University of Batna 2

Faculty of Mathematic & Computer Science

Computer Science Departeemnt

Master on Digital Transformation

and Innovation

Digital Law & Regulations Dr Nour El-Houda GOLEA

CHAPTER 2
 Digital Revolution and Digital Economy
Digital economy and ICT
COURSE OUTLINE
Digital Universe

Typical instances of the Digital Economy

Features of the digital economy

Key terminology
Benefits and limitations

Industries in the Digital Economy

Digital economics
▪ In the developed world, ICT has become an integral part of our daily existence, and the pace of

innovation in this field is relentless, with new technologies emerging each year.

▪ Over the past few decades, ICT has brought about profound changes in how we work, manage our

finances, and conduct business. Industries such as telecommunications, finance, and media have
undergone significant transformations due to ICT's influence.

▪ For instance, online music services like Spotify have disrupted the traditional music industry,

leading to a decline in CD sales and the near disappearance of physical CD stores. Global recorded
music sales decreased by 45% between 1999 and 2014, with online music sales matching physical
format sales for the first time in 2014.
▪ E-banking has revolutionized how consumers interact with banks and financial institutions. Most

financial activities, such as bill payments and loan negotiations, can now be done online via
smartphones or computers. Physical visits to banks are no longer necessary for routine transactions.

▪ At many airports, automation has streamlined passenger services, allowing travelers to check in, drop

their baggage, and board airplanes with minimal human intervention, except for security checks.

▪ This digital transformation is driven by the increased use of digital goods and services, often
replacing physical goods and non-digital services. Digital goods and services serve as the foundational
elements of the digital economy. While the business world has been gradually adapting to these
changes for some time, we are now at the cusp of an economic revolution as the full potential of the
digital economy is starting to unfold.
Digital Revolution phases:
The digital revolution commenced a few decades ago, encompassing a wide array of diverse
approaches. The three phases of the digital revolution.

Digital
Digitization Digitalization
Tansforrmation

Framework for understanding digitalization

Digital Revolution phases:
Phase 1: Digitization:
• Initially, digitization primarily pertained to converting analog products and services into digital
formats.
• Sectors reliant on information, such as publishing, music, and finance, led the way in this phase.
• Progress in digitizing tangible, physical products was comparatively slower.
• The primary outcome of this phase was the transformation of products and services into digital
versions.

Analog Data Digital Data

Video and audio cassettes, DVD, CD, e-mails, digital
photos, books, newprint photos, smartphones, apps
Phase 2: Digitalization:
▪ Unlike digitization, which focuses on converting existing analog data into digital form,
digitalization involves using digital data and technology to drive innovation, automation, and
efficiency..
▪ In the second phase, digitalization shifted its focus to the organizational level, ushering in new
business models and processes that capitalized on the benefits of newly digitized products.
▪ This phase saw the rapid emergence and growth of companies like Apple, Amazon, and others.

▪ Moreover, digitalization expanded beyond the business sector and found its way into the public
sector.
▪ The key result of this phase was the development of novel organizational models and processes.
Phase 3: Digital transformation
▪ Digital transformation has extended its reach to encompass entire economies and societies.

▪ This transformation has been brought about by the widespread adoption of new technologies.

▪ Digital technologies have the power to reshape individual and collective values, influence

decision-making processes, steer actions, and mold behaviors.

▪ In fact, they have the capacity to permeate virtually every aspect of life.
The technologies that play a significant role in driving digital transformation

Artificial Internet of Big Data Analysis and Machine Social Media

Intelligence Things (IoT) Cloud Computing learning and Platforms
(AI) and Connected
Devices

Robots and Autonomous 3D Printing Biotechnology Nanotechnology

Drones Vehicles
▪ The generic results of the digital revolution

Digital
Digitization Digitalization
Tansforrmation

Digital Digitalized
Digital Sector
Economy Economy
 Digitalized Economy

Digital Economy Precision

E-business
agriculture
Plateform
Digital services
Economy

E-commerce Sharing
Digital Sector economy
Hardware Software & IT
manufacture consulting
Industry 4.0 Big economy
Information Telecommunicat
services ion

Algorithmic economy
▪ The digital economy is defined as the portion of economic output that
originates exclusively or primarily from digital technologies. It
encompasses business models that are centered around digital objectives
and services.

