Saturday, April 25, 2009

What is meant by an online community and how is it important for e-commerce

I usually shy away from Wikipedia as the democratization of knowledge does not make something true. Where many people hold a fallacy, it gets propagated in a Wiki. It is a basis of art and not science. Art has a place, but I prefer to hold to scientific principles and test knowledge. I like to have a quantitative basis for the truth that is greater than the sum of how many people believe.

However, in this instance, I feel that it is appropriate to take my first quote from just that source (Wikipedia).

A virtual community, e-community or online community is a group of people that primarily interact via communication media such as newsletters, telephone, email, internet social network service or instant messages rather than face to face, for social, professional, educational or other purposes. If the mechanism is a computer network, it is called an online community.

So the question is, what does this really mean?

Online communities open up global opportunities while also increasing the volume of information available to consumers. Adam Smith postulated the ideal free market in “The Wealth of Nations” (Smith, 1776). The “invisible hand” of this free-market ideal is closer with the formation of open global communities for those who have a part within them. The failing remains the lack of complete knowledge with many parties facing an increasingly diverse “digital Divide” (NITA, 1995).

The growth of these communities has aided both Altruism and Envy (Konrad, 2002) with the development of positive and negative causes. It is noted that in economic terms, the utility value of these strategies results in the situation where “altruistic or envious individuals should achieve a lower expected material payoffs than individuals who are not altruistic or envious”. This is of course reflective of the physical world, with the projection of human desires and needs into the virtualised. These communities if stable could produce a socio-evolutionary march towards economic equilibrium.

The fallacy with the former statement is that no online community is close to achieving constancy. The growth of Internet based communities as more people are introduced radically alters the balance and mix of these communities. In addition, the developed countries are approaching a saturation point where large numbers of the population are online. Conversely, developing countries are (although fractionally slower in growth) adding more people to this global mix. The larger population densities in many of these countries mean that they will radically shift the Internet distribution away from homeostasis for many years to come.
An additional issue is the opportunity for free-riders in Internet communities. It has been stated that “on the Internet, nobody knows you are a dog” (Steiner, 1996).
The ability to hide on the Internet makes many people wary of using the Internet for commerce. Digital forensics can help. Making people accountable is a key factor in commercial transactions, both virtual and physical.

Although in development, online communities (such as Linked-In) have aided in creating a reputation structure where people can uncover the details needed to find enough information to be able to develop trust. This again is far from perfect with many failures. Again, we are in the development phase and far from equilibrium.

The absence of fraud remains a stumbling block. Market activity (commerce) can only be deemed to be truly voluntary and contain free activity if those who make it engage it knowingly. Smith's perfect market has to provide everyone with exactly what they expect. This market assumes perfect knowledge by all the parties. This requires an absence of fraud.

A lack of security and more crucially an near absence of globally enforceable laws and other legislative frameworks is arguably the greatest block to such a process. Until we can increase security and trust in the online communities we engage in, we can not create a truly open market. Security will never be enforceable without a suitable global legislative framework.

So we remain in the wild wild web for the time being.

No comments:

Post a Comment