IIPP hosts expert workshop on algorithmic rents

Experts in the regulation and economics of digital platforms met at UCL IIPP’s London offices on 3 October 2022 to discuss research from IIPP’s Omidyar-funded digital economy research programme, with a focus on a the concept of algorithmic rents.

The workshop, open to UCL staff and students, was organised by Dr Ilan Strauss, IIPP Senior Research Associate, and leader of the digital economy research team. Professor Mariana Mazzucato, IIPP Director and the principal investigator on the team, and Tim O’Reilly, CEO and founder of O’Reilly Media and Visiting Professor of Practice at IIPP, represented IIPP at the workshop. Experts attended from the UK Competition and Markets Authority (CMA), the UK’s Office of Communications (Ofcom), and the Financial Conduct Authority (FCA).

After Mariana’s welcome, Ilan and Tim provided an overview of recent research from IIPP’s digital economy research programme, funded by the Omidyar Network. The main part of the workshop was a discussion on a draft research paper produced by the team, entitled Algorithmic Rents: An algorithmic approach to contemporary sources of digital platform power and harms.

The research team defines algorithmic rents as “the returns that Big Tech extract from the fixed supply of screen space and user time (attention)  –  where the screen is the arena within which information competes for users’ scarce attention.” For example, the top result in a Google search is not necessarily the most popular one anymore, but the one which offers the platform a financial return. This rent stems from algorithms’ primary role for the user, which is to help them allocate their scarce attention (time) between competing sources and types of information.

As authorities seek to regulate so-called Big Tech (major global IT companies such as Alphabet, Amazon, Apple, Meta and Microsoft), they have focused on harms from monopolisation of one-side of their platforms’ multi-sided markets. However, all sides of a platform are connected through sharing a single screen and competing for the same market of user attention. Ilan and the team focus on two types of algorithmic harms. The first is when a platform prioritises inferior-quality, paid-for content to increase profits, and so reducing the quality of the content the user sees. The second type of harm is when the platform preferences its own services over others, known as ‘self-preferencing’, which can harm the platform’s value-creating ecosystem. In both instances, organic output declines due to great profit seeking and monetisation by the platform.

“As more of our decision making gets outsourced to algorithms, its vital that we understand how Big Tech's platforms are allocating user’s attention for their own value capture, and to the determinant of users and producers dependent on the platform,” says Ilan.

Read more about our research on Algorithmic Attention Rents.