Internet and the Economy (Issue)

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The Internet, an electronic form of communication that uses a computer, a modem, and a phone line, was developed in the mid-twentieth century. First established as a communications board for academics in the late 1960s, the Internet grew from a phenomenon found mainly in the halls of academia and government to a worldwide source of information, "chat," and commerce. It has spawned the Information Superhighway, which allows for instant communication everywhere. It created a new arena for advertisements and opened a new avenue of commerceE-commerce.

Twenty years after its development, the Internet grew from a small hobby of academics and government workers to a worldwide community of millions of Web users. Though industries were initially wary of using the Internet to promote their business to consumers, the continued growth of the World Wide Web and the temptation of reaching millions of users were undeniable. In the late 1990s it was estimated that the Internet doubled in size every three months. Though it grew worldwide, much of this increase was in the United States, where over half of the Internet's nearly seven million host computers were located.

As the Internet grew, service companies sprung up to offer online services (connections to the Internet) to users, encouraging the even further expansion. Companies like CompuServe, America On-Line, Netcom, and Prodigy took early advantage of the new market. By the mid-1990s the Internet had become an economic and social force. In the fall of 1995 the initial public offering of an Internet service company called Netscape Communications on the New York Stock Exchange created huge publicity. The stock opened for trade at around $14 per share, and the company's young founders soon found themselves millionaires. By July 1999, Netscape stock was trading at $97.63 per share.

Online service companies were not the only ones to profit from the Internet. By the end of the twentieth century, the United States was home to more businesses online than any other part of the world. It was also home to the highest number of computer owners, the most access nodes, and the lowest telecommunication rates. The Internet, however, was still a work in progress at the end of the twentieth century. Computer crashes, connectivity interruptions, slow transfers and downloads, and out-of-date or finding inaccurate information were common user experiences. But these problems did not slow the Internet's popularity or its development. Computer industry pioneers like Bill Gates have envisioned the Internet as a source for most avenues of communication, connecting computers, telephones, television, and radio.

One vision of the Internetas a new market for businesswas clearly being realized in the 1990s with the development of E-commerce. Businesses can post their advertisements online in hopes of wooing consumers to their products. By the click of a mouse on an online advertisement, a user can be taken to a business's website, see an image of the promoted product, read about its benefits, and often have the option to purchase that item online. The Internet is a forum in which small companies may be able to better compete in the global marketplace. It also removes many barriers of communication between customers and businesses, such as geography and time zones.

E-commerce has grown notably in the 1990s. Online companies such as have experienced large growth and surging popularity with users. provides the curious with book and music reviews, customer opinions, soundbites of song tracks, discounted prices, and ease of purchase. An online shopper at can read many opinions about a book or CD before deciding to purchase, add an item to his or her electronic shopping cart, and head to the never-a-line check-out (payment by credit or check only) all without the hassle of crowded malls or overeager salesmen. The benefits for a purely online company such as come in the low overhead costs of operation and the many consumers it can reach through its general reputation and extensive advertising network.

Books and music and online services are not the only areas of business to benefit from the Internet. Consumers can buy just about anything on the Internet, from food and clothing to cars and airline tickets. Looking for a new apartment? Go to A new job? Try The options are endless for the diligent online consumer. The variety of choice and the ease with which consumers can communicate with one another present a challenge to businesses. While the Internet allows companies to talk directly with their customers without the aid of distribution channels and mass advertising or the mediation of the press, it also allows outsiders to more easily reach one another and talk about companies amongst themselves, without going through the same intermediaries. Received poor service from an online company? Post your complaint in chat rooms and on posting boards across the World Wide Web. Bad publicity from the average consumer has become more a threat for businesses due to the easy communication inspired by the Internet. Companies have less control over their public image. Anything and everything about a business can be knownand found outon the Internet. While this may benefit consumers, it is a double-edged sword for companies.

Though E-commerce grew rapidly in the second half of the twentieth century, its actual successes have been questioned. Some economists claim E-commerce may diminish a company's profits. The Internet drops the cost per transaction, so it becomes practical to auction an item for dollars rather than thousands of dollars and still make money. A mass merchandiser like Internet Shopping Network, for example, can program its computers to accept the 3,000 best bids over $2.10 for 3,000 pieces of costume jewelry, rather than accept one set price for the jewelry, which would be common practice in a shop. In addition, as consumers use search engines to scour the web for the cheapest prices and the latest offers, rival competitors are only a mouse click away. The advantages of being the most well known company or the biggest advertiser are mitigated on the more level playing field of the Internet.

Available 24 hours a day, seven days a week, the Internet provides a non-stop forum for buyers and sellers to interact. The opportunities for profit, loss, problems, and rewards may be staggering and unpredictable, but E-commerce is clearly paving the way to a new economic road. Buy. Sell. Complain. Compliment. Do it all at your convenience on the Internet.

See also: Computer Industry, Information Superhighway, Internet


Manes, Stephen and Paul Andrews. Gates. New York: Doubleday, 1993.

Slater, Robert. Portraits in Silicon. Cambridge, MA: MIT Press, 1987.

Sussman, Vic. "Gold in Cyberspace." U.S. News and World Report, November 13, 1995.

Wallace, James and Jim Erickson. Hard Drive. New York: Wiley, 1992.

available 24 hours a day, seven days a week, the internet provides a nonstop forum for buyers and sellers to interact.

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Internet and the Economy (Issue)

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