(3), 356-378; Filistrucchi, L., Geradin, D., & Van Damme, E. (2013). Identifying Two-Sided Markets. World Competition: 
Law & Economics Review, 36(1), 33-60. According to Li, J. (Li, J. (2015). Is online media a two-sided market? Computer Law 
& Security Review: The International Journal of Technology Law and Practice, 31(1), 99-111), it is crucial for advertising-
supported media to qualify as MSM.  Platforms monetizing content through advertising would not qualify as two-sided if 
two-way indirect effects are needed.   
14 Users pay for these services in non-monetary ways, for example by giving the other side of the platform access to their 
data or attention.  
15 Critical mass can be defined as a minimal set of customers on each side that is large enough to attract more customers 
and result in sustainable positive feedback (Evans, D.S. and R. Schmalensee (2009) “Failure To Launch: Critical Mass in 
Platform Businesses” Review of Network Economics 9.4 (2010)) 
16 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 2016-
05, chapter 3. https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
17 According to ISO/IEC 2382-1, data are "a reinterpretable representation of information in a formalized manner, suitable 
for communication, interpretation or processing". Data can either be created/authored by people or generated by 
machines/sensors. Often, it is generated as a "by-product" of other processes. 
18 1 exabyte = 1 billion GB  
19  A zettabyte is equal to one trillion gigabytes  
20 Raconteur (2014). The Data Economy (Edition No.0272). Retrieved from: 
http://np.netpublicator.com/netpublication/n05031451, accessed on 3 May 2016 
21 Dumbill, Edd (January 2012), "What is big data? An introduction to the big data landscape". O'Reilly. Retrieved from: 
https://www.oreilly.com/ideas/what-is-big-data, accessed on 3 May 2016 
22 McAfee, Andrew, et al. "Big data." The management revolution. Harvard Bus Rev 90.10 (2012): 61-67. 
23 Mayer-Schönberger, Viktor, and Kenneth Cukier. Big data: A revolution that will transform how we live, work, and think. 
Houghton Mifflin Harcourt, 2013. 

47 

 
 
 
 
                                                      
 
 
24Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 2016-
05, section 4.1, https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
25 "Facebook has a billion users in a single day, says Mark Zuckerberg" (August 2015), BBC News. Retrieved from: 
http://www.bbc.com/news/world-us-canada-34082393, accessed on 3 May 2016; according to Facebook's official web 
page in March 2016 Facebook has 1.09 billion daily active users on average. Retrieved from:  
http://newsroom.fb.com/company-info/, accessed on 3 May 2016 
26 Brooks David (October 2014), Our Machine Masters, The New York Times. Retrieved from: 
http://www.nytimes.com/2014/10/31/opinion/david-brooks-our-machine-masters.html 
27 Top 10 websites according to Alexa, "The top 500 sites on the web". Retrieved from: http://www.alexa.com/topsites, 
accessed on 4 May 2016 (Alexa orders the sites in accordance with their 1 month Alexa traffic. The 1 month rank is based 
on a combination of average daily visitors and page views over the past month. The site with the highest combination of 
visitors and page views is ranked first). 
28 Clark Jack (November 2014), "5 Numbers that Illustrate the Mind-Bending Size of Amazon's Cloud", Bloomberg. Retrieved 
from: http://www.bloomberg.com/news/2014-11-14/5-numbers-that-illustrate-the-mind-bending-size-of-amazon-s-
cloud.html 
29 http://www.zdnet.com/article/microsoft-million-server-datacenters/ accessed on 10 April 2016 
30 Harris Derrick (February 2015), "Google had its biggest quarter ever for data center spending. Again", Gigaom. Retrieved 
from: https://gigaom.com/2015/02/04/google-had-its-biggest-quarter-ever-for-data-center-spending-again/, 
accessed on 4 May 2016 
31 See for example: https://aws.amazon.com/big-data/, https://cloud.google.com/bigquery/, 
https://www.microsoft.com/en-us/server-cloud/solutions/data-warehouse-big-data.aspx 
32 The EU has 10 (out of 15) most competitive countries in terms of technological readiness. Source: World Economic Forum 
– Global Competitiveness Index 
33 ITU, "ICT Facts and Figures – The world in 2015", p.3. Retrieved from: https://www.itu.int/en/ITU-
D/Statistics/Documents/facts/ICTFactsFigures2015.pdf, accessed on 3 May 2016 
34 Publicly available data on the exact volume of sales is not consistent due to use of different sources of data, different 
methodologies and different groups of products considered. For illustrative purposes, the following sources give an 
indication of the growth in e-commerce: see for e.g. Ecommerce Europe "The European B2C E-commerce Report 2015", 
http://www.ecommerce-europe.eu/press/2015/european-e-commerce-turnover-grew-by-14.3-to-reach-423.8bn-in-2014, 
Statista, "B2C e-commerce revenue in Europe from 2012 to 2018", http://www.statista.com/statistics/435843/b2c-e-
commerce-revenue-europe/  
35 Digital Scoreboard: https://ec.europa.eu/digital-single-market/en/digital-scoreboard 
36 Use of Social Media by European SMEs, 2013 
37 Breslin, J, Card, D., Dabrowski, M., and Mulligan, M., "Sizing the EU App Economy", Final Report Prepared for the 
European Commission, 2014. Retrieved from: http://eurapp.eu/2014/07/07/eurapp-final-report-published-eu-bookshop-0, 
