Internet services

Internet services continue to represent an increasingly large share of digital markets, often at the expense of veteran players. But their impact extends much further than just direct monetisation. The heavyweights’ platform strategies enable them to leverage a handful of services to expand their product line.

The Internet services market continues to grow at a steady clip. With average annual growth estimated at 11.5% for the coming years, it is expected to reach 730 billion EUR in 2021 and represent 20% of DigiWorld markets (7% in 2014). A handful of, notably cloud, services make up the bulk of the market. If advertising is still a sure thing, especially on mobile, for-pay services account for the largest share of the Internet market, in addition to being the most dynamic segment.

Oligopolies around the globe

The Internet’s competitive landscape is an extremely simple one. Worldwide, aside from the e-commerce market which is populated by a number of national heavyweights (often born of traditional sectors), the market is dominated by the top American players (Google, Amazon, Facebook, Apple), each with its own strategy and line of very different services. Only China’s Internet leaders (Baidu, Alibaba and Tencent), whose presence outside of China is still relatively limited – confined largely to WeChat in Africa, and online games in the rest of the world – seem capable of rivalling them. This is also the case, albeit to a lesser degree, with a few American specialists (Netflix, Uber) and market leaders from places like Russia (Yandex, VKontakte) and South Korea (Naver, Daum). If Facebook had been the frontrunner of the past several years, notably thanks to its success in monetising mobile services and its positioning via Instagram and WhatsApp, the top dog in recent months has been Amazon. The company’s successful forays into the cloud have given it the ability to make new, riskier investments, notably in the realm of voice assistants (Alexa) and physical retail outlets.

Diversifying into IoT and the physical world

For top Internet companies, a platform strategy (advertising and/or product and service intermediation) requires them to target new national markets, mainly in consumer segments. OTT companies are doing their utmost to forge ties with devices, and particularly with connected products, through their own integrated software layer and possibly their own hardware solution, and even their own physical distribution channels. The aim here is above all to replicate their existing services (and underlying platforms) in new products, rather than to create new services or new platforms. This puts them head to head with new (vertical) players, and more and more in the sights of regulators who are becoming increasingly reactive on data privacy and, especially, competition issues.

 
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