Nick Srnicek on Data Extraction and Platform Business Models

Nick Srnicek on Data and 21st-Century Systems

In this chapter, Nick Srnicek examines the raw material central to the system focus in the 21st century: data. Srnicek demystifies the critique of data collection as a mere monitoring method.

On the one hand, he warns that caution should be exercised regarding the belief that data collection and analysis is an automated and uncomplicated process. On the other hand, he lists the processes that make them profitable. The real problem for capitalist companies was that old business models were not well designed to extract and use data. A different business model was needed, and platforms emerged.

Platforms became an efficient way to monopolize, extract, analyze, and use the increasing amounts of data being recorded. There are five different types of platforms, and all share three characteristics in common:

1. Instead of having to build a market from scratch, a platform provides the basic infrastructure to mediate between different groups.
2. They produce and depend on network effects: as the number of users increases, the value of that platform increases.
3. They utilize cross-subsidization: one branch of the company reduces the price of a service or product while another branch raises prices to cover these losses (e.g., free email to attract users and paid advertising).

Advertising Platforms

These platforms represent the first attempts to build a model suitable for the digital age, emerging after the dot-com bubble burst. The data extracted shifted from a method for improving services to a way of raising advertising revenue. These platforms appropriate data as raw material.

Revenue is generated through:

• The extraction of data from the activities of online users.
• The analysis of these data.
• The auctioning of advertising space to advertisers.

They are currently the most successful of the new platform businesses, boasting high revenues, significant benefits, and vigorous dynamism. Google is an example of this platform.

Cloud Platforms

These platforms represent the step that consolidated the platform as a unique and powerful business model. The history of corporate cloud rental begins with e-commerce. To grow as an e-commerce platform, it seeks to gain as many users as possible through cross-subsidies. Quick and inexpensive delivery is one of the main ways to attract users to the platform to generate income elsewhere. Amazon is an example of this platform.