accessed on 12 April 2016, p.12 
38 Breslin,J, Card, D., Dabrowski, M., and Mulligan, M, op. cit., p. 4. 
39 Digital Scoreboard: https://ec.europa.eu/digital-single-market/en/download-scoreboard-reports 
40 Peter Evans and Anabelle Gawer, "The Rise of the Platform Enterprise" (The Center for Global Enterprise, 2016). 
Retrieved from: http://thecge.net/wp-content/uploads/2016/01/PDF-WEB-Platform-Survey_01_12.pdf, accessed on 4 May 
2016 
41 Evans & Gawer (2016) ibid. distinguish between four different types of platforms based on their key functions 
(transaction, innovation, investment and integrated), and the list of platforms in the study include a wide range of 
companies, such as Uber, Airbnb, iTunes, Netflix etc.  
42 Reinhilde Veugelers, Bruno van Pottelsberghe, and Nicolas Véron, Joint Research Centre, Institute for Prospective 
Technological Studies, "Lessons for ICT Innovative Industries: Three Experts’ Positions on Financing, IPR and Industrial 
Ecosystems", JRC Technical Reports, 2012, pp. 45-56, available at <http://ftp.jrc.es/EURdoc/JRC76458.pdf> accessed on 7 
April 2016;  Reinhilde Veugelers, "New ICT Sectors: Platforms For European Growth?", Bruegel Policy Contribution, Issue 
2012/14 August 2012 
43Center for Global Enterprise, Global Platform Database, 2015, as cited by Evans, P, Reflections on the Boston Platform 
Strategy Summits. Retrieved from: http://thecge.net/video/reflections-on-the-boston-platform-strategy-summits/, 
accessed on 10 November 2015.  
44 Grabowska Edyta (April 2015), The Global B2B E-commerce Market Will Reach 6.7 Trillion USD by 2020. Frost & Sulivan. 
Retrieved from: http://ww2.frost.com/news/press-releases/global-b2b-e-commerce-market-will-reach-67-trillion-usd-
2020-finds-frost-sullivan/. 
45 See: Official Amazon Webpage, "About Amazon Business". Retrieved from: 
http://www.amazon.com/b?node=11261610011, accessed on 4 May 2016 
46 See, for example, the 2015 Mobile Economy Report by GSMA which shows that at the end of 2013 about half of the 
world's population had at least one mobile subscription.  
47 ITU annual global ICT data and ICT development index, Retrieved 
from:http://www.itu.int/net/pressoffice/press_releases/2015/57.aspx#.VmgDGf7luUn  
48 Retrieved from: http://ec.europa.eu/eurostat/statistics-
explained/index.php?title=File:Proportion_of_people_who_used_mobile_devices_to_access_the_internet_away_from_ho

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me_or_work,_EU-28,_2014_(%25)_BYIE15.png&oldid=228781#file, accessed on 4 May 2016. The total is more than 100% 
since respondents were able to select more than one benefit. 
49 Digital Agenda Scoreboard 2015 – Use of Internet 
50 The total is more than 100% since respondents were able to select more than one benefit. 
51 Select Committee on European Union, Online Platforms and the Digital Single Market, 20 April 2016, HL  129,  
52 EDiMA and Copenhagen institute (2015), Online intermediaries – Impact on the EU economy. Retrieved from: 
http://www.europeandigitalmediaassociation.org/pdfs/EDiMA%20-%20Online%20intermediaries%20-
%20EU%20Growth%20Engines.pdf 
53 Ibid. 
54 Brynjolfsson et al: "The changing shape of Amazon’s sales distribution curve", 2010 
55 Select Committee on European Union, Online Platforms and the Digital Single Market, 20 April 2016, HL  129, 
56 Brynjolfsson and Oh: "The attention economy: measuring the value of free digital services on the  
Internet", 2012  
57 EDiMA and Copenhagen institute (2015), Online intermediaries – Impact on the EU economy. Retrieved from: 
http://www.europeandigitalmediaassociation.org/pdfs/EDiMA%20-%20Online%20intermediaries%20-
%20EU%20Growth%20Engines.pdf 
58 The GDPR was adopted in April 2016 together with the revised data protection Directive by Council and Parliament, and 
together they will form the EU's data protection framework. 
59 Flash Eurobarometer 439, Survey conducted by TNS Political & Social at the request of the European Commission, 
Directorate-General for Communications Networks, Content & Technology, April 2016 
60 EDiMA and Copenhagen institute (2015), Online intermediaries – Impact on the EU economy. Retrieved from: 
http://www.europeandigitalmediaassociation.org/pdfs/EDiMA%20-%20Online%20intermediaries%20-
%20EU%20Growth%20Engines.pdf 
61 Select Committee on European Union, Online Platforms and the Digital Single Market, 20 April 2016, HL  129, 
62 Use of social media by European SMEs, 2013 
63 Select Committee on European Union, Online Platforms and the Digital Single Market, 20 April 2016, HL  129, 
64 Directive 2006/114/EC on Misleading and Comparative Advertising 
65 Deloitte, "The global economic impact of Facebook" (2015). Retrieved from: 
http://www2.deloitte.com/uk/en/pages/technology-media-and-telecommunications/articles/the-global-economic-impact-
of-facebook.html, accessed on 4 May 2016 
66McKinsey & Company, "A labour market that works: connecting talent with opportunity in the digital age" (McKinsey 
Global Institute, June 2015) 
67 Select Committee on European Union, Online Platforms and the Digital Single Market, 20 April 2016, HL  129, 
68 This figure is based on data over submarine cables. This figure does not necessarily only capture the end-uses of the data, 
as data often transits though the U.S. and Europe. For instance, data from Latin America can transit the U.S. on its way to 
Europe and data from Africa can transit through Europe on its way to the U.S. Source: www.brookings.edu 
