Internet Economy
Encyclopedia
The internet economy conducts business through markets whose infrastructure is based on the Internet and World-Wide Web. An Internet economy differs from a traditional economy in a number of ways, including: communication, market segmentation, distribution costs, and price.
, any participant in a value chain
can usurp the role of any other participant.
Due to the enormous quantity of connected users, the incredible speed that information travels, and the irrelevance of distance, firms can offer goods and services not locally, but to potential customers across the entire globe. As stated by Gregory Mankiw (2003) Advances in information technology, such as the Internet, have been profound and have influenced many parts of the economy.
As an example of a business segment which can dramatically benefit from this new Internet economy is a university. Besides been able to provide education to on-campus students, it is possible now to provide online classes across the world, using streaming media
technology to deliver the very same class to anyone plugged
to the Internet, with lower costs.
In an early article, Iain Vallance (1993) sees communication between businesses and their customers as the key to success in the Internet economy. This results from integrating networks
, software, and customers. Currie (2000) sees communications via the Internet as involving virtually no transmission cost. She also notes that distance has become irrelevant, and that any amount of content
is instantly available.
Esther Dyson
(1998) suggests that the ready availability of global information
may make it necessary to artificially segment markets. In contrast, John Seely Brown
and Paul Dugid (2000) point out that although the Internet enables exploitation of niche markets, many examples of success come from large firms with well-established networks, rather than niche firms.
From a cost perspective, Nicholas Negroponte
(1996) indicates that although everything on the Internet appears to be free, even if a rational economic model were to be implemented, it would likely still cost only pennies to disseminate a million bits to a million people. However, Shapiro and Varian (1999) indicates that information is simply being provided at its marginal cost of zero.
Mondahl (1999) notes that price differences based on poor information or geographic distance will not survive in the Internet Economy. He also notes that businesses are likely to adjust their prices more frequently in response to Internet competition.
Internet economy
Ghosh (1998) states that businesses cannot avoid the internet economy. They must recognize and understand that there are both global opportunities available as well as risks of not participating. They note that through the internetInternet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
, any participant in a value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
can usurp the role of any other participant.
Due to the enormous quantity of connected users, the incredible speed that information travels, and the irrelevance of distance, firms can offer goods and services not locally, but to potential customers across the entire globe. As stated by Gregory Mankiw (2003) Advances in information technology, such as the Internet, have been profound and have influenced many parts of the economy.
As an example of a business segment which can dramatically benefit from this new Internet economy is a university. Besides been able to provide education to on-campus students, it is possible now to provide online classes across the world, using streaming media
Streaming media
Streaming media is multimedia that is constantly received by and presented to an end-user while being delivered by a streaming provider.The term "presented" is used in this article in a general sense that includes audio or video playback. The name refers to the delivery method of the medium rather...
technology to deliver the very same class to anyone plugged
to the Internet, with lower costs.
In an early article, Iain Vallance (1993) sees communication between businesses and their customers as the key to success in the Internet economy. This results from integrating networks
Computer network
A computer network, often simply referred to as a network, is a collection of hardware components and computers interconnected by communication channels that allow sharing of resources and information....
, software, and customers. Currie (2000) sees communications via the Internet as involving virtually no transmission cost. She also notes that distance has become irrelevant, and that any amount of content
Content (media and publishing)
In media production and publishing, content is information and experiences that may provide value for an end-user/audience in specific contexts. Content may be delivered via any medium such as the internet, television, and audio CDs, as well as live events such as conferences and stage performances...
is instantly available.
Esther Dyson
Esther Dyson
Esther Dyson is a former journalist and Wall Street technology analyst who is a leading angel investor, entrepreneur, philanthropist, and commentator focused on breakthrough innovation in healthcare, government transparency, digital technology, biotechnology, and space...
(1998) suggests that the ready availability of global information
Information
Information in its most restricted technical sense is a message or collection of messages that consists of an ordered sequence of symbols, or it is the meaning that can be interpreted from such a message or collection of messages. Information can be recorded or transmitted. It can be recorded as...
may make it necessary to artificially segment markets. In contrast, John Seely Brown
John Seely Brown
John Seely Brown is a researcher who specializes in organizational studies with a particular bent towards the organizational implications of computer-supported activities....
and Paul Dugid (2000) point out that although the Internet enables exploitation of niche markets, many examples of success come from large firms with well-established networks, rather than niche firms.
From a cost perspective, Nicholas Negroponte
Nicholas Negroponte
Nicholas Negroponte is an American architect best known as the founder and Chairman Emeritus of Massachusetts Institute of Technology's Media Lab, and also known as the founder of the One Laptop per Child Association ....
(1996) indicates that although everything on the Internet appears to be free, even if a rational economic model were to be implemented, it would likely still cost only pennies to disseminate a million bits to a million people. However, Shapiro and Varian (1999) indicates that information is simply being provided at its marginal cost of zero.
Mondahl (1999) notes that price differences based on poor information or geographic distance will not survive in the Internet Economy. He also notes that businesses are likely to adjust their prices more frequently in response to Internet competition.
See also
- Digital economyDigital economyA digital economy is an economy based on electronic goods and services produced by an electronic business and traded through electronic commerce...
- Electronic businessElectronic businessElectronic business, commonly referred to as "eBusiness" or "e-business", or an internet business, may be defined as the application of information and communication technologies in support of all the activities of business...
- Electronic commerceElectronic commerceElectronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...
- Information economyInformation economyInformation economy is a term that characterizes an economy with an increased emphasis on informational activities and information industry.The vagueness of the term has three major sources...
- information societyInformation societyThe aim of the information society is to gain competitive advantage internationally through using IT in a creative and productive way. An information society is a society in which the creation, distribution, diffusion, use, integration and manipulation of information is a significant economic,...
- Knowledge economyKnowledge economyThe knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...
- Knowledge marketKnowledge marketA knowledge market is a mechanism for distributing knowledge resources. There are two views on knowledge and how knowledge markets can function. One view uses a legal construct of intellectual property to make knowledge a typical scarce resource, so the traditional commodity market mechanism can be...
- Virtual economyVirtual economyA virtual economy is an emergent economy existing in a virtual persistent world, usually exchanging virtual goods in the context of an Internet game...