The impact of network structures on electronic business models: An new explanation for the long tail of Ecommerce demand

Network structures are an integral part of electronic business, and can play an important role in defining business models. In this paper, we present an analysis of the extent to which network structures affect demand in electronic commerce, using daily data about the graph structure of Amazon. com's co-purchase network gathered over 14 successive days. We establish that the incoming co-purchase links associated with a product sold on an ecommerce site explain a significant fraction of the variation in its demand. Further, using Google's Page Rank algorithm, and based on the assertion that a higher Page Rank is associated with a larger influence of the network structure, we show that an increase in the influence of the network structure flattens the distribution of ecommerce demand, as measured by the variation in Gini coefficients across categories. Our results provide an alternative explanation for the widely documented "long tail" of ecommerce demand, and suggest that network structures should play an important role in defining the business models of initiatives that aim to expand the scope of product offerings through electronic business.