69 Regulation 524/2013 on online dispute resolution for consumer disputes 
70 See: Hagiu, A., & Wright, J., "Marketplace or Reseller?", (2015) Management Science, 61(1), 184-203. 
71 To illustrate this further, Zalando, for instance, operates a partner program which allows third-party sellers (in return for 
a commission fee) to transact directly with customers via the Zalando website and mobile application. At the same time, 
Zalando also engages in direct sales and owns an inventory of goods for sale. For more info, see the Official Zalando 
Webpage, "Corporate Startegy", Zalando SE Annual Report 2015, pp. 12-13. Retrieved from: http://annual-
report.zalando.com/2015/assets/downloads/company/zalando_strategy.pdf, accessed on 6 April 2016. 
72Official Amazon Webpage, "Fees and Pricing". Retrieved from: 
https://www.amazon.com/gp/help/customer/display.html?nodeId=1161240, accessed on 4 April 2016 
73 Official Etsy Webpage, "Fees for Selling on Etsy". https://www.etsy.com/help/article/136, accessed on 4 April 2016 
74 Official Catawiki Wepbage, "Using our auctions". Retrieved from: http://www.catawiki.com/help/selling  
75 Official eBay Wepabge, "Standard selling fees". Retrieved from http://pages.ebay.com/help/sell/fees.html 
76 Spartoo marketplace – see: https://www.spartoo.com/marketplace_mentions.php 
77 Zalando marketplace – see: https://m.zalando.de/faq/partnerprogramm/ 
78 Table by Bundesverband Onlinehandel e.V. (BVOH), based on Traffic-Ranking by alexa.com and SimilarWeb (calculated by 
p.digital) February, 1st 2016; updated Feb, 21st 2016. Retrieved from: http://www.bvoh.de/ranking-335-marketplaces-
throughout-europe-online-means-diversity/, accessed on 28 April 2016 
79 Sellers at Tesco marketplace – see: http://www.tesco.com/direct/help/seller-terms-conditions.page 
80 Official Ebay Webpage, "eBay Acquires Dutch Company Marktplaats.nl eBay" (November, 2004). Retrieved from: 
http://pages.ebay.com/aboutebay/thecompany/2004/november.html, accessed on 3 May 2016 
81 Official Rakuten Webpage, "Rakuten to Acquire PriceMinister in France" (June 2010). Retrieved from 
http://global.rakuten.com/corp/news/press/2010/0617_01.html, accessed on 3 May 2016 
82 Official Ebay Investor Webpage, "eBay Inc. Reports Fourth Quarter and Full Year Results" (January 2015). Retrieved from: 
https://investors.ebayinc.com/releasedetail.cfm?ReleaseID=892350, accessed on 4 May 2016 
83 Official Ebay Webpage, "eBay Inc. Reports Fourth Quarter and Full Year 2013 Results" (January 2014). Retrieved from: 
https://investors.ebayinc.com/releasedetail.cfm?ReleaseID=820644, accessed on 4 May 2016 
84 Official Chrono24 Webpage, "Chrono24 Secures 21 Million EUR Investment from Insight Venture Partners 

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 to Fuel International Growth". Retrieved from: https://about.chrono24.com/chrono24-secures-21-million-eur-investment-
from-insight-venture-partners-to-fuel-international-growth/, accessed on 4 May 2016 
85 Deloitte, "Deloitte 2015 Technology Fast 500™ EMEA". Retrieved from: 
http://www2.deloitte.com/global/en/pages/technology-media-and-telecommunications/articles/technology-fast-500-
emea.html, accessed on 4 May 2016 
86 An association founded by national e-commerce associations and representing 25,000+ companies selling goods and/or 
services online to consumers in Europe 
87 Ecommerce Europe, "European B2C eCommerce Report 2015" (2015). Retrieved from:,http://www.ecommerce-
europe.eu/press/2015/european-e-commerce-turnover-grew-by-14.3-to-reach-423.8bn-in-2014 
88 Thelle, M., Rytter Sunesen, E. et al., "Online Intermediaries. Impact on the EU Economy." (October 2015), Retrieved from: 
http://www.europeandigitalmediaassociation.org/pdfs/EDiMA%20-%20Online%20intermediaries%20-
%20EU%20Growth%20Engines.pdf, accessed on 11 April 2016  
89Prothmann Oliver, "Ranking: 335 marketplaces throughout Europe – Online means diversity" (Bundesverband, February 
2016). Retrieved from: http://www.bvoh.de/ranking-335-marketplaces-throughout-europe-online-means-diversity/ 
90Ecommerce Foundation, "The Rise of the Global Market Place" (2015), Retrieved from: 
https://www.ecommercepolska.pl/files/9414/3504/3614/How_to_survive_the_global_market_places_v150610.pdf 
91Ecommerce News, "Global marketplaces to own 39% of online retail market in 2020" (June 2015). Retrieved from: 
http://ecommercenews.eu/global-marketplaces-to-own-39-of-online-retail-market-in-2020/ 
92 Eurostat (2015 ICT usage survey in households and by individuals) 
93 Flash Eurobarometer 413,( Q1May 2015) 4 
94 The Commission previously noted that only 15% of consumers were reported to have bought online from other EU 
Member States in 2014, while 44% did so domestically, leaving the EU's Digital Single Market underexploited. See: 
Commission Staff Working Document "A Digital Single Market Strategy for Europe – Analysis and Evidence" SWD (2015) 
100, available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52015SC0100  
95 See in this respect also the Commission Staff Working Document "A Digital Single Market Strategy for Europe – Analysis 
and Evidence" SWD (2015) 100, section 2.2,, available at: http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52015SC0100 [accessed at December 2015]. 
