Tag Archives: theory

Open Internet Economies – The next big thing? (part one)

Amazon did it. Silently but consequently they have opened their doors. Anybody, any retailer and even producer can offer products on Amazon. Even the same that Amazon is selling. They understood that opening their model towards former competitors is the best thing to do. Taking classic chioce theory into account, consumers have lots of tools at hand to search the web for the best price. Back in the days an Internetchop had the chance to offer the best price or see the user go to another website and buy there. The trend towards price search engines enabled the customers to get real transparency in this matter.

The Amazon approach to the “sell or let the user go” problem is ingeneous and far reaching. They let everybody sell on their marketplace. “If I (Amazon) can’t make the best price, then at least partissipate in the deal of the successful seller!” Great! You got a tripple win solution. The User now has a single point of contact for shopping with secure payment and great search possibilities. The seller has the chance to benefit from Amazons great traffic and Amazon is building the most attractive market place out there with the best range of products making even the price comparisson services obsolete – and Ebay!

As an economist I believe that the internet economy is facing a new period, the “opening phase” that national economies faced in the 18th and 19th century. The theory of comparative advantages by David Ricardo states, that two or more economies (here networks or service providers) can raise their over all benefit from openness and trade due to the fact, that they have difference in factor costs (here use cases, users and technology).

Following this theory, the open networks will be able to integrate with others in order to raise their users benefit. Let”™s think of a connection of Facebook for the social graph, YouTube for Videos, Google for Search, a GMail integration and openID for authentication. Add an Amazon Shop that uses my activities for its suggestions, that would be great! All together would be better than each of them alone.

I bet, the Internet”™s Economic future can be predicted by closely looking at real world”™s economic history.

… to be continued