The reasons for the stunning success of Internet-based firms such as Facebook, Living Social, Groupon and countless others are multi-faceted. The intuition, smarts and hard work of the founders are undoubtedly the principal reasons. Other entrepreneurs will envision and implement new businesses that will become stunning successes; many will not be as fortunate.
In the many parts of the United States, Internet-based businesses have access to essential Internet infrastructure at reasonable rates. Companies that are not longstanding, nationwide retailers or multi-national corporations can establish an Internet presence with relative ease in terms of out-of-pocket expenditures and access to essential services and technologies. Entrepreneurs offering interesting or innovative on-line experiences, products or services can contract with web hosting, high speed Internet access service, data center and/or cloud computing, and content delivery network services providers and establish a sophisticated, on-line presence in a matter of months. Consultants that can assess scale enhancements due to rising traffic on web sites may not be as easy to identify.
High speed Internet access service, the essential “utility service” for e-commerce, is available from multiple providers in many metropolitan areas and high technology corridors such as Washington, DC and nearby Northern Virginia. Internet-based companies are not tied to Verizon or AT&T for connectivity; they don’t need the national or multi-national footprints that are major selling points for the major carriers. Multiple second and third tier, facilities-based services providers continue to extend their networks to more customer locations.
Second and third tier Internet Access services providers often do not demand the strict “take-or-pay” obligations imposed by the major carriers. These services providers are not locked into nationwide, volume-based pricing structures and, just as the major carriers, offer a “best efforts” high speed Internet access service. In this competitive environment it is not surprising that at least one major carrier has taken steps to minimize the ease with which its customers can migrate their high speed Internet access service requirements to more aggressive competitors.
Internet-based entrepreneurs achieve global presence and scale by acquiring content delivery network services. E-commerce site operators do not have to enter into the highly structured, multi-year enterprise services agreements of the major carriers. Rather, they can purchase content delivery network services from entities such as Akamai to ensure a predictable and reliable on-line presence in their geographic areas of interest and to accommodate episodic or seasonal peak demand periods.
This robust Internet eco-system bodes well for continued U.S. leadership in e-commerce and on-line content.