Opinion: The predatory landlords of the platform economy
Platform landlords are increasingly controlling the digital economy, allocating value to themselves. AI is going to make it worse argues Georg Zoeller
Yesterday, an IOS App of the year, today an Apple Maps feature, with no exit or chance to compete for the developer.
The Predatory landlords of the digital economy
The thing with the platform economy is that almost two decades in, it is still legal in most countries for platforms to disintermediate their own merchants.
Here’s Apple giving the Amazon treatment to one of their top third party vendor apps, they just got Apple Basic’d into Maps:
Yesterday, an IOS App of the year, today an Apple Maps feature, with no exit or chance to compete for the developer.
Much of the digital economy is now so beset with predatory landlords, even the most successful startups end up being disintermediated and wiped out sooner or later. No amount of advertisement money spent to the landlord can overcome the advantage of first party positioning.
Only in the digital economy does the mall operator copy their tenants business with their own version on the ground floor next to the entrance after their helped make the mall successful and spent tons on rent (off every sale and transaction) and advertisement surfaces (also owned by the landlord).
Even the biggest startups get squeezed
Look no further than OpenAI, the best funded startup of our time, riding on innovation they invested deeply in, yet a small boat tossed in the ocean of hyper scaling platforms:
Dependent on Microsoft to pay for the massive training and inference compute costs via Azure credits, they had their main product, the ChatGPT AI Assistant, commoditized by Meta’s Meta.ai release across WhatsApp, Facebook, Instagram and Threads down to an expected price point of “zero”.
No amount of marketing dollars can match Meta hijacking their own search box with their own Generative AI product and so in the end, OpenAI needs Apple more than Apple needs OpenAI to return to the battlefield for users.
As ChatGPT is now just one of many LLM options available, OpenAI has little choice but to agree to Apple’s terms.
A 42% Apple Tax on another platform landlord’s proceeds, passed through to the customer.
And of course, Apple will also take their customary platform cut on every OpenAI subscription that should arise on IOS.
Startups in the Compute squeeze
If anyone has illusions about the AI startup ecosystem in the digital economy, they should not. AI adds the GPU Compute to the Cloud Compute, Storage and Bandwidth taxes, creating another opportunity for landlords as well as further disintermediation opportunities for platforms.
In the digital economy of 2024, landlords have almost no risk - They control users and eyeballs, use the data collected on the best performing apps to select and allocate popular features into their first party ecosystem, etc - while smaller developers and startups increasingly get forced into brutal inference compute clauses that reduce the risks for hyperscaler investors compared to anyone else.
Privileged investor agreements struck by the likes of AWS, Google, Microsoft and Nvidia lock promising startups like inflection into their cloud compute platforms. As the value of compute credits is entirely under the control of the platforms, hyperscalers end up benefitting even if other investors do not and the startup ultimately fails after spending much of their available capital on compute.
Platform economy
Unfortunately large tech platforms have become economic power projection assets for nation states and are soft gloved for behavior we learned to constrain the hard way during the age of electrification when power companies exploited the same dynamics to extort more and more of the economy.
Attention economy and platform economics are under studied and under appreciated. Because everything that’s happening in AI and because of AI since ChatGPT ultimately comes down to the war for the attention, ads and platform economy. Some time down the line we will relearn the lessons learned when building the initial utilities boards to curb landlording and crushing monopolies in the electricity industry.
