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Internet markets like the application of the other Information Technologies result in decreasing cost and increasing efficiency. Sellers have lower costs and higher profits and also consumers with more information can experience better choices and cheaper shopping. Therefore, it seems that the growth of markets on the internet is as an indicator of improved competition. Nevertheless there are specific characteristics of the internet that could increase monopoly in internet markets. In this paper the presence of monopoly in internet markets is studied from different aspects with emphasis on network externalities. The results show that the presence of network externalities produces monopolies in internet markets. Also competition in internet markets involves R&D-races aimed at capturing market share through innovation or retaining market leadership by creating new innovations. It could be concluded that monopolistic market structure in internet market (in contrast to traditional monopoly markets) does not decrease consumer surplus, rather consumer surplus will increase through creation of innovations