internet business model Part 2.0; of economic cycles, are we there yet?

[This is a re-post (originally posted on 7 Dec 2012) with minor edits, deleted the original post by mistake.]

This is a 2-part essay, this being the first.

“In mid-2008, the word Facebook passed sex in frequency as a search term on Google worldwide” – The Facebook Effect

Imagine if you were in Britain in the late 1970’s.  Margaret Thatcher has been elected prime minister.  She has unleashed her ‘Small Government’ ideology (and soon too will Reagan when he becomes President of the US) that would soon power the economy to an unprecedented boom for the next 30 years.  The country starts recovering from its worst (then) crisis since the world war.  There was a new business model of deregulation, an air of exuberance.  This is the mood the internet industry is in today.  While that (deregulation) came down with a crash in 2008, a good ideology waylaid by greed, and in a smaller way the dotcom crash of 2000 in similar circumstances, the internet economy is here to stay.  It is just like the industrial age in late 18^th century with the early niche business innovators.  [I liken the internet economy as one of the core sub-economy within the larger information age, like the transportation sector that drove the early industrial age was.]  And by the 19^th century with the industrial age sufficiently established, mainstream businessmen were suddenly awaken to the potential of industrialisation; new business models, new opportunities, re-ordering of entities.  Are we are at this stage in this new cycle?

Too early and mainstream businesses can safely ignore it.  If it can be placed roughly, we are better able look ahead.   We will get to it shortly but the cycle made clear why eCommerce, a financier’s folly during the first stage was done for from the beginning but is now flourishing.  It tells that the first dotcom boom was doomed from the beginning.  A second boom is forthcoming, in fact already upon us but this may not be a boom in the traditional sense but rather ongoing growth of an industry still in the making.  If this is true, opportunities abound.  What’s next after Pinterest?  What’s the impact on your organisation, society?

We learn in school about life cycles and for innovations, the bell curve of five stages; innovators, early adopters, early majority, late majority and laggard.

The dotcom boom and burst in 2000 and its continued role in the global economy tells us that the internet would be as significant as the invention of cars, electricity.  Historically innovation-based financial crashes such as with the car or railway industry occur in their early stages due to impatient financiers.  After a few years, the pace of internet innovations not only revived but accelerated.  Why eCommerce failed pre-2000 is simply that the infrastructure was incomplete and penetration rate too low.  With these two parameters ‘completed’, the socio-economic equation is ready and thus the recent burst of online activities again together with data showing its increasing pie in world economy.  This tells us the internet cycle is on the uptrend.  To try to place the position on the rising cycle, one angle and the one taken here is to look at IT cycles because the internet is after all a technology.  This will be the subject of the next post.

LinkedIn – dr tommi chen

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