96 Only 22 percent of Europeans have full trust in companies like search engines or social networks, see: Special 
Eurobarometer 359, "Attitudes on Data Protection and Electronic Identity in the European Union" 
97 Ecommerce News, "Only half of Amazon Germany's retailers are German" (March 2016). Retrieved from: 
http://ecommercenews.eu/half-amazon-germanys-retailers-german/ 
98 OECD "Magnitude of counterfeiting and piracy of tangible products" (November 2009) 
99 Report on EU customs enforcement of IPR – Results at EU border 2014, 2015 
100 Official ebay Webpage, "Reporting intellectual property infringements". Retrieved from: 
http://pages.ebay.com/help/tp/vero-rights-owner.html  
101 Evans Benedict, "Mobile is eating the world" (March 2016). Retrieved from: http://ben-
evans.com/benedictevans/2015/11/7/mobile-ecosystems-and-the-death-of-pcs.  
102 1,6 million in Google Play and 1,5 million apps in the App Store, more than 400,000 in the Amazon Appstore and 340,000 
in the Windows Store. Statista Webpage, "Statistics and facts about App Stores". Retrieved from: 
http://www.statista.com/topics/1729/app-stores/, accessed on 23 October 2015 
103 Pakman David, "May I Have Your Attention, Please?" (Medium, August 2015), Retrieved from: https://medium.com/life-
learning/may-i-have-your-attention-please-19ef6395b2c3?curator=MediaREDEF#.2rwedr27o   
104 Perez Sarah,"Consumers Spend 85% of Time on Smartphones in Apps, but only 5 Apps See Heavy Use" (TechCruch, June 
2015)Retrieved from: http://techcrunch.com/2015/06/22/consumers-spend-85-of-time-on-smartphones-in-apps-but-only-
5-apps-see-heavy-use/accessed on 2 May 2016 
105 Ecommerce News, "Mobile commerce in Europe 2015" (2015). Retrieved from: http://ecommercenews.eu/mobile-
commerce-in-europe-2015 
106 Facebook Inc., “10-Q for Period Ending September 30, 2015,” p. 40 
107 Facebook Inc., “10-Q for Period Ending September 30, 2012,” p. 27 
108 Tode Chantal, "M-Commerce Sales to Reach $142B in 2016" (October 2015). Forrester Mobile Commerce Daily. 
Retrieved from:  http://www.mobilecommercedaily.com/mcommerce-sales-to-reach-142b-in-2016-forrester 
109 Williamson Brian, Chan Yi Shen, Wood Sam, "A policy toolkit for the app economy – where online meets off-line" (Lisbon 
Council, 2016),. Retrieved from: http://www.lisboncouncil.net/index.php?option=com_downloads&id=1245  
110 Ibid, p.7  
111 Ibid, p.11 
112 Ibid, p.7 
113 Worldwide; 1st quarter 2009 to 4th quarter 2015. Source: Gartner; ID 266219 
114 Manchiganti, Rutu,"On emerging business ecosystems in the mobile device industry; Evaluation of current and emerging 
mobile phone ecosystems", (2013) Massachusetts Institute of Technology. Retrieved from: 
https://dspace.mit.edu/handle/1721.1/90694 
115 As the report from Mobile Developer Economics 2010 suggests, time to shelf came down from 68 days to 22 days, on an 
average. In terms of time-to-shelf, according to app developers it is 24 days for iOS, a week for Android and 58 days for 
Symbian. The difference provides a potential reason for Symbian losing market share so quickly. 

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116 Williamson Brian, Chan Yi Shen, Wood Sam,"A policy toolkit for the app economy – where online meets off-line" (Lisbon 
Council, 2016). Retrieved from: http://www.lisboncouncil.net/index.php?option=com_downloads&id=1245 
117 The Apple App Store grew 45% in terms of downloads and 75% in terms of revenues in 2013. Google Play nearly doubled 
in number of downloads and saw a near 4-fold increase in revenue.EU Commission Press release, "A Digital Single Market 
for Europe" (May 2015). Retrieved from: http://eculture.zone/category/egovernment/digital-agenda-europe/ 
118 Williamson Brian, Chan Yi Shen, Wood Sam , "A policy toolkit for the app economy – where online meets off-line" (2016). 
Retrieved from: http://www.lisboncouncil.net/index.php?option=com_downloads&id=1245 
119Official WorldWideWebSize Webpage, "The size of the World Wide Web (The Internet)" (March 2016). Retrieved from: 
http://www.worldwidewebsize.com, accessed on 14 March 2016 
120 See for instance Google's explanation on "How Google Search Works". Official Google Webpage "How Google Search 
Works". Retrieved from: https://support.google.com/webmasters/answer/70897?hl=en#1.  
