America’s Excessive Digital Domination: The Figures
Published in Les Échos
(France) on 24 October 2014
by Eric Le Boucher (link to original)
The United States represents 83 percent of the market capitalization of digital companies, compared with Europe’s 2 percent. This excessive domination is yet another sign that our continent no longer has imperial ambitions.
We know that Google, Apple, Facebook and Amazon — GAFA — have succeeded Microsoft, which itself replaced IBM as the global information technology leader. We know. We know that Europeans accept this supremacy as benevolent, beneficial, and, in any case, inevitable after the many failed attempts to address the issue in the 1970s, such as Plan Calcul and Unidata. China has launched Alibaba and Baidu to compete with Amazon and Google, and Russia is challenging them with Yandex and Vkontakte, but there is nothing of that kind in Europe, despite a few vague intentions. Europe doesn’t want, or no longer wants, to be an empire.
What’s more, this dominance is accepted because American companies provide high-quality, state-of-the art services, ensuring that millions of European Internet users remain committed to the GAFA “good guys.” The penetration rate of a company such as Google is higher in the Old Continent, particularly in France, than it is in the United States, where the telecom companies have retained a firm grip.
The other factor that favors the Internet giants from across the Atlantic is their brilliance at conveying a message of freedom. They present themselves as a universal medium of initiative, creativity and progress, representing the end of old-school methods, and embodying the virtues of competition; these companies symbolize emancipation, a movement away from the “old world,” financial liberty, and freedom from the ancient powers of nation states. “Digital natives,” born in the age of the Internet, regard any criticism of their heroes as an attack on their way of life.
But are people really aware of what is happening? Do they know that the United States represents 83 percent of the market capitalization of digital companies, compared with Europe’s 2 percent? Do they know that the research and development efforts of Microsoft and Intel exceed the whole of France’s civil research funding in all sectors? Do they know that on Jan. 1, 2013, for example, nine out of 10 of the world’s most frequently visited websites were linked to American companies, while 80 percent of users were outside of the United States? Do they know that America represents 72 percent of the top 50 sites in the world, compared with 22 percent from China, 6 percent from Russia, and 0 percent from Europe? Do they know that according to CIA calculations, the United States has 439,000 servers in their country — computers where all data are stored and processed – twice as many as the combined whole of the following nine nations on the list?
I personally discovered the scale of this dominance through reading the excellent article by Olivier Sichel, published by lfri.* Sichel is a key player in the French digital world, former CEO of Wannadoo, currently chief executive of LeGuide.com – which has been subject to strong competition from Google – and co-founder of the Open Internet Project, an initiative to encourage European resistance.
“Saturn” and “the string of pearls” – Olivier Sichel describes these two dominance mechanisms. He begins by pointing out that the economy of the web is “an exponential economy.” The power of computers doubles every 18 months, according to Moore’s well-known law, and the value of the network is proportional “to the square of the number of connected users,” according to the less well-known Metcalfe’s law. Unlike other sectors, where diminishing returns have an adverse effect on a growing company, on the Internet, the opposite is true. The scale of it provides a growing advantage, and eventually the winner takes all. Through experience, the digital giant gets to know its users better, and its service improves even more. Its horizontal development makes Internet users part of an “ecosystem” predesigned to facilitate a range of uses. Users who have invested time acquiring a service are reluctant to switch to a different provider.
This factor, together with their ability to raise capital in the United States, has enabled the American Internet giants to develop a two-pronged strategy. Just as Saturn attracts new orbital bodies, they buy up-and-coming businesses that could present a threat or a new development. Facebook wrote a check for $13 billion to acquire WhatsApp’s new messaging service. Google places pawns in every field, from fiber optics to neuroscience. The “string of pearls” consists of supplementing this horizontal expansion with a vertical integration to dominate the entire value chain.
America’s dominance has been carefully planned and solidly built, and shows no signs of weakening. What effects will this have? According to Sichel, Europe could lose its autonomy through the subtle imposition of Californian law, culture and ethics, which no longer have any respect for privacy – “an outdated concept,” according to the boss of Facebook – and drift toward a disturbing science-fiction-style transhumanism. On the subject of culture, economist Françoise Benhamou gives a detailed account of the publishing industry’s struggle to survive in the face of GAFA.**
Maybe there is no need to be quite so pessimistic about these dangers. Europe has now been dominated for half a century by the American computing industry but has shown a certain amount of resilience. However, I tend to agree with Olivier Sichel on the jobs lost by Europe in areas of the future, and especially on the Internet giants’ trickery: They don’t pay any taxes, and they suck up personal data and make mountains of money, thanks to the enthusiastic, unpaid participation of new generations of naive Internet users.
