Essentials of Management Information
Systems
Thirteenth Edition
Chapter 10
E-commerce: Digital
Markets, Digital Goods
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E-Commerce Today
• E-commerce: Use of the Internet and web to transact
business
• Began in 1995 and grew exponentially; still stable even in
a recession
• Companies that survived the dot-com bubble now thrive
• The new e-commerce: social, mobile, local
• Move from desktop to smartphone
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Figure 10.1 The Growth of E-Commerce
Sources: Based on data from eMarketer, “US Retail Ecommerce Sales, 2015-2021,”
2017a; eMarketer, “US Digital Travel Sales, 2014-2020,” 2016; and eMarketer chart, “US
Mobile Downloads and In-App Revenues 2013-2016,” 2016.
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Why E-Commerce is Different (1 of 2)
• Ubiquity
– Marketspace is virtual
– Transaction costs reduced
• Global reach
– Transactions cross cultural and national boundaries
• Universal standards
– One set of technology standards: Internet standards
• Richness
– Supports video, audio, and text messages
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Why E-Commerce is Different (2 of 2)
• Interactivity
• Information density
– Greater price and cost transparency
– Enables price discrimination
• Personalization/customization
– Technology permits modification of messages, goods
• Social technology
– Promotes user content generation and social
networking
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Key Concepts in E-Commerce – Digital Markets
and Digital Goods in a Global Marketplace
• Internet and digital markets have changed the way
companies conduct business
• Information asymmetry reduced
• Menu costs, search and transaction costs reduced
• Dynamic pricing enabled
• Switching costs
• Delayed gratification
• Disintermediation
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Figure 10.2 The Benefits of
Disintermediation to the Consumer
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Digital Goods
• Goods that can be delivered over a digital network
• Cost of producing first unit is almost entire cost of product
• Costs of delivery over the Internet very low
• Marketing costs remain the same; pricing highly variable
• Industries with digital goods are undergoing revolutionary
changes (publishers, record labels, etc.)
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Types of E-Commerce
• Three major types
– Business-to-consumer (B2C)
▪ Example: BarnesandNoble.com
– Business-to-business (B2B)
▪ Example: ChemConnect
– Consumer-to-consumer (C2C)
▪ Example: eBay
• E-commerce can be categorized by platform
– Mobile commerce (m-commerce)
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E-Commerce Business Models
• Portal
• E-tailer
• Content provider
• Transaction broker
• Market creator
• Service provider
• Community provider
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E-Commerce Revenue Models
• Advertising
• Sales
• Subscription
• Free/Freemium
• Transaction fee
• Affiliate
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What is the Role of M-Commerce in Business, and
What are the Most Important M-Commerce
Applications?
• M-commerce in 2017 is 35 percent of all e-commerce
• Fastest growing form of e-commerce
– Growing at 20 percent or more per year
• Main areas of growth
– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, TV, etc.)
– In-app sales to mobile devices
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Location-Based Services and Applications
• Used by 74 percent of smartphone owners
• Based on GPS map services
• Geosocial services
– Where friends are
• Geoadvertising
– What shops are nearby
• Geoinformation services
– Price of house you are passing
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Other Mobile Commerce Services
• Financial account management apps
– Banks, credit card companies
• Mobile advertising market
– Google and Facebook are largest markets
– Ads embedded in games, videos, and mobile apps
• 55 percent of online retailers have m-commerce websites
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