121 "Black hat" search engine optimization ("SEO") refers to strategies, techniques and tactics that focus only on increasing 
ranking by search engines and not improving quality of content for a human audience, and usually do not obey search 
engines guidelines. Some examples of black hat SEO techniques include keyword stuffing, invisible text, doorway pages, and 
adding unrelated keywords to the page content or page swapping (changing the webpage entirely after it has been ranked 
by search engines). When these measures are discovered by the operator of a search engine, they may result in a negative 
adjustment of the site's ranking in the overview of results, or even the removal of the site from the index. 
122 Official PC Mag Webpage, "Definition of vertical search engine". Retrieved from: 
http://www.pcmag.com/encyclopedia/term/57892/vertical-search-engine. 
123Official webpage from the Department of Computer Science and Statistics of the University of Rhode Island, "Searching 
The Web" ( Retrieved from: http://homepage.cs.uri.edu/faculty/wolfe/book/Readings/R10%20Links/search1.htm 
124 The "pay for placement model" was first introduced by Goto in 1998. Goto, which was later acquired by Yahoo, was a 
search engine where the results were all advertising. Sites bid for the top spot in any given search term, with the top bidder 
being listed first in the search results. There was no distinction between displaying paid and organic search results. But 
advertisers paid only if a user clicked on their ad. The concept of auctions for the first listings of any particular search terms 
became a standard element of general search business model at the end of the 1990s. 
125 However, as evidenced in social experiments, the users' concerns about privacy do not always translate into thought-out 
choices. This is known as the "privacy paradox". See: Benjamin Wittes and Jodie C. Liu , "The privacy paradox: The privacy 
benefits of privacy threats" (Brookings May 2015) 
126 The figures are rounded off and often do not add to 100% as the share of other smaller online search providers is not 
shown. They are estimated in relation to search queries on desktop, mobile, tablet and console and are based on page 
views (and not unique visitors) to over 3 million global websites. 
127 Official Alexa Webpage, "The top 500 sites on the web". Retrieved from: http://www.alexa.com/topsites. It must be 
noted that Alexa does not include mobile app traffic which may alter the ranking of most visited websites. 
128 Pollock, R,  "Is Google the Next Microsoft?" Competition, Regulation in Internet Search, Re-view of Network Economics 
(2010) 9 (4) pp. 24 
129 In 2007, Google invested 2.12 billion USD, equivalent to 12.8 percent of its revenue, in R&D (Google, 2008, p.36) while 
its closest competitor Yahoo! invested 1.08 billion USD or 15.6 percent of its revenues (Yahoo!, 2008, p.60). These figures 
are high by international standards. In the G7 countries for example, an average company in manufacturing allocated only 
2.7 percent of its annual production value to R&D in 2002 while the respective share for medical, precision and optical 
instruments – the sector with the highest relative R&D expenditures – amounted to 13.2 percent (OECD, 2005). See: DIW 
Berlin, "Competition in the web search market – A report for Microsoft" (July 2009). Retrieved from:   http://diw-
econ.de/wp-content/uploads/2014/01/Bericht_Suchmaschinen_DIWecon_v2.0.pdf 
130 Harris Derrick, "Google had its biggest quarter ever for data center spending. Again" (Gigaom, February 2015). Retrieved 
from: https://gigaom.com/2015/02/04/google-had-its-biggest-quarter-ever-for-data-center-spending-again 
131 Levy Adam, "5 Tech Companies Spending More on R&D Than Apple Inc" (Fool, Aprilie 2016) .Retrieved from: 
http://www.fool.com/investing/general/2015/06/14/5-tech-companies-spending-more-on-rd-than-apple-in.aspx 
132 Official Nasdaq Webpage, "Alphabet Inc.Class C Capital Stock Quote & Summary Data" (May 2016). Retrieved from: 
http://www.nasdaq.com/symbol/goog#ixzz43GwdBkqh 
133 Official WorldWideWebSize Webpage, "The size of the World Wide Web (The Internet)" (March 2016). Retrieved from: 
http://www.worldwidewebsize.com, 
134 With regard to the function of search services see: German Monopolkommission, "Special Report 68: Competition 
policy: The challenge of digital markets" (June 2015) 50 f. 
135 Directive 2005/29/EC on Unfair Commercial Practices  
136 Official Hubspot Webpage, "The Ultimate List of Marketing Statistics". Retrieved from: 
http://www.hubspot.com/marketing-statistics, accessed on 18 March 2016. 
137 Official Search Engine Land Webpage, "Survey: Under 40 Percent Start A Local Search With A Search Engine" (January 
2016). Retrieved from: http://searchengineland.com/survey-under-40-percent-start-a-local-search-with-a-search-engine-
240426. 
