Ecommerce business technology society Ecommerce business technology society

Chapter 1: The Revolution Is Just Beginning Chapter 1 Introduction to E-commerce Copyright ©

Facebook: The New Face of E-Commerce? Class Discussion n Do you use Facebook, and if so, how often? What has the experience been like? n Have you purchased anything based on an advertisement on Facebook or by using a link provided by a friend? n Are you concerned about the privacy of the information you have posted on Facebook? Slide 1 -3

E-commerce Trends 2010 -2011 n Social networking continues to grow n Social e-commerce platform emerges n Online consumer sales return to growth n Mobile computing begins to rival PC n Explosive growth in online video viewing n Continued privacy and security concerns Slide 1 -4

The First 30 Seconds n First 16 years of e-commerce v. Just the beginning v. Rapid growth and change n Technologies continue to evolve at exponential rates v. Disruptive business change v. New opportunities Slide 1 -5

What is E-commerce? n Use of Internet and Web to transact business n More formally: v. Digitally enabled commercial transactions between and among organizations and individuals Slide 1 -6

E-commerce vs. E-business n E-business: v Digital enablement of transactions and processes within a firm, involving information systems under firm’s control v Does not include commercial transactions involving an exchange of value across organizational boundaries Slide 1 -7

Why Study E-commerce? n E-commerce technology is different, more powerful than previous technologies n E-commerce bringing fundamental changes to commerce n Traditional commerce: v Passive consumer v Sales-force driven v Fixed prices v Information asymmetry Slide 1 -8

Unique Features of E-commerce Technology 1. 2. 3. 4. 5. 6. 7. 8. Ubiquity Global reach Universal standards Information richness Interactivity Information density Personalization/customization Social technology Slide 1 -9

Web 2. 0 n Technologies that allow users to: v. Create and share content, preferences, bookmarks, and online personas v. Participate in virtual lives v. Build online communities n E. g. Twitter, You. Tube, Facebook, Second Life, Wikipedia, Digg Slide 1 -10

Types of E-commerce n Classified by market relationship v Business-to-Consumer (B 2 C) v Business-to-Business (B 2 B) v Consumer-to-Consumer (C 2 C) n Classified by technology used v Peer-to-Peer (P 2 P) v Mobile commerce (M-commerce) Slide 1 -11

The Internet n Worldwide network of computer networks built on common standards n Created in late 1960 s n Services include the Web, e-mail, file transfers, etc. n Can measure growth by looking at number of Internet hosts with domain names Slide 1 -12

The Growth of the Internet, Measured by Number of Internet Hosts with Domain Names Figure 1. 3 SOURCE: Internet Systems Consortium, Inc. , 2010. Slide 1 -13

The Web n Most popular Internet service n Developed in early 1990 s n Provides access to Web pages v. HTML documents that may include text, graphics, animations, music, videos n Web content has grown exponentially v Google indexes between 75 – 100 billion pages Slide 1 -14

Insight on Technology: Spider Webs, Bow Ties, Scale-Free Networks, and the Deep Web Class Discussion n What is the “small world” theory of the Web? n What is the significance of the “bow-tie” form of the Web? n Why does Barabasi call the Web a “scale-free network” with “very connected super nodes”? Slide 1 -15

Origins & Growth of E-commerce n Precursors: v Baxter Healthcare v Electronic Data Interchange (EDI) v French Minitel (1980 s videotex system) v None had functionality of Internet n 1995: Beginning of e-commerce v First sales of banner advertisements n E-commerce fastest growing form of commerce in United States Slide 1 -16

Technology and E-commerce in Perspective n The Internet and Web: Just two of a long list of technologies that have greatly changed commerce v Automobiles v Radio n E-commerce growth will eventually cap as it confronts its own fundamental limitations. Slide 1 -17

Potential Limitations on the Growth of B 2 C E-commerce n Expensive technology n Sophisticated skill set n Persistent cultural attraction of physical markets and traditional shopping experiences n Persistent global inequality limiting access to telephones and computers n Saturation and ceiling effects Slide 1 -18

E-commerce: A Brief History n 1995 -2000: Innovation v Key concepts developed v Dot-coms; heavy venture capital investment n 2001 -2006: Consolidation v Emphasis on business-driven approach n 2006 -Present: Reinvention v Extension of technologies v New models based on user-generated content, social networks, services Slide 1 -19

Early Visions of E-commerce n Computer scientists: v Inexpensive, universal communications and computing environment accessible by all n Economists: v Nearly perfect competitive market and friction-free commerce v Lowered search costs, disintermediation, price transparency, elimination of unfair competitive advantage n Entrepreneurs: v Extraordinary opportunity to earn far above normal returns on investment – first mover advantage Slide 1 -20

Insight on Business “Noodlenomics” Guides Internet Investment in 2010 Class Discussion What explains the rapid growth in private investment in e -commerce firms in the period 1998– 2000? Was this investment irrational? n What was the effect of the big bust of March 2000 on ecommerce investment? n What is the value to investors of a company such as You. Tube which has yet to show profitability? n Why do you think investors today would be interested in investing in or purchasing e-commerce companies? Would you invest in an e-commerce company today? n Slide 1 -21

Assessing E-commerce n Many early visions not fulfilled v Friction-free commerce n Consumers less price sensitive n Considerable price dispersion v Perfect competition n Information asymmetries persist v Disintermediation v First mover advantage n Fast-followers often overtake first movers Slide 1 -22

Predictions for the Future n Technology will propagate through all commercial activity. n Prices will rise to cover the real cost of doing business. n E-commerce margins and profits will rise to levels more typical of all retailers. n Cast of players will change. Traditional Fortune 500 companies will play dominant role. v New startup ventures will emerge with new products, services. v n Number of successful pure online stores will remain smaller than integrated offline/online stores. n Regulatory activity worldwide will grow. n Cost of energy will have an influence. Slide 1 -23

Understanding E-commerce: Organizing Themes n Technology: v Development and mastery of digital computing and communications technology n Business: v New technologies present businesses with new ways of organizing production and transacting business n Society: v Intellectual property, individual privacy, public welfare policy Slide 1 -24

The Internet and the Evolution of Corporate Computing Figure 1. 9 Slide 1 -25

Insight on Society Who Really Cares About Online Privacy? Class Discussion n What techniques of privacy invasion are described in the case? n Which of these techniques is the most privacyinvading? Why? n Is e-commerce any different than traditional markets with respect to privacy? Don’t merchants always want to know their customer? n How do you protect your privacy on the Web? Slide 1 -26