▪ The digitalized economy is the result of the digital transformation, it

refers to an economy in which traditional processes and activities have
been transformed or optimized through the integration of digital
technologies. It's the application of digital tools and technologies to
improve efficiency, productivity, and overall business operations across
various sectors.
Definition 1:
The digital economy is an economy that relies on information and communication technology (ICT).

Definition 2:
The digital economy, also known as the Internet economy, is an economy based on online
transactions, mostly e-commerce. It includes digital wireline or wireless communication networks
(e.g., the Internet, intranets, extranets, and VANs), computers, software, and other related
information technologies.
▪ A significant development in the digital economy is the growing number of individuals utilizing

public narrowband and broadband mobile technologies.

The number of users connected to public mobile networks has now exceeded the global population. As
of 2020, there are 105 active mobile cellular subscriptions per 100 inhabitants worldwide.

▪ Access to the Internet has been suggested as a fundamental human right, and in 2016, the United

Nations (UN) issued a non-binding resolution condemning deliberate interference with such access
by governments (Vincent, 2016).

▪ It's evident that Internet access has had a profound impact on people's lives and the way businesses
function, and this influence is set to grow as the remaining half of the world's population gains
connectivity to the Internet.
The size of the digital economy is challenging to quantify due to several factors:

▪ ICT constitute an industry by themselves, encompassing the production of telecommunications

networks, Internet equipment, mobile phones, applications, and software.

▪ ICT has become deeply integrated into nearly every other industry, giving rise to new business

models, more efficient production processes, and novel consumer interaction methods.

▪ For instance, e-commerce allows people to purchase a wide array of products over the Internet,

marking a transition from the industrial economy, which focused on physical goods, to the digital
economy, centered on digital goods and services.
▪ As of the first quarter of 2021, the world's six largest corporations by market
capitalization (in descending order) are:
1. Apple,
2. Microsoft,
3. Amazon,
4. Alphabet (Google),
5. Facebook,
6. Tencent.

▪ All these companies are major players

in the digital economy, specializing in
the production of digital goods and
services. As of March 30, 2021, their
combined market capitalization exceeds
$8300 billion.
Digital technology spreads through the entire economy

Health Industry Tourism Education

Banking Agriculture City and Commerce

Mobility
Facebook
▪ There are more than three billion individuals worldwide who regularly use a social
media platform.
▪ Among these services, Facebook stands as the most widely used, boasting around
2.2 billion users.
▪ Facebook has exerted a significant influence on how people engage in
communication and manage their social interactions.
▪ The advertising industry has undergone substantial transformations due to the
ability to tailor social media ads to align with user attitudes and preferences.
Airbnb
▪ Founded in 2008, Airbnb has evolved into one of the largest global hospitality
services.
▪ As of 2017, Airbnb boasts a user base exceeding 200 million individuals and offers
more than three million accommodations spread across 191 countries.
▪ Airbnb facilitates homeowners in renting out their properties to registered guests,
serving as a prominent illustration of the expanding sharing economy.
▪ The success of Airbnb is underpinned by the widespread adoption of Internet access,
high-speed mobile networks, and smartphones.
Bitcoin
▪ Introduced in 2009 by an enigmatic entity known as Satoshi Nakamoto, Bitcoin
(BTC) has risen to become the most valuable and renowned cryptocurrency.
▪ Bitcoin employs blockchain technology to establish a decentralized form of
currency, eliminating the need for intermediaries.
▪ It possesses the potential to function as a genuine global currency.

▪ Nevertheless, recent inquiries have exposed various shortcomings in Bitcoin,

including extended transaction durations and substantial energy consumption.
▪ Alternative cryptocurrencies like Litecoin (LTC), Ethereum (ETH), and Ripple
(XRP) might potentially surmount these challenges and emerge as the leading
cryptocurrencies of the future, should cryptocurrencies persist in their significance.
Internet- World- Fast-paced
powered encompassing

