The digital sphere commands immense influence, driving the fortunes of the world's largest companies. Over the past decade, observers and analysts have introduced a variety of terms to explain this phenomenon. Some label it platform capitalism, while others prefer terms like rentier capitalism or surveillance capitalism. More recently, a wave of enthusiasm has even characterized the digital landscape as a return to technofeudalism, suggesting society has somehow regressed from capitalism to a feudal structure.
Despite these diverse labels, the fundamental economic engine driving the digital world is far more traditional than it appears. When examining the underlying financial realities, digital capitalism is simply capitalism operating through modern technological channels.
The Economic Reality of Tech Giants
To understand the core economic function of the digital sphere, one must examine where the revenue originates. The largest companies in the digital domain, such as Google and Meta (Facebook), draw the vast majority of their earnings from advertising. Although these entities frequently brand themselves as information services companies, social media networks, or technology firms, their primary economic function is rooted in advertising.
Conversations with individuals working within big tech reveal that their daily labor is fundamentally tied to ad matching, ad auctioning, ad personalization, and related mechanics. When users browse the web and encounter advertisements for watches, deep freezers, or other goods, these targeted placements are rarely coincidental. They correspond directly to recent information needs and search behaviors expressed online. Behind the interface, sophisticated matching algorithms operate continuously to deliver these targeted commercial messages.
Circulation, Production, and the Role of Ads
Within a capitalist economy, the function of advertising is clear and well established. Advertising serves to accelerate the movement of advertised products from the warehouses where they are produced into the hands of consumers. Karl Marx contrasted the sphere of production with the sphere of circulation. Capitalist production utilizes advertisements precisely to speed up the circulatory journeys of commodities so that they reach end users sooner.
By accelerating this journey, businesses recover their investments and realize profits more quickly. More broadly, corporations aim to speed up the entire production and circulation cycle to generate higher profits within the same span of time. Digital platforms offer producers a powerful tool for acceleration. In exchange for the speedup that digital platforms provide, production capitalists are willing to redirect a portion of their profits. This transferred value materializes for big tech firms as massive advertising revenue. The underlying dynamic is straightforward: a share of profits is extracted from production capitalists in exchange for accelerating circulation through digital advertising.
Continuity Versus Novelty
Advertisements are not a recent historical development. Billboards and print notices have existed for centuries. What separates the modern digital sphere from historical advertising is the sheer capability of digital platforms. Platforms can host, personalize, pull, and track advertisements in ways that conventional billboard owners or traditional media outlets could never achieve.
When viewed through this lens, the digital sphere is intricately linked to traditional capitalism. The primary function of digital platforms is to make the circulation of commodities vastly more efficient. The emerging universe of new terminology, from platform capitalism to surveillance capitalism, often implies that the digital sphere represents an entirely unique flavor of economic organization. Yet, tracing the underlying economic logic reveals that digital capitalism remains firmly tethered to the foundational rules of traditional capitalism.
[Deepak P, is Associate Professor of AI at Queen’s University Belfast and adjunct faculty member at IIT Madras]