Fundamental to a successful expansion and growth of an economy is the exploration and maturing of new business models which take advantage of technological advancements. The rate of change and growth that the sudden ubiquity of the internet brought about is unprecedented, even the industrial revolution took 50 years to realize the same GDP increases that were brought about by the internet (to stable countries) in a mere 15 years. Indeed, 21% of GDP growth was as a result of internet consumption and expenditure. It’s impact on the global economy is massive and represents one of the largest sectors, larger than energy or agriculture at 3.4 percent of GDP.
It’s here where we leave the realm of well researched fact and delve into the shady world of speculation. What I am interested in is; of the businesses which derive a significant percentage of their revenue from the internet, which business models have created new wealth opportunities and which have mealy transitioned business to the online sector. I am not an economist, nor am I an expert in internet business so I am, if not the last person who should be writing about this, certainly standing right next to that person. However, there is a surprising lack of serious research that has been done into the internet’s impact on the economy (something which is actually acknowledged in several of the studies I read and attributed to the medium’s infancy). This lack of data on the economics of the internet presents a fantastic opportunity for relatively justified speculation (something that is all too common on the internet).
The first point of consideration is the internet’s ability to penetrate existing markets. Unlike the industrial revolution, increases in efficiency in the manufacturing and distribution of goods will not be realized by consumers unless the number of users reaches a critical mass. The internet is nothing more than a form of rapid communication between devices capable of rapidly translating this communication into words, images, sounds, or data and thus offers very little increase in efficiency on the micro level. Increases in efficiency only develop when there is large support for that increase for without a large user base or infrastructure, there is no potential efficiency gain. This is part of the reason that internet growth is so fragmented and unstable.