What is the Digital Economy? And Where is it Going?

By Alexander Greco

April 8, 2019

The Digital Economy is a sleeping giant, and it’s still waking up. The internet has only been in its current form for a few decades, but already we’ve seen the rise and fall of massive tech companies, tremendous shifts in society, and a new era of business and economics. The internet has become a place where anyone and everyone can have a voice, can reach out to limitless numbers of people, and can sell a product.

I started blogging a little less than a year ago, and I began realizing the internet is far more complicated than I previously imagined, and there’s far more going on beyond Facebook and Twitter. There is a vast and growing online economy and workforce, which is beginning to impact national and international economies. This is not only affecting the economy, but it’s affecting the foundations of business, the workforce, and the rules of economic engagement. This is, of course, the Digital Economy.

At its surface level, the Digital Economy is a way of making transactions with computers. However, it has grown deeper than that, into a new form of conducting business, with arising online markets, and has intertwined itself with the traditional market.

The Digital Economy can be broken into three branches:[1]

  • Infrastructure:
    • This is the foundation of the online economy, consisting of the hardware and software markets, telecommunication, online networks, and human capitol.
  • E-Business:
    • This involves the processes and operations of a business that is done online, or with computer software.
  • E-Commerce:
    • This is where goods and services are sold online, essentially the core of the Digital Economy.

Because the concepts can be somewhat abstract, I think it would be easier to understand the Digital Economy by the composition of the workforce:

Infrastructure:[2] People who develop, maintain and sell the hardware, software and telecommunication technologies for online business. This breaks into smaller categories:

  • Hardware: Those who develop and sell hardware, ranging from computers to satellite technologies.
  • Software: Those who develop and sell software to be used in both the traditional and digital economy.
  • Telecommunication: Digital infrastructure of communicating around the world (AT&T, Verizon, so forth)

Platforms (an extension of Software Infrastructure): Companies that provide the servers, hosting and platforms for online business. Many of these are the giants of the Digital Economy:

  • Web Browser: Google, Bing, Yahoo, Firefox, DuckDuckGo, and so forth.
  • Website Infrastructure: Companies such as WordPress and Squarespace, which provide the tools and resources for creating a website.
  • Hosting Platforms: These are companies that host websites, podcasts, or music and video, such Bluehost, Lysbin, and YouTube.
  • Social Platforms: These are companies like Facebook, Instagram or Twitter.

Freelancing (typically either in Infrastructure or E-Business): Independent individuals who make a living either by doing gig work, or by setting up full-time contracts with a business online. Freelancing work can range from writing blogs and editing photography, to website development or online advertising consulting.

E-Commerce:[3] This is the bread and butter of the digital economy. This is how anyone and everyone makes money on the internet, or at least where it trickles down (or up) from. E-Commerce ranges from Amazon and Wal-Mart’s online shopping, to small, online businesses (which can range from selling graphic design services to selling cupcake recipes). The E-Commerce workforce would consist of:

  • Business owners (large or small)
  • Employees and/or freelancers involved in the business
  • Shipping and distribution of goods
  • Affiliates, partnerships and sponsorships

Now, I’m not going to delve much deeper into the topic than this, but it’s possible to fractionate the Digital Economy even more, into smaller, sub-economies:[4] [5]

  • Cultural Economy
  • Sharing Economy
  • Collaborative Economy
  • On-Demand Economy
  • Gig Economy
  • Freelance Economy
  • Peer Economy
  • Access Economy
  • Crowd Economy
  • Platform Economy

This isn’t a fully comprehensive list, but it shows the complexity of the internet’s economy, and the broadness of its utility. Throughout the Digital Economy, there are limitless niches, gigs, and positions one could have.

This is where we’ve come today, in a nutshell. A new way of life has emerged with the internet, whether by hybrid digital-physical businesses, or fully digital products and services. The thing is, we’re in the middle of something that’s been developing and changing over the last few decades, and it’s still developing and changing as we speak.

Now, in order to understand where the Digital Economy is going, I think it’s important to answer the following question:

Where did the Digital Economy come from?

(But if you’re not keen on history, you can skip this)

With the advent of computers and eventually the internet, technology and our use of technology began to change rapidly.

Modern, digital computers first began to emerge in the late 30’s and early 40’s.[6] They began as large, bulky machines that used punch-cards and plug-boards, and they mostly remained this way until the advent of microprocessors, such as the 4-bit Intel 4004 CPU, which was created in the early 70’s.[7] By the 1980’s, much more powerful CPU’s were introduced, such as the Motorola 68000 (or m68k) microprocessor.[8] The m68k went on to be used in Apple’s first Macintosh, the Sega Genesis, and the Commodore Amiga.