138 German Monopolkommission, "Special Report 68: Competition policy: The challenge of digital markets" (June 2015) 51 
139 An online search takes significantly less time than an off-line search. In a study conducted by Chen, Jeon and Kim, using 
random questions, an online search takes on average 7 minutes, whereas the corresponding off-line search takes 22 

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minutes. Source: Y Chen, GYJ Jeon, YM Kim, "A day without a search engine: an experimental study of online and off-line 
searches" (2014) Experimental Economics 
140 Rampton John , "5 Reasons You Shouldn't Use AdWords" (Forbes, July 2014), Retrieved from: 
http://www.forbes.com/sites/johnrampton/2014/07/07/5-reasons-you-shouldnt-use-adwords/#281bc0e7dbb7 
141 Robert Epstein and Ronald E. Robertson, "The search engine manipulation effect (SEME) and its possible impact on the 
outcomes of elections", PNAS , 2015 112(33) as cited by Martin Moore, "Tech Giants and Civic Power", April 2016 available 
at http://www.kcl.ac.uk/sspp/policy-institute/CMCP/Tech-Giants-and-Civic-Power.pdf, accessed on 20 April 2016 
142 Gallagher David, "Sites Become Dependent on Google" (The New York Times, December 2002). Retrieved from: 
http://www.nytimes.com/2002/12/09/technology/09NECO.html?pagewanted=all 
143 Grimmelmann James, "Some Skepticism About Search Neutrality" Retrieved from: 
http://james.grimmelmann.net/essays/SearchNeutrality 
144 Official Unbubble Webpage, "How search neutrality works". Retrieved from: https://www.unbubble.eu/info/en-
GB/search-neutrality 
145 Latanya Sweeney, "Discrimination in online ad delivery" Queue 11.3 (2013): 10, shows how Google's advertising 
technology exposes racial bias in society. 
146 W. Eggers, R. Hamill and A. Ali (2013). Data as the new currency: Govenemnt's role in facilitating the exchange, Deloite 
Review, 2013 (13), 19-29. 
147 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 
2016-05, sections on Data Transparency and Liability. https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
148 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 
2016-05, sections on Data Transparency and Liability. 
149 Nicas, J., 2011. “Google Roils Travel,” Wall Street Journal, 12/27. Retrieved from: 
http://www.wsj.com/articles/SB10001424052970203686204577116700668483194#:hiJy5j-vROCfpA, accessed 4 May 2016. 
150 Retrieved from: https://www.google.com/transparencyreport/removals/copyright, accessed on 3 May 2016. 
151 Retrieved from: http://fortune.com/2016/02/01/facebook-value-exxon, accessed on 2 May 2016. 
152 Retrieved from: http://investor.fb.com/secfiling.cfm?filingID=1326801-16-67&CIK=1326801, accessed on 4 
May 2016. 
153 Aleksandra Gebicka and Andreas Heinemann, " Social Media & Competition Law ", World Competition 37, 
no. 2 (2014): 149–172  
154 Gillespie, Tarleton. “The Politics of ‘Platforms’.” New Media & Society 12.3 (2010): 347–364. 
155 Jan H. Kietzmann, Kristopher Hermkens, Ian P. McCarthy, Bruno S. Silvestre, "Social media? Get serious! Understanding 
the functional building blocks of social media" Business Horizons (2011) 54, 241—251 
156 Case No COMP/M.7217 – Facebook/WhatsApp, paragraph 46. 
157 In Case No COMP/M.7217 – Facebook/WhatsApp, the Commission left the question open whether, for the purpose of 
market definition, social networking services should be segmented according to their intended use, see ibid at paragraph 
60. 
158 See: http://openid.net, accessed on 4 May 2016. 
159 See: http://oauth.net, accessed on 4 May 2016. 
160 D'Onfro Jillian (August 2015). Facebook is dominating Google, Yahoo and Amazon in this one niche area, Business Insider 
UK. Retrieved from: http://uk.businessinsider.com/facebook-third-party-identity-provider-2015-7?r=US&IR=T. 
161 Source: http://www.gigya.com/blog/the-landscape-of-customer-identity-q2-2015/ 
162 Larralde Alexandra (April 2015), Social Login Trends Across the Web: Q1 2015. Retrieved from: 
http://janrain.com/blog/social-login-trends-across-the-web-q1-2015, accessed on 4 May 2016. 
163 See: https://www.messenger.com/business, accessed on 4 May 2016. 
164 Retrieved from: http://investor.fb.com/secfiling.cfm?filingID=1326801-16-67&CIK=1326801, accessed on 4 
May 2016 
165 Retrieved from: http://investor.fb.com/secfiling.cfm?filingID=1326801-16-67&CIK=1326801, accessed on 4 
May 2016 
166 Ioanăs, Elisabeta, and Ivona Stoica. "Social media and its impact on consumers behavior." International Journal of 
Economic Practices and Theories 4.2 (2014): 295-303. 
167 The global social media check-up, Burson-Marsteller, available at: http://www.o2-v2.com/en/blog/what-
fortune-100-social-media-teaches-would-be-chinese-global-brands accessed on 10 April 2016 
168 Demystifying social media, McKinsey&Company, available at: http://www.mckinsey.com/business-
functions/marketing-and-sales/our-insights/demystifying-social-media accessed on 10 April 2016  
169 Kosinski, Michal, David Stillwell, and Thore Graepel. "Private traits and attributes are predictable from digital records of 
human behavior."Proceedings of the National Academy of Sciences 110.15 (2013): 5802-5805. 
170 Grabowicz PA, Ramasco JJ, Moro E, Pujol JM, Eguiluz VM. 2012. Social Features of OnlineNetworks: The Strength of 
Intermediary Ties in Online Social Media. PLoS ONE, Vol. 7, No. 1. http://dx.doi.org/10.1371/journal.pone.0029358 
(Accessed 10 July 2014.) 
