From Amazon to iTunes, digital economy is the way forward

A number of characteristics serve to distinguish a digital economy from an industrial economy. These characteristics include a decentralized communications environment; an increase in the economic and cultural value of digital goods and services; the emergence of different forms of proprietary and non-proprietary production; an increased role for consumers and members of the public in contributing to the production and cultural reception of digital goods and services; and finally a dual focus on hyper-personalisation and big data.

In contrast to things that are made out of physical materials e.g. a car or a household appliance, the value of digital goods and services is derived from the use of the goods by many users; plus the fact that once created the costs of producing additional digital copies of the information are negligible.

Many of the innovations in the digital economy therefore revolve around the capacity of digital networks to democratize the production, distribution and consumption of our goods and services.

From Amazon Web Services to Openstack, from IBM's Hiveto Apache's Hadoop, and from iTunes to last.fm, a digital economy enables not only the continuation of industrial, commercial, and proprietary production of digital goods and services, but also inaugurates an era in which social forms of production, non-proprietary distribution, and social commerce contend with prior forms of creating value.

Additionally, the widespread practice of digital-free in which companies initially demonetise their offerings, in anticipation of future re-monetisation opportunities, is also derived from the very particular economic and cultural properties of digital goods and services. Finally, a digital economy provides opportunities for the establishment of new relations between peers and between organisations and their users.

In this respect some of the more recent developments in the digital economy can be seen to work simultaneously at two levels of scale: by delivering hyper-personalisation strategies based on the disclosure and aggregation of information captured from social media platforms, and by predicting demand from the analysis of cloud-based big data sets. In short, the digital economy extends and moves beyond an industrial economy by opening up new areas of social value; and by focusing as much on the production of relations as on the production of the digital goods and services themselves.

Dr Jonathan Foster, Lecturer in Information Management, the University of Sheffield (UK)