Cloud empires: how digital platforms are overtaking the state and how we can regain control

The scale and ubiquity of platforms are such that an average internet user may struggle to exit the territory of big tech in a typical day online. From Amazon Marketplace to shop, via Uber to travel, ending at Meta’s various children – Facebook, Instagram and WhatsApp – for communicating with friends and family, most of our digital experience – and much of everyday life as a whole – is characterised by the omnipresence of platforms.

In this fascinating amble through contemporary digital society, Lehdonvirta examines and historicises the giant companies responsible for building and maintaining most of these platforms. Lehdonvirta’s thesis statement is simple – the rise of cloud companies is leading to a new social order as these tech firms now play a central role in regulating our economic and social activities. Lehdonvirta’s work responds to the techno-utopian visions that characterise early writing about the internet: that the move online would lead to freedom from authoritarianism and enable new forms of political organisation. He argues that the growth of the internet has led to the emergence of new forms of authority in the form of digital gatekeepers, who now rival state authorities.

Lehdonvirta explores these arguments through 10 empirically-driven chapters charting the beginnings of the internet economy in the 1990s through to contemporary labour organising among platform workers. These chapters showcase the significant ways that digital platform companies have shaped our society – from labour relations to educational certifications. Lehdonvirta skilfully weaves the personal histories of key individuals to present a composite picture of the social and economic dynamics characterising the platform economy. This gives the book an impressive scope – covering the early online marketplace Usenet Markets; later marketplaces Ebay, Silk Road, Upwork, the Apple App Store and Amazon; and cryptocurrencies. Lehdonvirta uses the discussion of these specific cases to explore how well-studied economic concepts like network effects and economies of scale apply to the digital economy. The first handful of chapters explore the origin stories of specific platforms to show how despite early visions that internet-based communities and economies could avoid hierarchical or centralised forms of governance, inevitable economic dynamics led either to the failure of these platforms or the emergence of a top-down regulatory system. Chapter two explores the limit of spontaneous cooperation and argues that Usenet Markets failed because there was no effective enforcement of bargains and a lack of trust among market users as internet use grew. Chapter three nicely contrasts this account, charting the emergence of eBay’s regulatory policies in response to these challenges.

Lehdonvirta’s focus on platforms that are explicitly billed as marketplaces helps him draw out a key feature of a platform – a place where supply meets demand. This quality of platforms leads to the presence of specific dynamics. As two-sided markets (where sellers meet buyers), platforms benefit from network effects – where the benefits to both sides increase as more people join. At the same time, these effects, plus the time and resources sunk into the platform, create the challenge of ‘lock-in’ where, as Lehdonvirta observes, ‘[i]n principle, sellers are free to leave at any time, but in practice, the cost is often too great’. As Lehdonvirta observes, these factors – network effects and high switching costs – among others may make existing policy responses to outsized corporate power, like competition and antitrust law, inadequate. While these effects are well documented in the platform studies literature (Barwise and Watkins 2018), Lehdonvirta’s focus on the personal histories of the people behind the platforms (whether their billionaire founders or the underpaid labour sustaining their success) is a unique and accessible angle to this topic.

While the book focuses on the history of Western online commerce (a limitation Lehdonvirta directly acknowledges), chapter five’s discussion of oDesk (later Upwork) shows how platforms interact with existing global inequalities in damaging but also unexpected ways. Lehdonvirta summarises his prior research which demonstrated the existence of statistical discrimination on the Upwork platform where workers from lower-income countries experienced lower starting wages when trying to solicit freelance work. However, as these workers gained experience on the platform Lehdonvirta’s study found that their wages grew significantly, closing the gap between them and workers from higher-income economies, who had less experience-related gains.

The book can be appreciated by a general audience but is underpinned by Lehdonvirta and his colleagues’ academic scholarship. Chapter eight on cryptocurrency, building on Lehdonvirta’s prior work in this area (Vidan and Lehdonvirta 2019), is a particular standout of the book. He fairly presents the limitations of the technology (and the ideology of its proponents) but avoids hyperbolic depictions. In this chapter, his overarching argument comes out most strongly – that new technologies cannot escape the effects of existing social and economic dynamics – as he tackles the techno-optimist and techno-solutionist views associated with blockchain.

In the concluding chapter, Lehdonvirta eventually turns to contemporary attempts by states to regulate and control the companies behind these platforms. However, this discussion feels limited, and at times, Lehdonvirta seems prone to the same ideas of technological determinism he argues against when ruling particular policy responses, like the public utility regulation of platforms. Similarly, there is limited discussion of the role of the state in promoting the growth of a lightly-regulated commercial internet, though Lehdonvirta does give this a small acknowledgment in the conclusion. Namely, throughout the 1990s the US government made active efforts to promote technological innovation in the internet by restricting the application of public utility regulation to internet services, via measures like the US’s 1996 Telecommunications Act. The omission of these deliberate policy decisions makes the jump from chapter two on Usenet to chapter three on eBay feel abrupt, and, again, seems to support a technologically determinist history of how the Internet developed.

Overall, Lehdonvirta skilfully uses the fascinating stories of tech builders and users to discuss the economic, social and political dynamics of platforms and highlight the challenges of regulating their more nefarious effects.

Acknowledgements

Thank you to the Chatham House Cyber Policy team for the opportunity to review this book.

Disclosure statement

Alongside completing her PhD at University College London, the author is also employed by the UK Department for Science, Innovation and Technology.

Additional information

Notes on contributors

Niamh Healy

Niamh Healy is a PhD candidate at the Centre for Doctoral Training in Cybersecurity at University College London. Her PhD research focuses on how states and digital technology companies resolve disagreements about technology. Her work has won awards from the International Studies Association and the Telecommunications Policy and Research Conference.