The first, most basic version of the internet came in 1960’s as ARPANET.[9] A number of university laboratories were given contracts from the US Department of Defense for creating “wide area networking” with computers. One such university was UCLA, which developed ARPANET and successfully used it to send a message to the Stanford Research Institution.

From there, the development of the internet continued in university labs with government money, until the Internet emerged in commercial uses. By the mid 90’s, the Internet was used with unrestricted access by the general public.

Society and computer-technology underwent revolutionary changes in this time, with things like email, instant messaging, forums, online shopping, and social networking.

The world saw AOL, then things like Amazon, eBay and Hotmail emerge in this time. In 1998, Google and PayPal were born. By 2005, we had Wikipedia, Skype, iTunes, Facebook, Podcasts, and Reddit, and then in 2006, Twitter was created. After that, the list continues on. Dropbox, Bing, Spotify, Kickstarter, Patreon, Kickstarter, Snapchat, so on and so forth.

We saw an enormous rise and fall of the internet with the Dot.com Bubble, and then a relatively rapid resurgence in the online markets.

Today, there are people who can pay their bills by sitting in front of a camera for 10 minutes a day. Today, more people listen to podcasts and watch YouTube videos than watch Television. Today, according to blogging.org, “409 million people on WordPress view more than 23.6 billion pages each month”[10] which is more than double the 169 million people who read newspapers per month.[11]

Today, three of the most powerful mega-companies of the world are Amazon, Google and Facebook, with companies like Twitter, Netflix, eBay and Spotify (among many other hyper-valuable online companies) close behind.

Today, there are also millions of lesser-known .com’s making money.[12] [13] There are 28 million small businesses in the US, and over 100,000 e-commerce businesses making $12,000 or more a year. Many individuals supplement their income with e-commerce, or support their pre-existing businesses with e-commerce.

The internet has grown into a place where anyone can make a living by their own means, and without a boss. People from freelancers to business owners are living free of upper management and punch-clocks, making their own money, and building their own lives. The internet has sprung into an oddly Libertarian economy, emerging as its own, sovereign economy, while still intertwining with the traditional economy.

And, the strangest thing is, this economy works really well. There’re issues—scams, financial risks, and learning how to use online resources—but there’s massive potential, much of which is already being seen today.

To make money online, you can work as a Freelancer doing a long list of things, such as: [14] [15]

  • Blogging
  • Teaching
  • Graphic Design
  • Photography
  • Interpretations
  • Virtual Assistants
  • Accounting
  • Online Research
  • Editing
  • Social Media Management
  • Social Media Marketing
  • Copywriting
  • Ghost Writing
  • Legal Work
  • Programming
  • Music Production
  • Podcast Production
  • Consulting
  • Website Design
  • Data Analyst
  • Consulting

And this isn’t close to a comprehensive list. This doesn’t even include YouTubers, or people who make money selling e-books, or businesses like Uber and Udemy. Some people make money simply by writing blogs about parenting, or by selling their artwork online. The list of things you can do is almost unfathomable.

Small businesses range from selling bicycles, office supplies, or nutritional supplements, to providing virtual tour guides, providing online psychological help, or selling and shipping DIY gardening kits.

This is where we are at right now. This form of online economy is growing rapidly, and this lifestyle of personal and financial sovereignty is becoming a reality for more and more people.

Now that we have a general sense of where the Digital Economy is right now, where is the Digital Economy going in the future?

The answer comes from Bitcoin. However, it’s probably not in the way that you think.

The answer isn’t cryptocurrency—though cryptocurrency has seen a rise in use over the last several years—the answer is a type of programming called “Block-Chain”, which makes cryptocurrency possible.

Block-Chain[16] [17] is a type of program that links chunks of data together (hence the name block-chain), copies itself across may different computers, so that hundreds of copies of the same piece of code exist across the internet. In order to alter that piece of code, all the computers that have that code must approve and verify the alteration, and that alteration creates a new link in the chain, rather than deleting pre-existing information

This forms the core of a high-level encryption that makes these blocks of data almost impossible to corrupt, and can programmed to perform a variety of functions, which cannot be corrupted. This made Bitcoin possible because each unit of cryptocurrency is backed by an incorruptible, secure unit of data.

However, many are now speculating on how Block-Chain could be used to revolutionize the entire internet.

