Lecture 1 Week 1
E-COMMERCE
Facebook and MySpace:
It’s All About You Class Discussion
■ How is Facebook different from MySpace?
■ Have you used Facebook or MySpace, and if so, how often? What was your experience?
■ Why do you think Facebook has overtaken MySpace as the most popular social networking site?
E-commerce Trends 2009–2010
■ New business models based on social technologies, consumer-generated content, and services
■ 2009 a flat year, but growth expected to resume in 2010
■ Broadband and wireless access continue to grow
■ Mobile e-commerce begins to take off
■ Traditional media losing subscribers
The First 30 Seconds
■ First 15 years of e-commerce
❖ Just the beginning
❖ Rapid growth and change
■ Technologies continue to evolve at exponential rates
❖ Disruptive business change
❖ New opportunities
What is E-commerce?
■ Use of Internet and Web to transact business
■ More formally:
❖ Digitally enabled commercial transactions between and among organizations and individuals
E-commerce vs. E-business
■ E-business:
❖ Digital enablement of transactions and processes within a firm, involving information systems under
firm’s control
❖ Does not include commercial transactions involving an exchange of value across organizational
boundaries
Why Study E-commerce?
■ E-commerce technology is different, more powerful than previous technologies
■ E-commerce bringing fundamental changes to commerce
■ Traditional commerce:
❖ Passive consumer
❖ Sales-force driven
❖ Fixed prices
❖ Information asymmetry
Unique Features of E-commerce Technology
1. Ubiquity
2. Global reach
3. Universal standards
4. Information richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology
Web 2.0
■ Applications, technologies that allow users to:
❖ Create and share content, preferences, bookmarks, and online personas
❖ Participate in virtual lives
❖ Build online communities
■ Examples
❖ YouTube, Photobucket, Flickr, Google, iPhone
❖ MySpace, Facebook, LinkedIn
❖ Second Life
❖ Wikipedia
Types of E-commerce
■ Classified by market relationship
❖ Business-to-Consumer (B2C)
❖ Business-to-Business (B2B)
❖ Consumer-to-Consumer (C2C)
■ Classified by technology used
❖ Peer-to-Peer (P2P)
❖ Mobile commerce (M-commerce)
The Internet
■ Worldwide network of computer networks built on common standards
■ Created in late 1960s
■ Services include the Web, e-mail, file transfers, etc.
■ Can measure growth by looking at number of Internet hosts with domain names
The Web
■ Most popular Internet service
■ Developed in early 1990s
■ Provides access to Web pages
❖ HTML documents that may include text, graphics, animations, music, videos
■ Web content has grown exponentially
❖ 2 billion Web pages in 2000
❖ At least 40–50 billion pages today
Spider Webs, Bow Ties, Scale-Free Networks, and the Deep Web
Class Discussion
■ What is the “small world” theory of the Web?
■ What is the significance of the “bow-tie” form of the Web?
■ Why does Barabasi call the Web a “scale-free network” with “very connected super nodes”?
Origins & Growth of E-commerce
■ Precursors:
❖ Baxter Healthcare
❖ Electronic Data Interchange (EDI)
❖ French Minitel (1980s videotext system)
❖ None had functionality of Internet
■ 1995: Beginning of e-commerce
❖ First sales of banner advertisements
■ Since then, e-commerce fastest growing form of commerce in the United States
Technology and E-commerce in Perspective
■ The Internet and Web: Just two of a long list of technologies that have greatly changed commerce
❖ Automobiles
❖ Radio
■ E-commerce growth will eventually cap as it confronts its own fundamental limitations
Potential Limitations on the Growth of B2C E-commerce
■ Expensive technology
■ Sophisticated skill set
■ Persistent cultural attraction of physical markets and traditional shopping experiences
■ Persistent global inequality limiting access to telephones and computers
■ Saturation and ceiling effects
E-commerce: A Brief History
■ 1995–2000: Innovation
❖ Key concepts developed
❖ Dot-coms; heavy venture capital investment
■ 2001–2006: Consolidation
❖ Emphasis on business-driven approach
■ 2006–Present: Reinvention
❖ Extension of technologies
❖ New models based on user-generated content, social networking, services
Early Visions of E-commerce
■ Computer scientists:
❖ Inexpensive, universal communications and computing environment accessible by all
■ Economists:
❖ Nearly perfect competitive market and friction-free commerce
❖ Lowered search costs, disintermediation, price transparency, elimination of unfair competitive
advantage
■ Entrepreneurs:
❖ Extraordinary opportunity to earn far above normal returns on investment—first mover advantage
The Internet Investment Rollercoaster
Class Discussion
■ What explains the rapid growth in private investment in e-commerce firms in the period 1998–2000?
Was this investment irrational?
■ What was the effect of the big bust of March 2000 on e-commerce investment?
■ What is the value to investors of a company such as YouTube which has yet to show profitability?
■ 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?
Assessing E-commerce
■ Many early visions not fulfilled
❖ Friction-free commerce
■ Consumers less price sensitive
■ Considerable price dispersion
❖ Perfect competition
■ Information asymmetries persist
❖ Disintermediation
❖ First mover advantage
■ Fast-followers often overtake first movers
Predictions for the Future
■ Technology will propagate through all commercial activity
■ Prices will rise to cover the real cost of doing business
■ E-commerce margins and profits will rise to levels more typical of all retailers
■ Cast of players will change
❖ Traditional Fortune 500 companies will play dominant role
❖ New startup ventures will emerge with new products, services
■ Number of successful pure online stores will remain smaller than integrated offline/online stores
■ Growth of regulatory activity worldwide
■ Influence of cost of energy
Understanding E-commerce:
Organizing Themes
■ Technology:
❖ Development and mastery of digital computing and communications technology
■ Business:
❖ New technologies present businesses with new ways of organizing production and transacting
business
■ Society:
❖ Intellectual property, individual privacy, public welfare policy
Privacy Online: Does Anybody Care?
Class Discussion
■ What techniques of privacy invasion are described in the case?
■ Which of these techniques is the most privacy-invading? Why?
■ Is e-commerce any different than traditional markets with respect to privacy? Don’t merchants always
want to know their customer?
■ How do you protect your privacy on the Web?
Academic Disciplines Concerned with E-commerce
■ Technical approach
❖ Computer science
❖ Management science
❖ Information systems
■ Behavioral approach
❖ Information systems
❖ Economics
❖ Marketing
❖ Management
❖ Finance/accounting
❖ Sociology
