Digital economy

The digital economy is the network of communications and economic transactions that takes place across the world via the Internet. Although only decades old, the industry is already worth trillions of dollars. It has fueled the technological growth of personal computing devices, including home computers, smartphones, Internet networks, and business computing software. It has brought new conveniences and tools to consumers across the world.

As the digital economy grows, some experts worry that it may be forming a bubble. Should the bubble burst, it will cause the digital economy to enter a sudden and severe downturn. This would have serious repercussions for industries affected by or reliant upon the digital economy. Others worry that the information harvested by participation in the digital economy will result in further violations of personal privacy.

Background

In the early 1970s, business computers slowly became commonplace. Early computers utilized punch-card technology to input information. However, this process was slow, complex, and difficult. For this reason, computers were not commonly utilized by businesses that did not do large amounts of calculations.

Punch-card technology was replaced with vacuum tubes and magnetic tape. These methods allowed individuals to interface with a computer in a more convenient manner. They made computers more useful for tasks such as analytics and data insight. As technology advanced, computer chips and hard drives took the place of vacuum tubes, magnetic tape, and punch cards. These forms of computer memory were much faster, more efficient, and smaller than their predecessors were.

As computers developed, they became easier for the average individual to use. This allowed businesses to use computers more, as employees needed less specialized training to interact with them. Additionally, more user-friendly technology helped the personal computer spread beyond the office to people's homes.

As computers grew in popularity, several computer and software companies saw great success. These included Microsoft and Apple. Over the years, these companies produced successful software, operating systems, personal computers, and other digital devices. As computers continued to evolve, several other computer manufacturers and companies enjoyed economic success as well. As these companies grew, they formed some of the largest and most powerful sectors of the digital economy.

As personal computers became common in many homes, companies in the digital economy began to provide additional services targeted toward home-based users. One of the largest sectors of the digital economy, and one of the fastest growing, was online shopping. Consumers could digitally purchase goods without leaving their homes. The goods would then be delivered to the home. This revolutionary concept permanently altered the way in which business was conducted around the world.

Overview

The digital economy is a massive network of commercial, professional, and economic activities carried out on a global scale. The digital economy includes all transactions carried out by individuals on personal computers as well as exchanges made by larger corporations or entities via digital communications.

The digital economy makes up a large portion of the world's economy. Collectively, the digital economy is worth more than $3 trillion. Unlike most industries, which grew slowly over time, much of the digital economy's value has been created in the last two decades. The world has adopted digital technology at an incredibly rapid pace, which has driven the growth of the digital economy.

The most important part of the digital economy is the connectivity enabled by the Internet. Cell phones, personal computers, and business computers can all conveniently exchange information at any given time. These devices can be used for personal communication, business coordination, consuming media, viewing advertisements, finding new products, making purchases, or any number of other activities.

Many experts believe that the success of corporations and companies in a digital economy is dependent upon four factors. The first factor is customer expectations. Digital communication makes it easy for customers to interact with companies, raising the standards for interaction between customers and companies. Many customers expect proactive company policies that attempt to fix potential problems before they occur.

The second factor is product enhancement. Customers are now able to digitally compare products among multiple competitors at once, making markets more competitive. Successful companies must broaden their product line or provide services that stand out to the customers, such as on-demand services.

The third factor is collaborative innovations. Companies must continually innovate to maintain an edge over their competitors. To succeed in this regard, many companies work with other companies to combine their services. Potential collaborative partners include universities, start-ups, researchers, and customers.

The fourth and final factor is organizational leadership. Many companies may need to adjust their leadership structure to account for sudden innovations and new market environments. The traditional, hierarchical business structure may not succeed in a digital economy. It may be slower to analyze data and may place undue value on the opinions of executives instead of the opinions of experts.

While it has driven significant technological advancement, the spread of the digital economy is not without drawbacks. For example, despite large numbers of small digital firms existing within the digital economy, much of the economic power is concentrated in a few massive corporations. Just nine companies collectively control more than 90 percent of the profits in the digital economy.

Many economic experts look at the rapid growth of the digital economy as a negative sign. They theorize that the growth indicates an economic bubble. In hindsight of the dot-com bubble, they believe that the digital economy will experience a sudden and severe downturn when the bubble bursts.

Some experts are also concerned with personal privacy in a digital economy. User information—such as browsing habits, page views, and purchase history—can be sold to advertising firms for a profit and utilized for digital marketing purposes. It can be used to craft targeted advertisements, tempting consumers with products related to their personal interests. There is often little consumers can do to prevent their data from being harvested and sold. In many cases, consumers are unaware that this process even occurs.

Bibliography

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