Network Economy

"eBay has achieved a virtuous circle that explains its size and success: the larger it gets the more items listed, the greater the likelihood buyers find interesting items worth their effort to acquire, the more sellers are attracted." Jon Lillie

A Network Economy is the lessening of centralised companies and organisations, to alignments with other companies, when groups or markets, have the need to connect. A Network Economy is not looking at what to produce but rather creates value by connecting us and reducing costs when transmitting information (Liebowitz, 2002). The limitations once seen when connecting people for economic gain, such as time and space, are no longer an obstacle in a network economy and vast amounts of information can be transmitted globally in just seconds.

eBay is one online organisation that fundamentally owes its success to the network economy. Within a more traditional marketplace, products needed to be mass produced and distributed amongst potential sellers in order to reach potential buyers. In contrast, eBay provides a platform for images of these products to be digitally transmitted to potential buyers. These products only need to be listed once for them to be seen by many. Because of this, it greatly reduces distribution and production costs for the seller as well as providing the buyer with a greater and more varied choice.


Network economies allow for people to be connected for little to zero cost. This encourages more users and makes it more valuable (Rifkin, 2001). The less something costs the more valuable it becomes in a Network Economy because in order for people to connect and move within e-commerce they must trust the environment like being in their own home freely.

In a network economy one needs to behave differently within it. The interconnectedness of team-like behaviour and being allied with others, is the key to a network economy (Kelly, 1997). Freely offering oneself within a group or niche, with their ideas and information feeds a network economy. Collecting users for free, and adding them as network economy subjects, is fundamental for eBay's internet commerce because it changes behavioural aspects, and the more people using it for free the more valuable it becomes as an internet business.

"The Network economy Characteristics are team like behaviour. Are you with us or them. Are you Windows or Mac. Being on the inside of an alliance means being on a network or off a network. One must be allegiance with something". K. Kelly

Characteristics of network economy are seen in cyberspace, where one can be connected with others virtually, rather than physically visiting a commercial venue to receive information or services. One can be connected with many using their virtual profiles rather than physically being in a geographical space, and these connections are what make a network grow. A Network Economy is a classic template of exponential growth, compounding in a non-linear way (Kelly, 1997). This is because it grows without control of individuals making up the network economy and this is a fundamental concept in internet commerce.

eBay's strength is its capacity to continually add users to their network, allowing people and businesses to create relationships through the sharing of images and ideas, while obtaining goods and services within their virtual space. eBay needs users serving each other and co-creating virtual information, while adding to the network in order to achieve success in internet commerce.

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