Competitive Dynamics of Web Sites

We present a dynamical model of web site growth in order to explore the effects of competition among web sites and to determine how they affect the nature of markets. We show that under general conditions, as the competition between sites increases, the model exhibits a sudden transition from a regime in which many sites thrive simultaneously, to a ”winner take all market” in which a few sites grab almost all the users, while most other sites go nearly extinct. This prediction is in agreement with recent measurements on the nature of electronic markets. ∗SMM thanks the Fannie and John Hertz Foundation and the Stanford Graduate Fellowship for financial support. We thank Eytan Adar and Lada Adamic for stimulating discussions. 1