How the Digital Economy Works
What started out as a new way of delivering goods through online digital sales has transformed the way global business is done, as well as the economy as a whole; the internet has driven the world towards a new Age of Network Intelligence where a plethora of information is readily available at our fingertips. Our everyday lives have forever changed, from the way we can find specific jobs through a simple Google search to the way we easily interact with others through social media. Not only has the digital economy created new opportunities through globalised connection, but it has allowed for the commercialisation of information, and other innovations, that more companies, like Facebook, have taken advantage of.
Emergence of the Digital Economy
The ‘digital economy’ was first coined in Don Tapscott’s The Digital Economy: Promise and Peril in the Age of Network Intelligence and is now estimated to be worth $3 trillion thanks to its hyper connective structure. In 2016, there was an estimate of 3.5 billion users online, or around 45% of the world’s population with user numbers continuing to grow. No longer are workers confined to offices with only the people around them to communicate with; companies can now stay easily connected with employees, whether they work from home, a coffee shop or across the globe. In addition, big corporations like Google are now able to easily manage diverse talent around the globe.
The customer experience has also seen dramatic change in the face of a globalised web, where consumers can download all digital content from anywhere in the world, get access to online services and order goods from an endless number of stores online. Netflix has shown us that the future of the entertainment industry is online steaming, Uber has shown us that apps are the future of booking taxis, and more significantly, Facebook has shown us that there is an exceptional demand for data online that can earn a company millions.
How the Digital Economy Impacts Business
There is no doubt that the internet has played a vital role in globalisation; hyperconnectivity has become a vital part of our everyday lives, and the same is true for how businesses operate in the modern age. However, with greater connectivity and demands from consumers, businesses have had to adapt to succeed in the new digital age. A typical example is how online shopping habits have had a profound impact on the retail market. Where retail companies like HMV and Woolworths have had to close down their high street stores, online stores like Amazon have thrived, offering competitive prices and convenient service.
Alongside better convenience and prices, the increasingly competitive online market has meant a drive to deliver a more personalised consumer experience for businesses to stand out. For businesses, this means a greater emphasis on market research and social media to actively engage with consumers. Of course, these business trends have also affected the job market where there is now a greater demand for social media content creators and marketing teams who must now work harder than ever to connect with customers through targeted advertisement campaigns and statistical analysis.
With most business processes being automated, there is a greater emphasis on creativity and flexibility within the job market. Workers, particularly in the marketing sector, will have noticed an increased demand for workers with innovative mind-sets, as well as skills in creative writing and Photoshop. In other words, there is now a greater focus on actively engaging with customers and using creativity to stand out in an economy where there is endless choice and better service than ever.
Future of the Digital Economy
Considering how far the internet has come since its conception, it is almost a certainty its evolution will continue long into the future, bringing further world-changing innovations that continue to impact the digital economy.
With online consumer habits also comes valuable data that has formed its own market based on customer habits. Although Facebook is a content-based website, it does not create its own content or charge users for using their platform. Instead, advertising has been a huge part of Facebook’s revenue which targets users based on their personal data from cookies. This data can show one’s gender, age group and certain interests through browsing habits to allow specifically targeted ads to be shown to certain groups.
The recent Cambridge Analytica controversy showed the potential issues that can arise when user information is passed on to third parties, as well as how valuable said information can be. Targeting more than 50 million users with personalised political advertisements based on their psychological profile has shown just how powerful data can be in the wrong hands. In response to the out-of-hand data economy, GDPR was introduced to improve user data regulation, including how it is collected and stored, and to only pass it on to third parties with explicit permission. With that in mind, it is also easy to see how fast the internet has progressed to a point where legislation has struggled to keep up.
GDPR was only a first step in the fight for the right to privacy which may become a greater concern in the future for the digital economy. Currently, data is free to flow across the globe, but there are tensions between allowing free flow of data to grow the economy versus protecting the privacy rights of individuals. Companies like Google tend to get around these issues by making user data anonymous, but as it becomes more complex, that may not be a viable solution in the long run.
With data being the lifeblood of the digital economy and our everyday lives, it is an issue that cannot be overlooked, and as the digital economy continues to evolve and become more complex, so must businesses and legislation continue to adapt to our fast-changing digital world.
Edward Mah