Business dependence

As noted above, platforms generate value for businesses by providing them with access to demand for their products, which may lead businesses to become dependent on the platforms to varying extents, and vulnerable to changes in the platforms’ policies.

In addition to the indicators on trade and turnover from sales online and marketplaces already presented in the section on trade flows, other indicators of the dependence of businesses on the online platform economy include the use of platforms to publish online advertising, and turnover from sales and share of revenue via online platforms as a proportion of the company’s total revenue from e-commerce.

In 2018, an average of 26.2% of enterprises across the EU paid to advertise online. In northern European countries such as Sweden and Denmark, this figure was over 44%.

Figure 12. Share of enterprises paying to advertise on the internet, % (2018)

Source: Eurostat

For 37.2% of respondents to our survey, online advertising spend represents more than 25% of their advertising budget.

Figure 13. Share of advertising budget spent on online advertising, % of companies (PPMI survey, 2019)

Q6. What share of your business’s annual advertising budget is spent on advertising

Source: PPMI Survey (N=1667)

Based on Eurostat data on the total turnover of enterprises and the amount of turnover from online platforms, we can see that the countries in which online platforms generated the greatest real value for enterprises are Germany, Italy and France.

Figure 14. Turnover from online platforms sales by enterprises, millions of euros (2017)

Source: Eurostat

Estimates vary as to the share of European enterprises’ revenue that comes from e-commerce. According to Statista estimates, in 2017, 18% of company revenues across the EU-28 came from e-commerce, with the highest proportion in Ireland (33%) and Czechia (31%).

Figure 15. Average share of company revenue coming from e-commerce in selected European countries, % (2017)

Source: Statista (Eurostat)

According to a PPMI survey conducted in 2019, around half of enterprises derived more than 25% of their revenues from online platforms. For almost 10% of companies, online platform sales exceed 75% of all revenues.

Figure 16. Share of revenue coming from online platforms, % of companies (PPMI survey, 2019)

Source: PPMI survey (N=1667)

Platforms’ share of consumer attention

According to our estimates using SimilarWeb data, on average across the EU member states, selected major online platforms account for over 30% of website traffic. Web traffic to the major online platforms is most significant within the online hospitality sector, e-commerce and social media.

Figure 17. Most frequently used platforms across the EU Member States

Source: Data collected from SimilarWeb (July 2019)

Acquisitions as a competitive strategy

An online platform’s competitive strategy can determine its position and dominance in the market (e.g. as a result of acquisitions). The 50 largest online platforms carried out a total of 432 acquisitions during the period 2013-2019, with Google being the absolute leader, followed by Verizon Communications (Yahoo!), Amazon and Facebook.

The first graph below shows the number of acquisitions carried out by the parent companies that own online platforms; the second graph illustrates the number of individual acquisitions carried out by each online platform.

Figure 18. Number of acquisitions by parent companies (2013-2019)

Source: elaborated by PPMI, based on data from Crunchbase.

Figure 19. Number of acquisitions by platforms (2013-2019)

Source: elaborated by PPMI, based on data from Crunchbase.

The country distribution of acquisitions by parent companies shows that 89% of acquisitions were made by US parent companies, 3% by Russian, and 3% by German parent companies (Figure 20). In total, 6.5% of all acquisitions were performed by parent companies based in the EU (Figure 21).

Of those companies that were acquired, 70% were US-based, 6% were UK-based, and 3% were German (Figure 20). In total, 19% of companies acquired were based in the EU (Figure 21).

Figure 20. Number of acquisitions by country of parent company and by country of company acquired (2013-2017)

Parent companies

Acquirees

Source: elaborated by PPMI, based on data from Crunchbase.

Figure 21. Share of acquisitions by country of parent company (EU/non-EU) and by country of company acquired (EU/ non-EU), 2013-2017)

Parent companies

Acquirees

Source: elaborated by PPMI, based on data from Crunchbase.

In addition, in Figure 22 we visualise the flows of acquisitions between various countries, with the EU Member States grouped together.

On the graph, the flow of acquisitions is as follows: from right to left, [country name] parent company acquires a company from [country name] which is classified as either a platform or non-platform.

Of all companies acquired between 2013 and 2019, 40% can be classified as online platforms. 70% of those companies originate from the U.S., almost 20% from the EU, and the rest from other countries. Over 90% companies shown have been acquired by U.S. parent companies, and only 6% by European parent companies.

With regard to the U.S. companies that acquired European start-ups, some important information should be noted. In total, U.S. parent companies (Google, Facebook, Amazon, Twitter, eBay, Verizon Communication, Booking Holdings, Tripadvisor, Airbnb, Expedia Group, Outbrain) acquired 50 European companies.

Few details are available with regard to the value of these deals, but from the information that is available, there are a few points of interest. In 2014, Tripadvisor acquired the French online restaurant reservation service LaFourchette for USD 140 million (EUR 102.5 million). In 2016, Twitter acquired the UK-based technology company Magic Pony Technology, which develops machine-learning technologies, for USD 150 million (EUR 136 million). In 2014, Google acquired the UK-based artificial intelligence company DeepMind for USD 500 million (EUR 366 million).

In addition, in 2019 Twitter acquired the UK-based company Fabula AI; Amazon acquired the Swedish online video gaming ecosystem, IGDB.com; Outbrain acquired the German native advertising solutions provider Ligatus; and Airbnb acquired Gaest, a Danish online marketplace specialising in unique spaces to work.

European parent companies acquired a total of 22 companies. In 2019, Idealist acquired the Spanish online travel booking company AvaiBook; Ryanair acquired the Austrian airline solutions company Lauda Motion; And NASPERS acquired Aasaanjobs, an Indian recruitment company for entry-level jobs.

Figure 22. Overview of mergers and acquisitions (2013-2019)

Source: elaborated by PPMI

Note: Middle East  = Israel, UAE; Asia  = India, Singapore, China, Taiwan, Japan, Thailand, Philippines and Uzbekistan; South America = Chile; non-EU European countries = Belarus, Iceland, Switzerland.

Period covered: 2013-2019.

Meanwhile, the other figures present more specific (country-level) information on the origins of companies acquired by EU parent companies (Figure 23), and the origins of parent companies that acquired EU companies (Figure 24).

In Figure 23, we represent the flows of acquisitions by European companies (from right to left): [EU country] parent company acquires a company from [country name], which is classified as either a platform or non-platform.

Out of all companies acquired by European parent companies between 2013 to 2019, almost half can be classified as online platforms. More than 30% of those companies originate from Germany, 12% from Austria, and 12% from Romania. Over 40% of those companies have been acquired by German parent companies, and 24% by Dutch parent companies.

Figure 23. Mergers and acquisitions by EU parent companies (2013-2017)

Source: elaborated by PPMI

In Figure 24, we represent the flows of acquisitions of EU start-ups by various companies (from right to left): [country] parent company acquires a company from [EU country name], which is classified as either a platform or non-platform.

Out of all European start-ups acquired during the period, 35% can be classified as online platforms. More than 30% of those companies originate from the UK, 15% from Germany, 9% from France and 8% from Spain. Over 60% of these online platforms have been acquired by US parent companies, and 14% by German parent companies.

Figure 24. Mergers and acquisitions of EU start-ups (2013-2017)

Source: elaborated by PPMI