Intermediaries and Cybermediaries: Sarkar, Butler and Steinfield

It is suggested that not only is it likely that widely available information infrastructures will reinforce the position of traditional intermediaries, but that networks will also promote the growth of a new generation of intermediaries.

Abstract

The advent of nearly ubiquitous information infrastructures has led many to predict that one effect of electronic markets will be the bypassing of intermediaries in electronic markets. The ability of electronic networks to reduce transaction costs is the theoretical cause of this supposed trend. We suggest that, on the contrary, not only is it likely that widely available information infrastructures will reinforce the position of traditional intermediaries, but that networks will also promote the growth of a new generation of intermediaries. These new players, which we term “Cybermediaries,” are organizations that perform the mediating tasks in the world of electronic commerce. We illustrate that the case for the elimination of intermediaries in the move to create direct producer-consumer links is based on questionable assumptions. We then examine functions of intermediaries that are not easily absorbed by producers. We describe some of the new forms of cybermediaries, noting the new needs that electronic commerce imposes on producers and consumers. We note that using a rational, economic logic rooted in transaction cost theory, it is equally plausible to conclude that more, rather than fewer intermediaries will be involved in electronic markets. Finally, we briefly highlight several social and institutional factors that also may mitigate against the elimination of intermediaries. This broader perspective of the role of intermediaries in the exchange process calls for incorporating consumer-centric and institutional perspectives into the discussion of the evolution of electronic market structures.