The Global Internet Economy: An Unrealized Promise
For the purposes of creating and distributing information, the Internet has mastered ‘simple’ and ‘powerful.’ Next, online commerce must master ‘simple’ and ‘powerful’ for the global exchange of goods and services. Advances in the ways we find information, generate and share ideas, and communicate with one another, all trend towards tools that solve increasingly complex problems with simple, user-friendly interfaces. For technology to achieve mass scale, simplicity is more than aesthetics. It ensures that the powerful tools we create will be accessible and useful to many.
In past decades, online publishing tools evolved to support a global information network where users can generate and share ideas with anyone at unprecedented speed. Publishing content in the early days of the Internet was a Herculean feat — you had to buy a domain, rent data center space, lease or buy a physical web server, connect the server to a power source and to the Internet, write code, and run it through the server. The next set of publishing tools made it easier for individuals with less technical expertise to publish content through blogging software. Today’s tools, embedded in social media, make it simple for anyone with Internet to post content online. Would there have been a revolution if Sidi Bouzid’s act of desperation in Tunisia hadn’t been captured by the cellphone cameras of enraged onlookers and shared on the Internet? Or worse, if onlookers had to buy a domain and code to send a message? Likely not. As demonstrated during the Arab Spring, the power of one voice to reach across the world, mobilize groups, and transform societies, is amplified by the power of tools that make global connectivity a reality.
Every iteration of simplifying these tools has increased the number of people able to publish their ideas by orders of magnitude. As online communications platforms have evolved, they’ve created space for previously inconceivable forms of expression, organization, and coordination.
Why hasn’t the Internet unlocked global commerce at a similarly disarming rate, with the same march towards simplicity and leaps in efficiency? One reason online commerce – which accounts for a paltry 2% of global consumer spending – lags behind the meteoric rise of online communication is that the fabric of the Internet is particularly well-suited for transmission of ideas. The problem of digitally distributing ideas lives exclusively in the world of moving electrons, while almost everything in commerce requires moving atoms. An exchange of goods and services inevitably has real world touch points, with real world friction. Even with online tools to expedite the process, we still expect a car to arrive at our door, and our meals and packages to be delivered. While digital media can blanket the world in seconds, solving the problems of delivering services and goods requires tackling the messy problems of the real world.
For entrepreneurs creating new online commerce platforms, a daunting challenge is building a system for payments. Particularly since the advent of the smartphone, consumers expect payment processes to be streamlined, and instantaneous. For example, a Lyft passenger calls a driver with a few taps of the phone. She doesn’t enter a credit card every time she takes a ride, so the app must securely store payment information. When the passenger pays, the driver gets paid, minus a cut for Lyft. The payment system handles all sides of this transaction. The system also handles regulatory and compliance issues and the risk of fraud.
Setting up a business to handle payments across borders is even more complicated. Banking systems vary by country; most developing countries do not use Visa. Accepting any kind of electronic payment requires connecting to the relevant payment processing organizations or banks. Navigating financial regulations is difficult. The complexity of developing payment technology requires huge upfront costs that could be amortized over a large customer base like Apple’s, but could potentially keep smaller entrepreneurs out of the game.
Online commerce needs a level playing field. Its tools need to follow the trajectory of online publishing, becoming simpler and more accessible to a broader audience of developers. Stripe, an online payments startup, is at the forefront of this effort, letting developers send and receive money of all kinds, from all over the world. Stripe shields developers from the bureaucracy of the global financial system, so they can focus on innovating products and services. By simplifying the infrastructure for payments, companies like Stripe will do for online commerce what Twitter did for publishing. If the tools to build marketplace platforms are simple, cheap, and flexible, entrepreneurs can dream up new applications, experiment freely, and compete with companies hundreds of times their size. By enabling new developers to easily integrate payments, Stripe increases, by an order of magnitude, the possibilities for Internet commerce.
In the last decade, entrepreneurs created new platforms to address food, shelter, transportation, and employment needs. Mobile apps to buy instantly-delivered meals, rent a home, find a ride, or connect with jobs, are becoming the backbone of the new global Internet economy. These platforms are growing exponentially; recently, Airbnb announced 1.5M listings — up 50% from January 2015. Online marketplaces solve problems that empower people and their business models focus on delivering value for customers.
We are beginning to see the economic ripple effects of these new forms of commerce. This impact will only grow as online commerce becomes more accessible. Recently, McKinsey predicted that even if online talent platforms – like Thumbtack and Upwork – were to only touch a fraction of the global workforce, by 2025 they could add $2.7 trillion, or 2%, to GDP, while increasing employment by 72MM full-time-equivalent positions. Already, these platforms serve hundreds of millions of people; the next five years could bring billions more into the fold as they extend beyond tech-centric hubs.
The global Internet economy isn’t a myth; it’s an unrealized promise. It’s the promise of being able to compete in the global marketplace not as a part of a large corporation, but as an individual or small enterprise. It’s the promise of building small businesses or serving customers directly, with little friction. It’s the promise that the real-world problems of commerce — payments, production, customer relationships and marketing, to name a few — will become infinitely less daunting, as the tools to create online businesses are easier to use, cheaper to access, more reliable, and more powerful than ever before.