Always-on Data-driven Competitive

E-business
▪ The term 'e-business' is defined as the utilization of electronic methods to carry out an
organization's business processes, both within the company and externally.
▪ Internal e-business activities encompass connecting an organization's employees through
an intranet to enhance information sharing, facilitate the dissemination of knowledge, and
aid in management reporting.
▪ e-business activities also extend to supporting post-sale service functions and
collaborating with business partners, such as engaging in joint research, co-developing new
products, and creating sales promotions.
▪ Despite the unique terminology associated with it, e-business should not be considered as
a separate entity within a firm.
▪ Instead, organizations should harmoniously blend their online e-business operations with
their offline activities to create a cohesive whole.
E-commerce
▪ An integral component of the digital economy is electronic commerce, often referred to as e-
commerce.
▪ E-commerce involves the online buying and selling of both physical and digital products.
▪ Some of the most prominent companies in the digital economy, such as Amazon, Alibaba,
and eBay, operate within the realm of e-commerce.
▪ Electronic commerce, often referred to as e-commerce, is a narrower concept compared to e-
business and can be considered a subset of the latter.
▪ E-commerce primarily focuses on facilitating transactions and the sale of products and
services through online channels, such as the Internet or other telecommunications networks.
E-commerce
▪ This encompasses the electronic exchange of both physical and digital goods, often covering
all stages of the trading process, including online marketing, online ordering, electronic
payment, and, for digital goods, online distribution (particularly for after-sales support
activities).
▪ E-commerce applications with an external orientation involve buy-side e-commerce
interactions with suppliers and sell-side activities with customers.
▪ One noteworthy facet of e-commerce is the role of user feedback and recommendations.
Given that e-commerce limits consumers' ability to physically interact with products, the
feedback and comments provided by other consumers can instill trust in the shopping
experience.
Mobile e-commerce
▪ Mobile commerce, often abbreviated as m-commerce, is indeed a subset of
electronic commerce (e-commerce).

▪ While it encompasses online activities similar to those found in traditional e-

commerce, the key distinction lies in the underlying technology.

▪ M-commerce specifically operates within the realm of mobile

telecommunications networks, and it is primarily accessed through wireless
handheld devices like mobile phones, handheld computers, and personal digital
assistants (PDAs).

▪ This mobility and the unique characteristics of mobile devices differentiate

m-commerce from conventional e-commerce.
Electronic business includes e-commerce and Mobile e-commerce

e-business

e-commerce

Mobile e-
commerce
Sharing economy
▪ The sharing economy is an economic framework built on the idea
of individuals sharing goods and services with one another.
▪ It is also referred to as 'collaborative consumption' or
the 'collaborative economy' and often leverages information
technologies for its functioning.
▪ An illustrative instance of this concept is car-sharing.
▪ Participants in the sharing economy enjoy significant advantages,
including cost savings for buyers and increased selling
opportunities for sellers.
▪ Furthermore, the broader society benefits from a decreased
carbon footprint (e.g., through ride-sharing), greater recycling
efforts, and enhanced social interactions.
▪ Recommendations and consumer feedback are pivotal

components of the digital economy, often triggering

powerful network effects that result in increased customer
numbers and sales.

▪ In some cases, this dynamic can even lead to the

establishment of de facto monopolies. The collection of

consumer feedback can occur through direct or indirect
means.
▪ An example of direct user feedback involves asking a consumer to provide ratings or comments
regarding a product or service after making a purchase. Subsequently, this feedback, along with other
data the retailer may have about the consumer, can be leveraged to boost sales by suggesting
additional products to the consumer.
▪ Gathering information about consumers, whether through direct or indirect means, is a

fundamental aspect of the business model for many companies in the digital economy.

▪ Additionally, reviews and feedback play a crucial role in establishing trust within the shopping

experience.

▪ Customers can read reviews and feedback from other consumers, helping to eliminate information

asymmetry in the digital economy. When encouraged by positive feedback and reviews from other
customers, potential new customers are better equipped with information about the products they are
considering purchasing.
▪ Indirect user feedback is exemplified by actions like web browsing
with Google.
▪ Google can use search results to create user profiles, allowing for
more precise targeting of advertisements to users.
▪ This enhances Google's value as an advertising provider.
▪ For Facebook, indirect feedback is even more pronounced. Actions
such as using the "like" button, analyzing user-generated text,
examining a user's network of friends, and monitoring user activities
all contribute to the creation of a detailed user profile.
▪ Amazon also leverages indirect feedback when suggesting books.
These recommendations are based on information gathered about
books a user has previously bought or shown interest in, as well as
books purchased by other customers with similar preferences.
 Enhanced Access to Reduced Costs Time Efficiency
Information Increased Flexibility

