Analytical paper “Structure of the online platform economy post COVID-19 outbreak”

The support study team just published the analytical paper “Structure of the online platform economy post COVID-19 outbreak”. The COVID-19 pandemic has created a unique situation where movement restrictions and confinement measures have led all sectors of industry and society to digitise at lightning speed in order to be able to pursue their activities.

The aim of this analytical paper is to analyse the impacts of the COVID-19 crisis on the platform economy. First, the paper explores the immediate, medium and potential long term economic impacts of the COVID-19 crisis on online platforms, their business users and end-users. Then, a comparison of the trends and strategies of mergers and acquisitions (M&A) before and after the COVID-19 outbreak provides evidence on the potential impact on the structure of digital markets and the incentives for M&A. Finally, the paper assesses the existing and potential political impacts of COVID-19 crisis.

The research for this analytical paper was conducted based on literature review and desk research, semi-structured interviews with stakeholders and experts, and a survey with business users of online platforms.

With the lockdown and social distancing measures, most activities (work, communication, education, entertainment) had to move online, increasing the use of online services and the breadth of users. The closure of physical shops and movement restrictions have created economic disruptions and severely affected the sectors most dependant on in-person activities such as the tourism, hospitality, transportation and event-focused sectors. While the digitalisation of businesses was already underway across sectors, the pandemic has considerably accelerated this transition and one can expect that that the businesses that have digitalised their processes, moved to online business models or increased their use of online platforms will keep these in place beyond the crisis. Due to the increase in the use of online platforms for work, sales, communication and entertainment, the top platforms in these sectors have seen an increase in their revenues in 2020. Despite the COVID-19 crisis, the top platforms (Google, Amazon, Facebook, Apple, Microsoft) have also maintained the pace of their M&A activities in 2020, demonstrating a continuation of their strategy to consolidate their core segments and expand into adjacent products and services.

The COVID-19 crisis has confirmed the importance of digital services and online platforms in mitigating the disruptions of physical activities, but also exposed their vulnerabilities in containing illegal and harmful practices online, such as scams, false claims of cure and disinformation. A range of new legislative initiatives and strategies have recently been unveiled by the Commission, addressing pre-existing issues that have been amplified by the pandemic, and attempting to address the increased digitalisation of consumers and businesses accelerated by the COVID-19 crisis.