Services versus data: DFG project investigates market mechanisms and their regulation in the digital platform economy

Major online platforms such as Amazon, Facebook or Google offer companies improved placement in exchange for data. As part of a DFG project, a team from the University of Passau is researching the consequences for competition and how this can be intelligently regulated.

Online platforms play a key role in today's Internet ecosystem: they serve as intermediaries and mediators between a company and its customers. They use data to arrange content and position products so that users will find them quickly.

Recently, platforms have been offering services like this in exchange for data. ‘Although sharing data in exchange for prominent placement on platforms is of practical and political relevance, very little economic research has been undertaken in the area thus far', says Professor Jan Krämer, holder of the Chair of Internet and Telecommunications Business at the University of Passau. This is a gap that he is seeking to fill with the ‘Platform Neutrality and Data-Driven Business Models: B2B Data Sharing as Payment for Prominence of Content Providers on Online Platforms' project. The German Research Foundation (DFG) is funding the project for a period of two years.

Outsourcing corporate risk

One such service is Google's Accelerated Mobile Pages project. Websites that use this turbo news service receive a prominent position in the results of mobile web searches, due to their much faster loading times. In return, the search engine is provided with access to the website's connection data and usage statistics. A similar model is used for ‘Fulfilment by Amazon'. This service allows online shops to entrust their entire shipping process to Amazon, and as recompense, the world's largest online retailer gains valuable insight into transactions, product popularity and customer behaviour outside of its marketplace.

‘The insidious element of this is the fact that corporate risk is completely outsourced to individual distributors', Professor Krämer explains. Major online platforms can monitor what works and then offer successful products themselves. Sharing data, therefore, has much more complex consequences for competition and welfare than paying with money does.

As part of this project, Krämer and his team are developing game theory models. The first examines business models financed by advertising. In this instance, data is used to target advertising more effectively. The second tackles subscription-based business models, where additional data enables the services provided to be further personalised.

New findings for the debate on platform regulation

Professor Krämer expects the project to offer key findings for international discussions on how to regulate dominant online platforms: ‘regulating online markets is difficult, as competition is not always useful or even possible in this environment', the information systems scholar explains. ‘Our research seeks to contribute to this discourse and attempts to provide factual arguments.'

Professor Krämer and his team are able to draw on expertise from current and past projects. The Chair is working closely with Passau's research group Data Policies, led by Dr Daniel Schnurr, which is examining how access to data in digital markets might work in the future. The Bavarian State Ministry of Science and the Arts is funding the research group under the framework of the Centre Digitisation.Bavaria (ZD.B).

More information:

• Video interview with Professor Jan Krämer: https://univideo.uni-passau.de/2019/03/prof-dr-jan-kraemer-ueber-datengetriebene-geschaeftsmodelle-und-ihre-probleme/
• Blog article ‘Why digital platforms pose a challenge for market regulation': https://www.digital.uni-passau.de/beitraege/2019/prof-dr-jan-kraemer-ueber-datengetriebene-geschaeftsmodelle/

Principal Investigator(s) at the University	Prof. Dr. Jan Krämer (Lehrstuhl für Wirtschaftsinformatik mit Schwerpunkt Internet- und Telekommunikationswirtschaft)
Project period	01.01.2020 - 31.03.2022
Source of funding	DFG - Deutsche Forschungsgemeinschaft > DFG - Sachbeihilfe
Projektnummer	KR 3889/5-1, AOBJ: 652213, 409474477
Themenfelder	Wirtschaftswissenschaften, Wirtschaftsinformatik (f. Wirtschaftswiss.), Wirtschaftswissenschaften