Our world today is dominated by internet giants who hold sway over our daily routine. Google, Amazon, Facebook not only dominate a part of the internet, but hold such commanding market share that we could start calling them Digital Monopolies. Regulators certainly think they are monopolies, if we look at the recent anti-trust allegations in Europe against Google.

Yet the question beckons – can we really call them monopolies? Are internet giants abusing power just as brick-and-mortar monopolies do in the physical world?

The answer is not easy at it seems.

Digital monopolies certainly operate under different market conditions than their counterparts in the physical world.

• Barriers to entry are a lot lower for anyone who wants to enter the market. It is not difficult to start a competing venture. You can think of Twitter or What’s App. Most start-ups focus on a niche opportunity and then grow that business with funding into larger market. Scale-up in the era of cloud computing is linear with little need for large upfront investments
• There is really no lock-in that the internet giants force on their consumers. You have a choice to search on Yahoo or use MySpace
• In the internet world, any long term competitive advantage is fleeting. Both Google and Facebook are under threat on a daily basis from a start-up in the garage next door
• Most monopolies in the digital world have benefited the consumer a lot of more than the supplier. In fact today’s digital monopolies get little or no direct revenue from the consumers
• They rely on network effects, both direct and indirect, that promote collaboration and mutually beneficial relationships.

So unlike monopolies of older era they do not seem to be directly abusing power. A few books indeed argue that monopolies are good in a few ways, in that they can afford large research budgets and can have really long term outlook. Companies operating in cut throat competition don’t have that luxury.

Yet, concerns remain about Digital Monopolies.

• All internet giants own their space that is different than others. Google and Facebook have amassed huge piles of data about every bit of our daily routine intermingled with the digital world. Has data itself become a monopoly?
• Digital monopolies could abuse their position in a different market that is not easily apparent to us. Both Google and Amazon have run into problems; Google with their advertisers and Amazon with their publishers
• They can use their power of data mining technology and skills to enter new markets. Think of self-driving cars, Amazon e-books and so on.

So there is, after all, a case to regulate some parts of the internet space to ensure a fair play. The hardest thing is to know which part.