The Profitability of the Internet

April 30

The rise of the networked economy is changing economic possibilities around the world. From the call centers in India to eBay and the new Internet entrepreneurs, there are many signs that suggest a flatter world fueled by innovative production and marketing strategies. In this session, we will explore the promise and reality of the changing economic tides associated with rising Internet use including those marketing to the long tail and the new oligopolists.

Assignments

Assignment #4 is due before class today. You can upload the assignment here.

Readings

• Wikipedia, Dot-com bubble

• Chris Anderson, The Long Tail (Wired)

• Guy Kawasaki, The Wrong Tail: A Checklist for Long Tail Implementations

• Kevin Kelly, Better than Free

• Eric Von Hippel, Democratizing Innovation (Chapter 8)

• Digital Music News, The Most Infamous Music Infographic, Updated for 2012

• Benjamin Wallace, The Rise and Fall of Bitcoin (Wired)

Optional Readings

• Lee Gomes, Ivy League 2.0 or Just Another Pets.com? (MIT Technology Review)

• The Future of Music Coalition, Artist Revenue Streams (peruse)

Class Discussion

Please remember to sign your postings by adding four tildes (~~~~) to the end of your contribution. This will automatically add your username and the date/time of your post, like so: Asellars 15:29, 21 January 2013 (EST)

While the phrase "irrational exuberance" was mentioned in the readings, I'm surprised more was not made of it. In the 1990s there was most certainly a rush to jump on any investments that involved a company that had a .com extension to it's name with little or no scrutiny of the books or fundamental numbers of that company. While the bubble was partially based on sound fundamental judgment - the advent of the web browser and the world wide web in 1994 which made the Internet accessible for so many more non-technical people around the world and this created a much bigger market for e-commerce. However, the cart was put a bit before the horse and a lot of the growth associated with the explosion of Internet access was over exaggerated and not based on sound fundamentals.

The Long Tail article brought up an even bigger point than it intended. It pointed out how the Internet offers certain opportunities to exploit niche markets in the entertainment industry, but this goes beyond the entertainment industry to all aspects of the economy and even extends outside of commerce.

As far as Bitcoin is concerned, as someone who works in the information security field, I am immediately and significantly skeptical about the protections any digital currencies provide against fraud, especially with regard to duplication. I would absolutely echo some of the concerns relayed in the article - about the security of sharing the Bitcoin architecture with any number of unknown entities (individuals or groups) and relying on them for the integrity of the network as a whole. Although, I will admit that some of the issues discussed in the article - such as not accidentally deleting your Bitcoin wallet - can be prevented via basic data backup technologies and procedures and utilizing a minimal amount of common sense. I think it still has potential and whether Bitcoin is the currency of the future or not, there will be a legitimate virtual currency that catches fire and crosses international boundaries at some point.

CyberRalph 11:10, 28 April 2013 (EDT)

As a risk-averse individual, my emotional reaction to the wikipedia article on the dot-com bubble was, "You irresponsible idiots! Weren't any of you thinking rationally?" However, I understand the fervor of the time. I felt more favorably about the dot-com bubble once the article posited at its end that "Nothing important has ever been built without irrational exuberance" and that the speculative mania of the dot-com bubble allowed the infrastructure we have today. Besides the bankruptcy of companies and a glutted job market for computer programmers, I wonder what lasting negative effects from the dot-com bubble we are still experiencing now.

Prompted by CyberRalph's comment, I tried to think of other niche markets for/in the long tail and thought of online fashion rental services that advertise themselves as Netflix for designer dresses, designer handbags, jewelry, plus-size clothing, etc. Can fashion exist in or take advantage of the long tail? Using the checklist for long tail implementations, I think not, yet online fashion rental services continue to proliferate, seemingly launching every quarter.

"Better than Free" crystallized for me why I'm still willing to pay for entertainment. The article also helped me contextualize the abundance of advertising via social media: "In short, the money in this networked economy does not follow the path of the copies. Rather it follows the path of attention, and attention has its own circuits."

My primary take-away from von Hippel's chapter is that we need to create policy that allows users to create and become involved with manufacturing because current policy is not as conducive to innovation as the original policymakers intended.

My quick thoughts on Bitcoin are that (1) it sounds like a libertarian dream, (2) I consider it a fascinating social experiment, and (3) it seems too unregulated to be a viable long-term currency.

JW 23:47, 29 April 2013 (EDT)