171 As an example, Facebook manipulated 689.003 users' emotions without them noticing. Booth Robert (June 2014), 
Facebook reveal news feed experiment to control emotions, The Guardian. Retrieved from: 
http://www.theguardian.com/technology/2014/jun/29/facebook-users-emotions-news-feeds, accessed on 4 May 2016  

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172Moore Martin (April 2016) Tech Giants and Civic Power. Retrieved from: http://www.kcl.ac.uk/sspp/policy-
institute/CMCP/Tech-Giants-and-Civic-Power.pdf 
173 Zittrain Jonathan (June 2014), Facebook Could Decide an Election Without Anyone Ever Finding Out, New Republic. 
Retrieved from: https://newrepublic.com/article/117878/information-fiduciary-solution-facebook-digital-gerrymandering, 
accessed on 4 May 2016. 
174 Moore Martin (April 2016) "Tech Giants and Civic Power", April 2016 available at http://www.kcl.ac.uk/sspp/policy-
institute/CMCP/Tech-Giants-and-Civic-Power.pdf. 
175 Moore Martin (April 2016) Tech Giants and Civic Power. Retrieved from: http://www.kcl.ac.uk/sspp/policy-
institute/CMCP/Tech-Giants-and-Civic-Power.pdf. 
176 The US Democratic Party has for example set up a company controlling a database of detailed voter information, which 
"provides data and data-related services exclusively to progressive organizations to help them better identify, understand, 
and communicate with the people they need to persuade and mobilize", see: http://www.catalist.us/. See in more detail: 
http://www.economist.com/news/special-report/21695190-voters-america-and-increasingly-elsewhere-too-are-being-
ever-more-precisely.  
177 Nasr Joseph (December 2015), "Facebook, Google, Twitter agree to delete hate speech in 24 hours: Germany", Reuters. 
Retrieved from: http://www.reuters.com/article/us-germany-internet-idUSKBN0TY27R20151215, accessed on 4 
May 2016 
178 See: https://blog.twitter.com/2016/combating-violent-extremism, accessed on 4 may 2016, accessed on 4 May 2016 
179 Natalie Andrews (February 2016), Facebook Steps Up Efforts Against Terrorism, The Wall Street Journal. Retrieved from: 
http://www.wsj.com/articles/facebook-steps-up-efforts-against-terrorism-1455237595, accessed on 4 May 2016. 
180 See: https://www.facebook.com/help/131112897028467/?ref=hc_fnav&locale=en_US and 
https://www.facebook.com/help/405183566203254, accessed on 4 May 2016 
181 See: http://www.marketsandmarkets.com/Market-Reports/mobile-advertising-market-944.html, accessed on 4 May 
2016. 
182 Case COMP/M.4731 – Google / Doubleclick. 
183 An example of such a platform for publishers is Facebook's Liverail (https://www.liverail.com/platform/). 
184 See for a detailed description of these services the Commission's recent decision in case COMP/M.7023 – Publicis / 
Omnicom. 
185 OECD, (April 2010), The Economic and Social Role of Internet Intermediaries. pp. 18-19. Retrieved from: 
https://www.oecd.org/Internet/ieconomy/44949023.pdf 
186 Ibid. 
187 Ibid. 
188 OpenX whitepaper, Ad Networks vs. Ad Exchanges: How They Stack Up, of July 2010, p. 10. Retrieved from:  
https://www.cs.princeton.edu/courses/archive/spring13/cos448/web/docs/adnets_vs_exchanges.pdf. 
189 Evans, David S., "The Online Advertising Industry: Economics, Evolution and Privacy", 23 Journal of Economic 
Perspectives 3 (2009), p. 52. 
190 EMarketer, "Total Media Ad Spending Growth Slows Worldwide", 15 September 2015. Retrieved from: 
http://www.emarketer.com/Article/Total-Media-Ad-Spending-Growth-Slows-Worldwide/1012981, accessed on 4 May 
2016.  
191 IAB Europe, IAB Mobile (April 2015), Global Mobile Advertising Revenue 2014. Retrieved from: http://www.iab.com/wp-
content/uploads/2015/08/Global_mobile_advertising_revenue_2014_report.pdf. 
192 Ibid. 
193 IAB Europe, IAB Mobile (April 2015), Global Mobile Advertising Revenue 2014. Retrieved from: http://www.iab.com/wp-
content/uploads/2015/08/Global_mobile_advertising_revenue_2014_report.pdf. 
194 Evans, David S., "The Online Advertising Industry: Economics, Evolution and Privacy", 23 Journal of Economic 
Perspectives 3 (2009).  
195 Macmillan Souglas and Dwoskin Elizabeth (July 2015), Drawbridge Hires Apple Ad Executive to Track Users Across 
Devices, The Wall Street Journal. Retrieved from: http://blogs.wsj.com/venturecapital/2015/07/13/drawbridge-hires-apple-
ad-executive-to-track-users-across-devices, accessed on 4 May 2016. 
196 Liem Cassandra ( January 2016), The economic value of personal data for online platforms, firms and consumers. 
Retrieved at: http://bruegel.org/2016/01/the-economic-value-of-personal-data-for-online-platforms-firms-and-consumers, 
accessed on 4 May 2016 
197 Nash Ted (November 2008), 5 CPA Alternative to Adsense On Your Blog or Website, makeuseof. Retrieved from: 
http://www.makeuseof.com/tag/5-cpa-alternatives-to-adsense-on-your-blog-or-website, accessed on 4 May 2016 
198 Statista (2015) "Google’s annualized advertising ARPU from the 1st quarter of 2012 to the 1st quarter of 2014 (in US 
dollars)", accessed on 7 December 2015 at http://www.statista.com/statistics/306570/google-annualized-advertising-
arpu/. 
