A reminder – this post is the (half-baked) opinion of an individual analyst, not an agreed and published Gartner position.
If you are Chinese and you are reading this you might use WeChat daily and Alibaba often. If you are American you use Google daily and Amazon directly or indirectly, often. If you are a European you might use any of these but you can’t name regional equivalents. That really matters for Europe.
Europe has giants.. just no digital giants.
Of course it’s brave and relevant for Margrethe Vestager to challenge the American digital giants over their market dominance and impose fines where needed. But I found a recent front cover of the Economist a little sad, in the way it showed an army of faceless bureaucrats confronting a cowering GAFA. We seem to be collectively avoiding the bigger and more important question: by 2019 – why doesn’t Europe have any comparable companies of its own? Not necessarily direct like-for-like equivalents – economic specialization means we could be doing something complementary and different – but I can’t see that either. So why is Europe seemingly incapable of creating its own titans of the digital age?
On the ‘remain’ side of the endless UK Brexit discourse it is often argued that European countries need to band together in the EU to create a greater economic powerhouse. The EU is the mechanism by which Europe will hold its own vs the 20th century giant of America and the rising 21st century giant of China. It’s a fair point to make but if the EU isn’t generating digital clout of equivalence by now, then I’ll argue it isn’t truly succeeding.
Three recent news stories help explain what could happen and perhaps why it isn’t happening. First – recent troubles at Boeing have placed Airbus back in the spotlight. Airbus is a good example of massive, joined up, European collaboration in a sector where scale matters. That’s the same for digital giants. In China and America their power comes from scale and that scale comes partly from the inherent size of their home markets. So where are Europe’s Airbus-like commercial grands projets of digital? Digital matters and some parts of it need massive semi-monopolistic / public infrastructure scale. If in the 1970s European leaders woke up and realized aviation needed a collaborative play, why haven’t they woken up to the need for similar digital platform play(s) in the 2000s?
The second news story was about Deutsche Bank trying to merge with Commerzbank (though talks broke down). A suggested reason for it, was that Germany needed a large scale ‘national champion’ bank. The third story was the EU blocking (at least by way of significant conditions) an attempted merger between Siemens and Alstom. These two examples seem to show Europe not focused on creating entities of global competitive scale, but instead fretting about national and regional internal competition.
Every time European regulators fine an American digital giant for market dominating behaviors, I think Europeans should wince a bit more than celebrate. Can we even imagine how our economies would cope if US digital giants switched off access to their services for a week? Why don’t we have anything of our own to rely on.. and to sell?
Some say that globalization makes such considerations irrelevant. I hope they are right but I fear they are not. Over the last few years, the equation seems to have changed. National and regional self-interest politics and economics have come to the foreground. We seem to be in a new normal where so called “popularists” win debates and elections that thrive on division.
Future history books may someday reflect that what Europe really needed was a “Googazon” of its own… perhaps as much as it needed a global positioning satellite system or even a common currency.