This study deals with the factors that influence diffusion of the Internet market. In order to explain diffusion of the Internet market, innovation-IT-diffusion theory is used. Internal factors and external factors influence the adoption level of the Internet market. Internal factors include top management support, existence of champion, cost incentive, inclination toward new technology, and absorptive capacity. External factors indicate institutional support, competitors move, and customer pressure. Those factors will explain the level of adoption such as non-adopter, made adoption decision, low level implementation, and sophisticate implementation. To test hypotheses, LOGIT analysis is used. The results may give some implication to the managers of the companies that intend to participate or already participated in electronic commerce.