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, the turnover from sales and share of revenue via online platforms or the extent of multi-homing and barriers to multi-homing.

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

Source: Eurostat

For 36% of respondents to our study survey with business users, the share of online advertising spend represents more than 25% of their advertising budget in 2020, compared to 37.2% in the first wave of the survey in 2019.

Figure 16. Share of advertising budget on online advertising, % of companies (PPMI survey)

What share of your business’s annual advertising budget is spent on advertising via online platforms?

Source: PPMI Survey. First wave (November 2019) N=1192, Second wave (October 2020) N=1291.

Based on Eurostat data on the total turnover of enterprises and the amount of turnover from online platforms, we can see that in 2017 the countries in which online platforms generated the greatest real value for enterprises were Germany, Italy and France.

Figure 17. Turnover from online platforms sales by enterprises, million euros (2017)

Source: Eurostat

Estimates vary as to the share of European enterprises’ revenue that comes from e-commerce. According to Statista estimates, in 2019, 18% of company revenues across the EU came from e-commerce, with the highest proportion in Ireland (34%) and Czechia (32%).

Figure 18. E-commerce revenue share of companies in selected European countries, % of total revenue (2019)

Source: Statista (Eurostat)

Note: EU current composition – EU 28 as of 2019

According to our second wave of the study survey conducted in October 2020, more than a half of enterprises (59%) derived more than 25% of their revenues from online platforms compared to 50% of companies in November 2019. Online platform sales exceeded 75% of the revenues of 13% of companies in 2020 compared to 10% in 2019. These figures demonstrate the increasing dependency of business users on online platforms, which may have been accelerated by the COVID-19 crisis and lockdown measures in 2020.

Figure 19. Share of revenue coming from online platforms, % of companies (PPMI survey, 2019)

What share of your business’s annual advertising revenues is generated via online platforms?

Source: PPMI Survey. First wave (November 2019) N=1598, Second wave (October 2020) N=1979.

Although the views of business users on their level of dependency have remained stable between the two survey waves, a high share of respondents (61% in 2020) consider that the successful operation of their business is very dependent or completely dependent on online platforms.

Figure 20. Dependency on online platforms, % of companies (PPMI survey)

How much, if at all, is the successful operation of your business dependent on online platforms?

Source: PPMI Survey. First wave (November 2019) N=1667, Second wave (October 2020) N=1990.

Another indicator of the dependence of business users on platforms is the extent of multi-homing, and the barriers to multi-homing experienced by companies. Our study survey with business users shows that around half of respondents from the accommodation/ tourism, services and physical goods sectors use more than one online platform to sell. On the other hand, only 31% of app/ software businesses use more than one platform.

Figure 21. Multi-homing, % of companies (PPMI survey, second wave)

Does your business use more than one online platform to sell:

Source: PPMI Survey. Second wave (October 2020). Physical goods N=1424, Services N=1415 , Accommodation\tourism N=747, Apps/ software=656.

According to our study survey, the main reason for business users to use only one platform is that they can reach their clients with this one platform. In the services and accommodation/ tourism sectors, at least 20% of companies considered that using more than platform is difficult to manage. For the sale of physical goods, more than 20% of companies mentioned that the fees charged by other platforms are higher than the one they use. In the accommodation/ tourism sector, more than 15% of business users replied that the platform they use makes it difficult to use other platforms.   

Figure 22. Reasons for using only one platform, % of companies (PPMI survey, second wave)

You indicated that your business uses only one online platform. What are the reasons for not using more platforms?

Source: PPMI Survey. Second wave (October 2020). Physical goods N=741, Services N=770, Accommodation/ tourism N=418, Apps/ software=536.

Among the business users reporting that the platform they use makes it difficult to use other platforms, a quarter specified that this was due to the unique mix of services offered, another quarter replied that they benefit from rewards or initiatives that encourage them to use mainly this one platform, and another quarter revealed that the platform they use forbids using other platforms in their terms and conditions.

Figure 23. Reasons for difficulties to use other platforms, % of companies (PPMI survey, second wave)

You indicated that the platform that you use makes it difficult to you to use other platforms. Could you provide more details?

Source: PPMI Survey. Second wave (October 2020). N=310.

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 24. Most frequently used platforms across the EU Member States (December 2020, weighted average)

Source: data collected from SimilarWeb (December 2020)

Comparing the evolution during the last year and a half, we can see that the traffic shares of the top platforms have remained stable or slightly increased. In April 2020 when most countries where in lockdown due to the pandemic, the traffic share of social media and search engines increased while it decreased for marketplaces.

Figure 25. Most frequently used platforms across the EU Member States: change in the period from August 2019 to December 2020 (weighted average)

Source: data collected from SimilarWeb (August 2019, April 2020, December 2020)

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 446 acquisitions during the period 2013-2020 (including 17 in 2020), with Google being the absolute leader, followed by Facebook, Verizon Communications (Yahoo!) and Amazon.

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 26. Number of acquisitions by parent companies (2013-2020)

Source: elaborated by Open Evidence, based on data from Crunchbase.

Figure 27. Number of acquisitions by platforms (2013-2020)

Source: elaborated by Open Evidence, 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 28). In total, 6.5% of all acquisitions were performed by parent companies based in the EU (Figure 29).

Of those companies that were acquired, 69% were US-based, 6% were UK-based, and 3% were German (Figure 28). In total, 19% of companies acquired were based in the EU (Figure 29).

Figure 28. Number of acquisitions by country of parent company and by country of company acquired (2013-2020)

Parent companies

Acquirees

Source: elaborated by Open Evidence, based on data from Crunchbase

Figure 29. Share of number of acquisitions by country of parent company and by country of company acquired (EU/ non-EU), 2013-2020)

Parent companies

Acquirees

Source: elaborated by Open Evidence, based on data from Crunchbase

In addition, in Figure 30, 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 2020, 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.

In 2020 the 50 top online platforms conducted 17 new acquisitions. Out of the European companies acquired by Google, the Irish retail inventory software Pointy was acquired for USD 163 million. Facebook acquired the UK-based computer vision startup Scape technologies for USD 40 million, and the Swedish street-level imagery platform Mapillary.

One of the most expensive operations of 2020 was the acquisition of Zoox by Amazon, an AI robotics company that provides mobility as-a-service and self-driving car services, for USD 1.2 billion.

Figure 30. Overview of mergers and acquisitions (2013-2020)

Source: elaborated by Open Evidence

Note: other includes: Middle East (Israel, UAE), Asia (India, Singapore, China, Taiwan, Japan, Thailand, Philippines, Uzbekistan), South America (Chile), non-EU European countries (Russia, Belarus, Iceland, Switzerland)

Period covered: 2013-2020

Meanwhile, the other figures present more specific (country-level) information on the origins of companies acquired by EU parent companies (Figure 31), and the origins of parent companies that acquired EU companies (Figure 32).

In the first figure 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.

European parent companies acquired a total of 26 companies.

Out of all companies acquired by European parent companies between 2013 to 2020, 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 46% of those companies have been acquired by German parent companies, and 23% by Dutch parent companies.

For example, 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. In 2020, the German marketplace Zalando acquired the Swiss company Fision operating the Meepl platform that can do body scan for clothes size recommendations.

Figure 31. Mergers and acquisitions by EU parent companies (2013-2020)

Source: elaborated by Open Evidence

In the next figure, 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 7% from Spain. Over 65% of these online platforms have been acquired by US parent companies, and 14% by German parent companies.

Figure 32. Mergers and acquisitions of EU start-ups (2013-2020)

Source: elaborated by Open Evidence