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When Dot-Coms Succeed

by Carole VanSickle



Rick Watson, who studies how the Internet affects the role of businesses, recently published a case study describing basic principles that help explain online commercial success.

In “ Five Technology Forces Revolutionize Worldwide Wagering,” which appeared in the October 2005 issue of the European Management Journal, Watson and his coauthors analyze the online betting exchange, which brings customers together over the Internet to place money on virtually anything. Such a company, based unambiguously on wagering, is not so different from many other modern businesses that deal in intangibles, he explains. And in so doing, they provide an impressively accurate forecast for everything from presidential elections to printer sales.

Online gamblers using can place bets via the telephone as well as its web site.

“It’s called ‘the wisdom of crowds,’” said Watson, the University of Georgia’s J. Rex Fuqua Distinguished Chair for Internet Strategy. “When people are betting on an event, you’ll get a pretty good idea of the outcome by watching the way the opinions go. And while people might lie in a poll about how or if they voted, they won’t lie when their money is at stake.”

Briefly explained, the five technology forces key to’s operations, according to Watson and his colleagues, are:

Moore’s Law: The exponential growth of computing power over time leads to business models that rely on customers having access to the same relatively low-cost computing power that the companies have.

Metcalfe’s Law: As the number of people using a service multiplies, capacity and efficiency of that service increase proportionately.

Coasian Economics: When numerous parties are able to participate in a market, agreements will ultimately emerge.

Flock-of-Birds Phenomenon: Because ease of communi- cation enables one person to interact with many on a national or global scale, the network becomes a functioning business and communications entity.

Fish-Tank Phenomenon: With lower entry barriers, the market ends up with many online “fish tanks” (websites) of varying sizes and calibers, enabling greater creativity on every level.

“My research stream illustrates that as these forces continue to grow in influence, customers will take more and more control of business transactions,” Watson said. “Companies will begin trading in knowledge of how to facilitate a transaction or communication, while many of the actual services will be provided by the customers themselves.”

For more information, email Rick Watson at


Research Communications, Office of the VP for Research, UGA
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