*Author's Note: “L’Echiquier numérique américain. Quelle place pour l’Europe?” [The American digital scene. What place is there for Europe?] September 2014. Ifri.org
**Author's Note: “Le Livre à l’heure numérique” [The book in the digital age]. Seuil
We know that Google, Apple, Facebook and Amazon — GAFA — have succeeded Microsoft, which itself replaced IBM as the global information technology leader. We know. We know that Europeans accept this supremacy as benevolent, beneficial, and, in any case, inevitable after the many failed attempts to address the issue in the 1970s, such as Plan Calcul and Unidata. China has launched Alibaba and Baidu to compete with Amazon and Google, and Russia is challenging them with Yandex and Vkontakte, but there is nothing of that kind in Europe, despite a few vague intentions. Europe doesn’t want, or no longer wants, to be an empire.
What’s more, this dominance is accepted because American companies provide high-quality, state-of-the art services, ensuring that millions of European Internet users remain committed to the GAFA “good guys.” The penetration rate of a company such as Google is higher in the Old Continent, particularly in France, than it is in the United States, where the telecom companies have retained a firm grip.
The other factor that favors the Internet giants from across the Atlantic is their brilliance at conveying a message of freedom. They present themselves as a universal medium of initiative, creativity and progress, representing the end of old-school methods, and embodying the virtues of competition; these companies symbolize emancipation, a movement away from the “old world,” financial liberty, and freedom from the ancient powers of nation states. “Digital natives,” born in the age of the Internet, regard any criticism of their heroes as an attack on their way of life.
But are people really aware of what is happening? Do they know that the United States represents 83 percent of the market capitalization of digital companies, compared with Europe’s 2 percent? Do they know that the research and development efforts of Microsoft and Intel exceed the whole of France’s civil research funding in all sectors? Do they know that on Jan. 1, 2013, for example, nine out of 10 of the world’s most frequently visited websites were linked to American companies, while 80 percent of users were outside of the United States? Do they know that America represents 72 percent of the top 50 sites in the world, compared with 22 percent from China, 6 percent from Russia, and 0 percent from Europe? Do they know that according to CIA calculations, the United States has 439,000 servers in their country — computers where all data are stored and processed – twice as many as the combined whole of the following nine nations on the list?
I personally discovered the scale of this dominance through reading the excellent article by Olivier Sichel, published by lfri.* Sichel is a key player in the French digital world, former CEO of Wannadoo, currently chief executive of LeGuide.com – which has been subject to strong competition from Google – and co-founder of the Open Internet Project, an initiative to encourage European resistance.
“Saturn” and “the string of pearls” – Olivier Sichel describes these two dominance mechanisms. He begins by pointing out that the economy of the web is “an exponential economy.” The power of computers doubles every 18 months, according to Moore’s well-known law, and the value of the network is proportional “to the square of the number of connected users,” according to the less well-known Metcalfe’s law. Unlike other sectors, where diminishing returns have an adverse effect on a growing company, on the Internet, the opposite is true. The scale of it provides a growing advantage, and eventually the winner takes all. Through experience, the digital giant gets to know its users better, and its service improves even more. Its horizontal development makes Internet users part of an “ecosystem” predesigned to facilitate a range of uses. Users who have invested time acquiring a service are reluctant to switch to a different provider.
This factor, together with their ability to raise capital in the United States, has enabled the American Internet giants to develop a two-pronged strategy. Just as Saturn attracts new orbital bodies, they buy up-and-coming businesses that could present a threat or a new development. Facebook wrote a check for $13 billion to acquire WhatsApp’s new messaging service. Google places pawns in every field, from fiber optics to neuroscience. The “string of pearls” consists of supplementing this horizontal expansion with a vertical integration to dominate the entire value chain.
America’s dominance has been carefully planned and solidly built, and shows no signs of weakening. What effects will this have? According to Sichel, Europe could lose its autonomy through the subtle imposition of Californian law, culture and ethics, which no longer have any respect for privacy – “an outdated concept,” according to the boss of Facebook – and drift toward a disturbing science-fiction-style transhumanism. On the subject of culture, economist Françoise Benhamou gives a detailed account of the publishing industry’s struggle to survive in the face of GAFA.**
Maybe there is no need to be quite so pessimistic about these dangers. Europe has now been dominated for half a century by the American computing industry but has shown a certain amount of resilience. However, I tend to agree with Olivier Sichel on the jobs lost by Europe in areas of the future, and especially on the Internet giants’ trickery: They don’t pay any taxes, and they suck up personal data and make mountains of money, thanks to the enthusiastic, unpaid participation of new generations of naive Internet users.
*Author's Note: “L’Echiquier numérique américain. Quelle place pour l’Europe?” [The American digital scene. What place is there for Europe?] September 2014. Ifri.org
**Author's Note: “Le Livre à l’heure numérique” [The book in the digital age]. Seuil
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