Block-Chain can be used to perform secure transactions online called Smart Contracts[18], which cannot be tampered with or corrupted, and is completely transparent in its function. These Smart Contracts can be used in:

  • Online business
  • Online banking
  • Online insurance contracts
  • Online legal work
  • Online voting (thus circumventing the ballot box)
  • Online, open-sourced programming
  • And potentially much more

On the more extreme end of speculation, some believe Block-Chain could lead to:

  • Decentralization of the economy
  • Decentralization of the financial and legal sector
  • Decentralization of health care
  • Decentralization of education
  • Possible decentralization of government/military authority

This sounds somewhat radical, yes, and there’s debate on whether or not we’ll be ready for such a dramatic shift, but, just like with the Digital Economy, there’s much potential with this.

It’s difficult to speculate what life will be like with Block-Chain technology, if and when it goes into mainstream use across the internet, but many are hoping it leads to a brighter future. The hope is that this technology will usher in a more democratic, open society, with less authoritarian government-rule, more transparency, and fair, open-access economies.

At the very least, many believe Block-Chain will revolutionize the world economy, and bring us closer to a time where everyday individuals can easily participate in a decentralized global economy, where businesses and institutions become more transparent, and governments have less regulatory power over the economy.

Regardless of what may or may not happen with Block-Chain, the internet is currently a growing nebula of self-made business owners, freelance artists and professionals, and global marketplaces. The Internet and the Digital Economy that it has spawned has become a platform for anyone to carve their own path in life, without any boss but themselves.

If this sounds at all interesting to you, the next logical question would be:

How Can I Be a Part of the Digital Economy?

Here’s the thing. It’s really simple. But it’s also really complicated.

The fundamental concept of making a living online—or partially making a living—is simple. You produce a good or service, advertise in online, then you provide customers with your good or service. The process of developing your online business idea can also be relatively simple:

  • Come up with an idea
    • Blogging about parenthood
    • Selling your own brand of t-shirts
    • Starting an African trucking company (which is a real thing).
  • You come up with a plan to implement that idea
    • Figure out what your primary platform will be (personal blog, crowdfunding, social media, etc.)
    • Figure out how you’ll go about supporting or promoting that platform.
  • Then start making it happen.

It’s the making it happen that’s the difficult part, especially if you’re not super tech-savvy.

The first complication is that there are a variety of ways to join the Digital Economy.

  • Some people make a living with YouTube, but don’t have a website.
  • Some people have a website, but aren’t active on social media.
  • Some people make their money with ads.
  • Some people make their money selling products or services.
  • Some make money as assistants or freelancers.
  • Some make their money exclusively with crowdfunding.

Other people don’t even make money directly from their online presence, but instead use it to promote or advertise their physical, “real-life” business. For example, musicians might promote their music online, or put demos of songs on Soundcloud. A hotel might advertise on Facebook to attract customers. People use crowdfunding websites for charity, for developing prototypes of products, or for supplementing themselves as artists.

In addition, there’s many steps to each and every route you go on.

If you want to make a podcast, you’ll need:

  • Audio equipment you need for it
  • Editing software (and knowledge of how to use it)
  • An RSS feed
  • A site to host your podcast

With websites, you have to worry about:

  • Design
  • SEO
  • HTML, CSS and JavaScript
  • Advertisement
  • Post management
  • Website hosting

If you want to use social media for advertising, there’s a slew of things you have to consider:

  • Demographics
  • Cost to benefit ratios of paying for ads
  • Designing/planning that advertisement
  • The “organic” and “non-organic” ways of building a social media presence
  • And simply learning how to navigate the ins and outs of these different platforms.

And these are just a few sub-aspects of the Digital Economy. If any of this sounds overwhelming, no worries. It is overwhelming, but it’s not impossible.

However, because of the levels of knowledge and experience needed in the Digital Economy, many businesses outsource the work to online agencies or freelancers. Outsourced jobs include:

  • SEO Management
  • Social Media Management
  • Graphic Design
  • Web Design
  • Blogging
  • Audio and Video Editing
  • Beta-Testing
  • And so forth

Outsourcing is a great way to get work done that you might not have the ability to do on your own. While you can make a basic website on your own with Squarespace or WordPress, if you want a more customized website that fits all your needs, you might have to learn HTML, CSS and JavaScript. Or you can hire someone to make your perfect website for you.

Also, the inverse of this is that being a freelancer—the person being outsourced—can also be a great and satisfying way to make a living. Instead of being the person selling shaving razors online, you can be the person who designs the online storefront for the people selling shaving razors.

