Size Matters on the Internet

[Commentary] In case anyone thinks the European Union’s charges against Google are really about antitrust, the EU’s digital commissioner recently made clear the real issue: “Our online businesses are today totally dependent on a few non-EU players,” Günther Oettinger said.

Eurocrats are on an impossible mission to undermine Silicon Valley because in the digital world, size matters. There is great value from the network effect of having many users. Americans can roll their eyes at Europe but should realize that even the US could become subscale unless the country begins to grow more quickly. Americans may smirk at benighted Europeans, but the U.S. is no longer the only domestic market capable of seeding global digital businesses. Four of the top 10 Internet businesses in terms of users are now Chinese. They’re growing quickly, benefiting from the enormous domestic market in China, whose population is some four times that of the US. Over time, this population gap combined with digital network effects could result in an innovation gap.