199 Facebook Annual Report 2014, page 38 
200 Bensoussan Pascal (September 2013), How to Talk About Banning Third-Party Cookies, Digiday. Retrieved from: 
http://digiday.com/agencies/banning-third-party-cookies, accessed on 4 May 2016. 
201 Retrieved from: http://www.scmagazine.com/top-websites-using-flash-cookies-to-track-user-behavior/article/141486, 
accessed on 4 May 2016. 
202 Retrieved from: https://www.onguardonline.gov/articles/0042-cookies-leaving-trail-web, accessed on 4 May 2016. 

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203 Angwin Julia (January 2015), Zombie Cookie: The Tracking Cookie That You Can't Kill, ProPublica. Retrieved from: 
https://www.propublica.org/article/zombie-cookie-the-tracking-cookie-that-you-cant-kill, accessed on 4 May 2016. 
204 Landgericht Dusseldorf 9 March 2016 (Az. 120 151/15). 
205 Ibid. 
205 Moscaritolo Angela (August 2009), Top websites using Flash cookies to track user behaviour, SC Magazine. Retrieved 
from: http://www.networkadvertising.org/choices , accessed on 4 May 2016. 
205 Gibbs Samuel (March 2015), Facebook 'tracks all visitors, breaching EU law', The Guardian. Retrieved from: 
http://www.theguardian.com/technology/2015/mar/31/facebook-tracks-all-visitors-breaching-eu-law-report, accessed on 
4 May 2016. 
206 Retrieved from: http://www.pcworld.com/article/2865297/super-cookies-can-track-you-even-in-private-browsing-
mode-researcher-says.html, accessed on 4 May 2016. 
207 Google fined over Safari cookie privacy row (August 2012), BBC News. Retrieved from: 
http://www.bbc.com/news/technology-19200279, accessed on 4 May 2016. 
208 Manjoo Farhad (August 2015), Ad Blockers and the Nuisance at the Heart of the Modern Web, The New York Times. 
Retrieved from: http://www.nytimes.com/2015/08/20/technology/personaltech/ad-blockers-and-the-nuisance-at-the-
heart-of-the-modern-web.html, accessed on 4 May 2016. 
209 Ibid. 
210 Temple James (November 2013), Mozilla anticookie tool plans crumbling, SF Gate. Retrieved from: 
http://www.sfgate.com/technology/dotcommentary/article/Mozilla-anticookie-tool-plans-crumbling-4958045.php, 
accessed on 4 May 2016. 
211 For more info, see "How The Cookie Clearinghouse Works". Retrieved from: 
https://cch.law.stanford.edu/index.html%3Fp=8.html, accessed on 4 May 2016. 
212 Gibbs Samuel (March 2015), Facebook 'tracks all visitors, breaching EU law', The Guardian. Retrieved from: 
http://www.theguardian.com/technology/2015/mar/31/facebook-tracks-all-visitors-breaching-eu-law-report. 
213 OECD (2015), Data-Drivedn Innovation: Big Data for Growth and Well-Being, OECD Publishing, Paris, 
http://dx.doi.org/10.1787/9789264229358-en. 
214 Only 22 percent of Europeans have full trust in companies like search engines or social networks, see: Special 
Eurobarometer 359, 'Attitudes on Data Protection and Electronic Identity in the European Union' . 
215 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 
2016-05. https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
216 See: Misleading ‘free’ trials and subscription traps for consumers in the EU, study by GfK, 2016 (to be published).. This 
study showed that 63% of online ‘free’ trial offers do not give clear or adequate information to the consumer on the use of 
personal data and possible sharing with third parties, despite existing EU law governing these matters.  
217 For instance in the context of energy markets, see BEUC, "Building a consumer-centric Energy Union". Retrieved at: 
http://www.beuc.eu/publications/beuc-x-2015-068_mst_building_a_consumer-centric_energy_union.pdf, accessed on 4 
May 2016; also, see Dr Natali Helberger, "Forms Matter: Informing Consumers Effectively" (Study commissioned by BEUC, 
September, 2013). Retreived at: 
http://www.beuc.eu/publications/x2013_089_upa_form_matters_september_2013.pdf, accessed on 4 May 
2016.Retreived at: http://www.beuc.eu/publications/x2013_089_upa_form_matters_september_2013.pdf, accessed on 4 
May 2016. 
218 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 
2016-05. https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
219 Synopsis report on The Public Consultation on the Regulatory Environment for Platforms and Online Intermediaries 
220 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 
2016-05. https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  
221 Reinhilde Veugelers, Bruno van Pottelsberghe, and Nicolas Véron (2012), "Lessons for ICT Innovative Industries: Three 
Experts’ Positions on Financing, IPR and Industrial Ecosystems", JRC Technical Reports, pp. 45-56, Retrieved from: 
http://ftp.jrc.es/EURdoc/JRC76458.pdf, accessed on 7 April 2016 
222 Martens, B. (2016) "An economic policy perspective on online platforms". JRC/IPTS Digital Economy Working Paper 
2016-05. https://ec.europa.eu/jrc/sites/default/files/JRC101501.pdf  

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