However, with anything, you get what you pay for. For $500, you can have a decent website made by a novice web designer, or for $1000, you can have a highly experienced designer make a professional, classy and easy-to-use website. The inverse of this is that as a beginner-freelancer, you might only get one or two $500 contracts a month.

Many freelancers will provide you with quality work, even if you’re on a budget, but some jobs can be quite expensive. For many people, even the cheaper freelancers can be out of their price-range.

So, if you want to enter the Digital Economy, and you don’t want to spend too much money doing it, you’ll probably be doing much of the leg-work on your own.

Don’t let this discourage you.

If you want to start your own business or supplement your income from online markets, there’s one, amazing resource that can help you learn the necessary skills.

The Internet.

The Internet has thousands and thousands of blogs, vlogs, podcasts and webinars on how to do almost anything. If you want to learn how to make your own website, how to market your products online, and how to make a living online, it is 100% possible to learn all these things for $0.

If you want to learn how to sell and market a product online, you can find everything you need online, for free.

Everything I’ve told you is only scratching the surface on these topics—there are thousands of in-depth blogs just on Search Engine Optimization—and virtually anything you need to know on these topics can be found online.

And keep in mind, if this still sounds overwhelming: you don’t have to learn this all in one day. You don’t have to have you’re dream-business up and running overnight.

Start small. Start with something manageable, and learn as you go. Learn more day by day, and grow your website, blog, business, or social media presence over time, even if you’re building it one small brick at a time.

It might take time, it might take some days of frustration, and it might take a few failures before it begins working, but it’s 100% possible to make a living working for yourself and make a living doing something you enjoy.

So, if after hearing all this, you’re still interested in starting your own business, or even using the internet to share some hobby of yours with the world, the next logical question is:

What’s Stopping You?

As one last note, if you think your passions or interests can’t be monetized as an online business, remember that PewDiePie’s estimated net worth is around $20 million, and that’s from making silly YouTube videos. People make money with inspirational videos. People make money talking about Magic The Gathering and DnD. People make money selling vape accessories, DIY kits, and novelty poker sets.

There’s no end to the things you can make a living doing. Perhaps your interests don’t match up one-to-one with a marketable idea, but maybe you can tweak it into a marketable idea. Or maybe you don’t want to market it. Maybe you just want to put things out onto the internet, have fun with it, and see where it takes you. Whatever the case may be, there’s an entire dimension of possibility and opportunity on the internet.

[1] Mesenbourg, T.L. (2001). Measuring the Digital Economy. U.S. Bureau of the Census.

[2] http://www.ques10.com/p/14467/discuss-technology-infrastructure-for-e-business-1/

[3] Wienclaw,Ruth A. (2013) “E-Commerce.” Research Starters: Business.

[4] https://www.weforum.org/agenda/2017/12/when-is-sharing-not-really-sharing/

[5] https://www.google.com/amp/s/www.forbes.com/sites.berndardmarr/2016/10/21/the-sharing-economy-what-it-is-examples-and-how-big-data-platforms-and-algorithms-fuel/amp/

[6] “A Computer Pioneer Rediscovered, 50 Years On”. The New York Times. April 20, 1994. Archived from the original on November 4, 2016.

[7] https://en.m.wikipedia.org/wiki/Intel_4004

[8] https://en.m.wikipedia.org/wiki/Motorola_68000_series#cite_ref-1

[9] G. Schneider; J. Evans; K. Pinard (2009). The Internet – Illustrated. Cengage Learning. ISBN 0538750987.

[10] https://blogging.org/blog/how-many-websites-and-blogs-are-on-the-internet/

[11] https://www.google.com/amp/s/www.forbes.com/sites/paulfletcher/2016/12/26/good-news-for-newspapers-69-of-u-s-population-still-reading/amp/

[12] https://townsquared.com/ts/resources/small-business-united-states-numbers/

[13] https://www.google.com/amp/s/www.forbes.com/sites/mikalbelicove/2013/09/18/how-many-u-s-based-online-retail-stores-are-on-the-internet/amp/

[14] https://nation1099.com/freelance-careers-types-freelance-jobs/

[15] https://www.google.com/amp/s/www.forbes.com/sites/abdullahimuhammed/2017/05/06/55-freelance-businesses-you-can-start-for-free-tomorrow-morning/amp/

[16] Drescher, Daniel. Blockchain Basics: A Non-Technical Introduction in 25 Steps. Apress, 2017, Print.

[17] https://en.m.wikipedia.org.wiki/Blockchain

[18] https://blockgeeks.com/guides/smart-contracts/


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