Assignment 2 Outline


  • Our project will be a text based document which will include graphs and diagrams.
  • Our case study will be based on eBay.

Outline for A2

"What is the fundamental economic basis of Internet commerce?"

Introduction to E-Commerce
Introduction to e-commerce, internet business models and economic systems (network, attention, gift etc). Introduction to idea that “connectivity” is the foundation for internet commerce with majority of online business models and economic systems relying on the internet’s ability to connect individuals, organisations and communities – across time and space – with each other, information, products and services, in order to create value and generate income. (Steve, you mentioned you felt distribution was key - maybe you want to add something here about that as well?)

Ebay as an Example
Introduction to Ebay’s product, business model and role within the internet economy and how it will be used as an example of e-commerce in practice.

Internet Business Models
Discussion of prevalent business models and how the internet creates value through connectivity. Use Ebay as an example of how these methods work in practice (wherever possible). [6]
• Brokerage
• Advertising
• Infomediary
• Merchant
• Manufacturer (Direct)
• Affiliate
• Community
• Subscription
• Utility

Internet Economies
Discussion of the Network, Attention and Gift economies, their use of connectivity and their role within e-commerce. Examples provided within the context of Ebay. [3] [4]

  • Network Economy
    • low fixed costs, insignificant marginal costs, and rapid distribution promotes growth [4]
    • New markets for people to interact and share: virtual worlds (think farmville cash, Second Life lindon(?) dollars, WoW auction house(?), etc); online marketplaces and traders [5] (ebay, etsy, threadless, etc)
  • The importance of community in building and sustaining an online economy [2]
    • Ebay does not generate any of its own content
    • Ebay relies heavily (though not entirely) on revenue generated from listing fees and percentage of sales
    • The service offered by ebay has changed very little over the life of the site
    • Ebay's success relies on ongoing use and support from their customers
  • Gift Economy
    • Ebay is free for buyers to use, which is one of its major drawcards Compare this to newspaper classified advertising, which requires a purchase to browse the ads. (citations needed)
  • Attention Economy
    • social value: more effective communication methods [5] (facebook events,, etc)

Connectivity (and distribution?)
Bring all of these business and economic models together to show how the foundation of internet commerce is the internet’s ability to connect the masses and provide new opportunities for people, organisations and communities to generate income and value across time and space. Discuss the Long Tail and Ebay as examples. [1] [2]

  • Distribution is key. The internet is a distribution network.
  • Creating pportunity without geographical boundaries (crowdfunding: kickstarter, etc)

Summary of information presented.

1. Anderson, C. (2004, October). Wired 12.10: The Long Tail. Retrieved from
2. Caban, J. (2007, June 1). Business Environment of EBay, Wal-Mart, & Best Buy. Yahoo! Contributor Network. Retrieved from
3. Goldhaber, M. H. (1997, April 7). The attention economy and the Net. text. Retrieved from
4. Kelly, K. (1997, September). New Rules for the New Economy. Wired. Retrieved from
5. Liebowitz, S. (2002). Basic economics of the internet. Re-thinking the network economy : the true forces that drive the digital marketplace. Retrieved from
6. Rappa, M. (n.d.). Business Models on the Web. Managing the Digital Enterprise. Retrieved from
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