Lower Barriers to Entry Economic Growth Transparency Job Creation

Data Insights Rise in E-commerce Improved Public Digital Delivery of

Services Goods and Services
Disruptions in Cybersecurity Infrastructure
Labor Markets Requirements

Privacy Issues Bypassing of Environmental

Labor Laws Costs
Companies within the digital economy encompass various industrial
sectors, including:

Information and Content Producers and Providers

This category includes entities like newspapers, television channels,
bloggers, YouTube creators, and streaming services like Netflix.

Social Media Providers: Companies such as Facebook, LinkedIn,

and Twitter fall under this category, facilitating social networking
and communication.
▪ Manufacturers of Devices and Software: Prominent players
like Microsoft and Apple are known for producing both
hardware and software products.

▪ Operators of Fixed and Mobile Network Infrastructure:

This involves Internet and mobile network providers, along with
emerging technologies like Starlink.
▪ Electronic Payment Services and Banking: Entities like

PayPal and Bitcoin miners are instrumental in digital payments

and cryptocurrency transactions.

▪ E-commerce: Online marketplaces like eBay and Amazon

enable the buying and selling of goods and services over the
internet.
▪ Sharing Service Providers: Companies like Uber and

Airbnb operate platforms that facilitate the sharing and

utilization of resources like transportation and
accommodations.

▪ Cloud Computing: This sector involves cloud service

providers that offer storage, computing power, and various

software services over the internet.

▪ Multiplayer Interactive Game Providers: Entities within

the gaming industry provide online multiplayer gaming

experiences.
Digital economics is a specialized branch of economics that
focuses on the analysis of digital goods and services.

In the context of this field, the term "digital goods" is used to

encompass both digital goods and services, as the need to
distinguish between the two is rare.

The complete term, including "digital goods and services," is

only employed when such differentiation becomes essential.
▪ Digital goods encompass a wide spectrum of digital entities, including:
- Any form of software.
- All varieties of files stored in digital formats.
- Smartphone applications and the associated services they offer.
- Any type of digital information.
- The content hosted on a website.
- Communication sessions conducted digitally.
- Applications that rely on the Internet for their functionality.
- Transactions related to trade and banking conducted digitally.
▪ This comprehensive definition encompasses the entirety of digital entities
and activities within the scope of digital economics.
- Automation involves the utilization of technology to perform tasks without human intervention.
- The significant advancements in computation, storage capacity, and communication bandwidth,
primarily driven by information and communication technologies (ICT), have opened up substantial
opportunities for automation.
- The overarching goal of automation is to decrease costs, enhance competitiveness, boost
revenues, and improve customer satisfaction.
- It plays a pivotal role in the ongoing digitization of our economy and society, with ICT-based
automation initiatives permeating nearly every sector.
- These initiatives often replace human labor with automated digital services, robots, and algorithms.
Policymakers and politicians are grappling with a pressing concern: whether this automation wave
will lead to a net loss of jobs.
Financial Technologies (FinTech) represents
the adoption of novel and emerging technologies to
supplant traditional financial services.

This includes examples like mobile payment

services, cryptocurrencies, blockchain
methodologies, crowdfunding, and smart contracts.

One of the major challenges associated with

FinTech is ensuring robust data security.
Robotic Process Automation (RPA) stands as a form of
business process automation that employs software robots in
lieu of human workers.

▪ These robots excel at handling repetitive tasks, such as

updating websites, responding to customer inquiries, and

sending standardized emails. Advanced iterations of these
robots, built on cognitive automation principles, are currently
in development.
Intelligent Transport Systems (ITS) leverage ICT to
automate the road and transportation industry.

Examples of ITS applications encompass intelligent traffic

signs and self-driving cars, both contributing to reduced
transportation costs and enhanced traffic safety.
The academic field of digital economics has connections and overlaps with various other fields within
economics.

Digital economics is known by different designations, each with a slightly different focus and scope.
Some of these designations include:

Network Platform Information Data Virtual

Economy Economy Economy Economy Economy

Internet Attention Sharing Abundance

Economy Economy Economy Economy