The second piece of the series, “Internet Economics” can be found here: Scale, Economies of Scale and Online Higher Education. 
The third piece of the series, “Internet Economics”, can be found here: The Network Effect and Online Higher Education. 
It’s not often you hear a reference to the “economics of the internet” at conferences held on digital teaching and learning, or at one of the workshops offered on campus about “how to teach online”. That’s a shame. Although the effects of internet economics have yet to be fully realised in higher education, there are very few factors that will have a greater impact on the institution in the coming years. Figuring out how to best navigate these influences is a core challenge of our time.
In other sectors, the internet’s impact on costs is familiar terrain. Jonathan Levin of Stanford summed up this influence succinctly:
” . . . the internet has lowered a range of economic costs: the cost of creating and distributing certain types of products and services, the cost of acquiring information about these goods, the cost of collecting and using data on consumer preferences and behaviour.” Jonathan Levin
But the influence of economics goes well beyond costs, distribution, and the processes of acquiring information. Economic factors ultimately influence what gets produced, how it’s produced, where, and by whom. Evidence of the huge impact of internet economics are clear in a handful of new, internet-native organisations:
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” Tom Goodwin. 
Few organisations seem more removed from the above examples of location-neutral, born-to-be-flipped, consumer-facing enterprises than the institution of higher education. While there are a few institutions and organizations in higher education that are clearly Internet-enabled – I’m thinking here of Minerva, WGU, and Coursera – the vast majority of institutions have had their organizational structures and practices held in place by several especially resilient forces: regulatory systems (accreditation, student loans), tradition, social conventions, and the effects of decentralized management.
But there are signs that the internet economy is beginning to more broadly infiltrate higher education. New learning providers are taking advantage of the economics of content creation and distribution to offer inexpensive alternatives to higher ed – some of these are being integrated into traditional institutions. MOOCs have provided a concrete example of what a widely distributed, rational content model might look like – providing scale on a level not seen since the heydeys of textbook publishers. Learners are gaining access to more information about institutions to help them measure the value of different institutions; and more.
It’s important we develop a more in-depth and nuanced understanding of the unique properties of internet economics. This will help us leverage its unique properties to meet our goals and, when needed, avoid its influences for the same reason.
In the next few posts, we’re going to address a series of concepts that are intertwined with the Internet economics, including:
– scale and economies of scale
– network effect
– mass customization
– freemium
– unbundling
– disintermediation
Each of these concepts was in use prior to the Internet, but the economics of the internet have made them more common and/or important. We’ll address each in terms of how they relate to aspects of higher education – starting with scale and scalability in our next post.
Keith Hampson, PhD is the founder of digital / edu / strategy, a research and consulting service that helps colleges, universities and education businesses develop better strategies for maximising value.