The Competitive Dynamics of Web Sites

European Management Journal, 2004

Companies doing business on the Internet have experienced environmental turbulence from early growth and subsequent decline as businesses failed. The Internet provides a unique opportunity to examine the evolution of a business sector over a relatively short time period. Biological models to represent and predict the competitive dynamics within a business sector have been utilized. Using the analogy of strategies used in natural systems, this paper will demonstrate the applicability of using a model of population dynamics to companies that have survived the burst of the Internet bubble, specifically the cases of Amazon and eBay.

1999

In this paper, we analyze the e ects of brand loyalty and network e ects on the fortunes of Internet companies in an agent-based model. We nd that brand loyalty and network e ects produce interesting dynamics when included together in a simulated Internet which are very di erent from the dynamics observed when only one or neither of these e ects are present. If both brand loyalty and social communication are high, a loyal user can beconvinced to switch web sites, thus causing large and traumatic changes in the fortunes of the Internet companies.

From its early days, the World Wide Web space has demonstrated strong agglomeration trends with a very small number of web sites capturing the larger part of the Internet population. At a first glance, agglomeration over the virtual space sounds as a paradox. Web sites are numerous and highly diversified and can be easily reached from everywhere and anybody, with no particular transportation or search cost. However, Internet users use only a small number of sites for searching for information and products, interacting with others and socialize, thus producing dense concentrations and locational patterns similar to those observed in the physical space where few cities and industrial clusters host the huge majority of population and the entire industrial activity. Is that depending on the attractiveness of the popular web sites or are there agglomeration economies providing incentives to users to be in a location which have been visited by other users or pointed-in by other sites? Thi...

System Dynamics Review, 2003

Many e-businesses have pursued a 'get big fast' (GBF) strategy, pricing low and marketing heavily to build their user base, in the belief that there were significant sources of increasing returns favoring early entrants and large players. Until early 2000 the capital markets rewarded the GBF strategy, but since then market values have collapsed and scores of new-economy firms have failed. The rise and fall of the dot coms is not merely a case of a speculative bubble. Many firms stumbled when they grew so rapidly that they were unable to fulfill orders or provide quality service. GBF proponents focus on the positive feedbacks that create increasing returns and favor aggressive firms, but have not paid adequate attention to the negative feedbacks that can limit growth, e.g., service quality erosion. The faster a firm grows, the stronger these negative feedbacks may be. We address these issues with a formal dynamic model of competition among online and click-and-mortar companies in business-to-consumer e-commerce. The model endogenously generates demand, market share, service quality, employee skill and retention, content creation, market valuation, and other key variables. The model is calibrated to the online book market and Amazon.com as a test case. We explore growth strategies for e-commerce firms and their sustainability under different scenarios for customer, competitor, and capital market behavior.

2004

Companies doing business on the Internet have experienced environmental turbulence from early growth and subsequent decline as businesses failed. The Internet provides a unique opportunity to examine the evolution of a business sector over a relatively short time period. Biological models to represent and predict the competitive dynamics within a business sector have been utilized. Using the analogy of strategies used in natural systems, this paper will demonstrate the applicability of using a model of population dynamics to companies that have survived the burst of the Internet bubble, specifically the cases of Amazon and eBay.

2004

This paper presents a model of competition between two advertising- financed media firms, and we apply the model to analyze competition between por- tals on the Internet. First, we show that equilibrium prices of advertising are actually higher the less differentiated the portals are perceived to be. Second, we show that aggregate profit for the portals increases if they form

The New Gateways to Internet Information and Services

The arrival of the Internet offers both opportunities for incremental efficiency gains and complete industry redefinition, presenting new value propositions and hence leading to the emergence of new businesses and industries. One particular case is that of the general portal industry, consistently the most visited sites on the Web. Nevertheless, and despite the ongoing concentration of the market, overall profitability remains low. In this chapter we argue that, although the industry has great potential for value creation, value appropriation in information-based businesses remains problematic. Still, interest in this industry is huge, which is understandable if one analyzes the industry within its online value network. As we show, the horizontal portal constitutes a critical link in this network as it provides a way of organizing content, which seems to be the king of the future, and can capture and canalize the incoming traffic of the Internet service providers. Still, they face a number of hurdles to capture the value they generate and become profitable.

This papers provides a framework for organizing empirical research on structural change in electronic commerce at the nexus between infrastructure and virtual activity. The framework identifies several key questions for understanding the evolution of the value chain underlying electronic commerce. The paper illustrates this framework on one example, the development of the commercial Internet access market. It also organizes its discussion of future research using the same themes, encompassing many classes of open issues. Policy for electronic commerce requires analysis for an evolving dynamic market, where the frameworks are rooted in an understanding of the economics of diffusion, adaptation and industry evolution.

2000

Acta Universitatis Danubius Oeconomica, 2014

The advent of the World Wide Web is arguably amongst the most important changes that have occurred since the 1990s in the business landscape. It has fueled the rise of new industries, supported the convergence and reshaping of existing ones and enabled the development of new business models. During this time the web has evolved tremendously from a relatively static pagedisplay tool to a massive network of user-generated content, collective intelligence, applications and hypermedia. As technical standards continue to evolve, business models catch-up to the new capabilities. New ways of creating value, distributing it and profiting from it emerge more rapidly than ever. In this paper we explore how the World Wide Web and business models evolve and we identify avenues for future research in light of the web"s ever-evolving nature and its influence on business models.