Corporate strategies must not be developed with a focus on a single segment of the internet value chain, a new study has warned.
The interdependencies between the various segments of the value chain are now “too powerful” and decisions based on a narrow view could be “seriously flawed”, the GSMA-commissioned report concluded.
The study defined the value chain as comprising content rights, online services, enabling technology, connectivity and the user interface.
The online services segment is the biggest, representing 47 percent of the total value chain, followed by the user interface segment, which accounts for 23 percent.
Connectivity is third, with 17 percent, while enabling technology is fourth with 11 percent.
Content rights account for just two percent of the value chain.
The report said there was a “strong” concentration of returns and inflows of capital with comparatively few market leaders.
These companies, in turn, were able to expand and grow more easily by acquiring the next generation of innovators.
As a result, an “incremental response” to disruption in the value chain is riskier than some executives and shareholders may choose to believe, report authors AT Kearney said.
New competitors may arrive more quickly and with more scale than anticipated, they added.
At the same time, however, the report noted that some new developments in product and service model innovations are as much defensive plays as they are genuine disruption given the internet is "showing signs” of an industry that is maturing.
The total value of the internet value chain has almost trebled from $1.2 trillion in 2008 to almost $3.5 trillion in 2015.
This growth has been driven by three factors: a continuous increase in the number of people able to access the internet at ever greater speeds; the declining cost of internet-capable devices, notably smartphones; and people are using the internet for a wider array of activities and for longer periods of time each day.
Other underlying trends include the growth in revenues of online services generated via advertising and a “strong” shift towards the use of mobile networks, which now generate more revenue from internet-related services than fixed networks.
However, the report warned that growth in the connectivity segment would slow to seven percent between 2015 and 2020, versus 14 percent between 2008 and 2015.
John Giusti, Chief Regulatory Officer of the GSMA, said: “Each day, more than 600,000 people go online for the first time, supported by a highly interdependent ecosystem of companies including mobile operators.
“Connectivity is at the heart of the digital ecosystem, but policy and regulatory frameworks have not been modernised to reflect these new market dynamics brought about by the internet.”