[Policy Pulse]The Next Challenge After Market and Government Failure: Platform Failure

Just as there is market failure in markets and government failure in governments, can there also be failure in platforms, the core infrastructure of the digital age? Recently, the concept of "platform failure" has been drawing attention in academia. Dutch media scholar José van Dijck has pointed out that in the "platform society," platforms have evolved into structures that mediate society as a whole, but as public values become subordinated to the logic of private profit, new social problems are emerging. Platform failure refers to a structural phenomenon in which digital mechanisms based on data and algorithms, under the banner of efficiency, undermine publicness and trust.

Platforms have been regarded as symbols of innovation by lowering transaction costs, expanding connections, and enabling new forms of interaction. However, as network effects and data concentration accelerate, competition has weakened while social dependence on a small number of platforms has actually increased. The controversy over the KakaoTalk overhaul illustrates this shift. As a service that has functioned as a national communication tool expanded the weight of advertising, shopping, and content, user criticism intensified. This shows that when a space for everyday communication reinforces commercial strategies, cracks in trust can emerge.

These problems appear even more structurally in information platforms. Naver has served as a gateway for access to information in Korea, from search and news to shopping and maps. A structure has been formed in which it is difficult for both users and businesses to access markets and public opinion without going through Naver.

The problem is that the algorithmic criteria that determine search results, exposure, and recommendations are not sufficiently disclosed. The situation in which algorithms perform a social allocation function but are not subject to public verification is a typical manifestation of platform failure.

The most concerning aspects of platform failure are the weakening of transparency and accountability. Criticism that the recommendation algorithms of YouTube and Instagram prioritize provocative content and thereby amplify conflict, and research findings that Facebook's recommendation structure played a certain role in spreading disinformation during the 2020 U.S. presidential election, clearly demonstrate this. In Korea as well, portal algorithms exert a powerful influence, but their operating principles remain hidden under the label of trade secrets. Social control mechanisms are insufficient relative to their influence.

The government's response is not easy either. Platforms cut across the boundaries of industries and laws, so existing systems have limits in regulating them. The Fair Trade Act finds it difficult to address data-based monopoly issues, and regulation is constantly confronted with the argument that it stifles innovation. Excessive intervention is burdensome, while a passive approach invites criticism for undermining publicness. If market failure appears as a distortion of price functions and government failure as administrative inefficiency, platform failure manifests itself in the way digital systems erode social trust.

The solution must go beyond the dichotomy of regulation versus laissez-faire. A minimum level of transparency in algorithm operation and data use must be secured, and the social responsibilities of platforms must be institutionalized in concrete terms. At the same time, the government must consider not only the role of a simple regulator but also the role of designing the conditions under which publicness can function in the digital environment.

The way we manage platform failure will determine the level of trust and sustainability in digital society.

Oh Chulho, Professor Emeritus, Department of Public Administration, Soongsil University

This content was produced with the assistance of AI translation services.