Research On Industrial Organization Of Internet Industry

The rapid development and application of the Internet has dramatically promoted the evolution of Network Economy. Internet Industry, as the core of the Network Economy has been stronger. Hence knowing the current situation and mastering the law of the Internet development is significant for the blossom of Chinese Network Economy. Current research has done a lot to analysis the Internet Industry both from the law of the Internet Economy macroscopically and from the enterprise development microcosmically, while little has done from the aspect of the Internet itself. Some scholars tried to explore the law of Internet development by using economic theories like Industrial Economic Theory, however, since the transience of the Internet development, there is still no systematic data for scholars to do the research, leading to no systematic positivity of investigation. We use available track data of the websites to analyze the current situation and structure of Chinese Internet Industry, in order to recognizing and mastering the law of the development better instead of mere deduction and reasoning of theoretical models.Among the theories that can be used to analyze the industries, the most efficient empirical analysis system info is SCP(Structure-Conduction-Performance). Considering the purpose of our research is to explain the current situation and law of Internet Industry, we choose SCP to analyze Chinese Internet Industry. The first problem we confronting is how to establish the Industrial Classification System, since for a newly born industry, there is no unified system. Based on the actual survey data and Industry Value Chain, we divided the Internet Industry into five parts, namely Elementary Service, Information Service, Leisure Service, E-business and Other Service .We find that the eight categories we used in actual statistics has obvious segmentation, while on the other hand, they have similarities with the five parts mentioned above. Thus we establish the Classification System based on the eight categories and other subclass analytical methods.In order to better assess the industrial concentration and characteristics, we use the classification system combined with open data from professional websites analytical corporations. By gathering the real time data in specific time, using the user scale to represent the revenue level, we quantize and measure the market concentration of different industries in Chinese Internet Industry. We find, through the analysis of 8 categories,90 sub-categories and more than 1600 web data, most industries belong to oligopolistic structure, which have higher lever compared with Chinese industrial concentration(lower than the particularly highly developed industrial concentration). Moreover, the concentration of application and service for 8 different categories are different, indicating the differentiation and particularity among different internet industries.Based on the factors for industrial concentration, we propose 4 main factors to explain the reasons for differentiation among different internet industries, namely, the economies of scale influenced by industrial increment speed, market size, diversity of user demand and market barrier. Through the analysis by Linear Regression Model and Tobit Regression Model, we find that economies of scale and market barrier promote the concentration of Chinese Internet Industry, while market size and diversity of user demand may decrease the concentration. However, from the whole perspective, economies of scale and market barrier have stronger influence, resulting in the oligopolistic structure of Chinese Internet Industry.Apart from the traditional industries, the target of Internet Industry is to expand the market scale and capture the market share, including both non-pricing and pricing actions. For the most important part, pricing, frequently used strategy is free pricing, which takes advantage of the Diminishing Marginal Costs and Increasing Returns to Scale, in order to accomplish the positive feedback system and promote the self-virtuous circle and increase.In addition, how do market structure and market behavior influence the market performance? Is the existence of current oligopolistic market reasonable or not? In regard to the questions above, we proof the reasonability of the efficiency of Internet resource allocation by using second hand data, as well as from three different perspectives of consumer utility, development of Chinese Internet Industry and traditional industrial resource allocation. While for the technical progress of dynamic efficiency, we use illustrativecase method (Chinese search engine), to demonstrate the oligopolistic structure doesn't hamper the development and technical progress of Chinese search engine. On the contrary, it does some good to the industry.From the analysis of SCP (Structure-Conduction-Performance) of Chinese Internet Industry, we know that most sub-industries belong to oligarchic monopolistic competition. This doesn't hamper the market innovation and consumer satisfaction, so the general development of Chinese Internet Industry is benign. Hence the government should correctly recognize current competition pattern, continuously providing a loose business environment. Meanwhile, since we have a small market share in the global market, the government should encourage and support the internationalization of Chinese Internet Industry, without overlooking the development of minor enterprises and user expansion of vulnerable groups.