Chapter 01
Introduction to
E-commerce
E-Commerce
By: Ahmad Abdelsalam
Moussa Academy
00201007153601
Introduction:
• First 20 years of e-commerce
– Just the beginning
– Rapid growth and change
• Technologies evolve at exponential rates
– Disruptive business change
– New opportunities
• Why study e-commerce
– Understand opportunities and risks
– Analyze e-commerce ideas, models, issues
• Use of Internet to transact business
– Includes Web, mobile browsers and apps
• More formally:
– Digitally enabled commercial transactions between and among organizations and
individuals
The Difference between E-Commerce and E-Business
E-business:
• Digital enabling 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
Technological Building Blocks Underlying E -Commerce
• Internet
• World Wide Web: H T M L , Deep Web versus. “surface” Web
• Mobile platform :Mobile apps
Major Trends in E-Commerce
• Business trends include:
– All forms of e-commerce show very strong growth
• Technology trends include:
– Mobile platform has made mobile e-commerce reality
• Societal trends include:
– Increased online social interaction and sharing
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
Types of E-Commerce
• Business-to-Consumer (B2C)
• Business-to-Business (B2B)
• Consumer-to-Consumer (C2C)
• Mobile e-commerce (M-commerce)
• Social e-commerce
• Local e-commerce
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Figure 1.5 The Growth of B2C E-Commerce in the United States
Figure 1.7 The Growth of B2B E-Commerce in the United States
Figure 1.8 The Growth of M-Commerce in the United States
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E-Commerce: A Brief History
Precursors
– Baxter Healthcare modem-based system
– Order entry systems
– Electronic Data Interchange (E D I) standards
– French Minitel
1995–2000: Invention
– Sale of simple retail goods
– Limited bandwidth and media
– Euphoric visions of
• Friction-free commerce
• First-mover advantages
– Dot-com crash of 2000
2001–2006: Consolidation
– Emphasis on business-driven approach
– Traditional large firms expand presence
– Start-up financing shrinks
– More complex products and services sold
– Growth of search engine advertising
– Business web presences expand
2007–Present: Reinvention
– Rapid growth of:
• Web 2.0, including online social networks
• Mobile platform
• Local commerce
• On-demand service economy
– Entertainment content develops as source of revenues
– Transformation of marketing
Figure 1.10 Periods in the Development of E-Commerce
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Assessing E-Commerce
• Stunning technological success
• Early years a mixed business success
– Few early dot-coms have survived
– Online sales growing rapidly
• Many early visions not fulfilled
– Price dispersion
– Information asymmetry
– New intermediaries
• Other surprises
– Fast-follower advantages
– Start-up costs
– Impact of mobile platform
– Emergence of on-demand e-commerce
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
Figure 1.11 The Internet and the Evolution of Corporate Computing
Academic Disciplines Concerned with Technology
o Technical: Computer science, management science, information systems
o Behavioral: Information systems research, economics, marketing, management,
finance/accounting, sociology
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Chapter 02
E-Commerce Infrastructure
E-Commerce
By: Ahmad Abdelsalam
Moussa Academy
00201007153601
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The Internet: Technology Background
• Internet
– Interconnected network of thousands of networks and millions of computers
– Links businesses, educational institutions, government agencies, and individuals
• World Wide Web (Web)
– One of the Internet’s most popular services
– Provides access to billions, possibly trillions, of web pages
The Evolution of the Internet 1961–Present
• Innovation Phase, 1961–1974
– Creation of fundamental building blocks
• Institutionalization Phase, 1975–1995
– Large institutions provide funding and legitimization
• Commercialization Phase, 1995–present
– Private corporations take over, expand Internet backbone and local service
The Internet: Key Technology Concepts
• Internet defined as network that:
– Uses I P addressing
– Supports T C P/I P
– Provides services to users, in manner similar to telephone system
• Three important concepts:
– Packet switching
– T C P/I P communications protocol
– Client/server computing
Packet Switching
• Slices digital messages into packets
• Sends packets along different communication paths as they become available
• Reassembles packets once they arrive at destination
• Uses routers
• Less expensive, wasteful than circuit-switching
Figure 2.3 Packet Switching
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•
•
•
Transmission Control Protocol (T C P)
– Establishes connections among sending and receiving Web computers
– Handles assembly of packets at
point of transmission, and
reassembly at receiving end
Internet Protocol (I P)
Four T C P/I P layers
1. Network interface layer
2. Internet layer
3. Transport layer
4. Application layer
Figure 2.4 The T C P/I P Architecture and Protocol Suite
•
I P v4
– 32-bit number
– Four sets of numbers marked off by periods: 201.61.186.227
 Class C address: Network identified by first three sets,
computer identified by last set
• I P v6
– 128-bit addresses, able to handle up to 1 quadrillion addresses (I P v4
can handle only 4 billion)
Figure 2.5 Routing Internet Messages: T C P/I P and Packet Switching
Domain Names, D N S, and U R L s
Domain name system
Domain name
(D N S)
I P address expressed in
Allows numeric I P
natural language
addresses to be expressed
in natural language
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Uniform resource locator
(U R L)
Address used by Web browser to
identify location of content on the
Web
– For example:
http://www.azimuthinteractive.com/
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•
Powerful personal computers (clients) connected in network with one
or more servers
•
Servers perform common functions for the clients
– Storing files
– Software applications
– Access to printers, and so on
The Mobile Platform
• Primary Internet access is now through tablets and smartphones
• Tablets supplement P Cs for mobile situations
– Over 160 million people in U . S. use Internet with tablets
• Smartphones are a disruptive technology
– New processors and operating systems
– Over 220 million in U.S. access Internet with smartphones
The Internet “Cloud Computing” Model
• Firms and individuals obtain computing power and software over Internet
• Three types of services
– Infrastructure as a service (I a a S)
– Software as a service (S a a S)
– Platform as a service (P a a S)
• Public, private, and hybrid clouds
• Drawbacks
– Security risks
– Shifts responsibility for storage and control to providers
• Radically reduces costs of:
– Building and operating websites
– Infrastructure, I T support
– Hardware, software
Other Internet Protocols and Utility Programs
• Internet protocols
– HTTP
– E-mail: S M T P, P O P 3, I M A P
– F T P, Telnet, S S L/T L S
• Utility programs
– Ping
– Tracert
The Internet Today
• Internet growth has boomed without disruption because of:
– Client/server computing model
– Hourglass, layered architecture
▪ Network Technology Substrate
▪ Transport Services and Representation Standards
▪ Middleware Services
▪ Applications
Figure 2.10 The Hourglass Model of the Internet
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Figure 2.11 Internet Network Architecture
The Internet Backbone
• Tier 1 Internet Service Providers (Tier 1 I S P s) or
transit I S P s
• Numerous private networks physically connected to each other
• Undersea fiber optics, satellite links
Internet Exchange Points (I X P s)
• Regional hubs where Tier 1 I S P s physically connect with one another and with regional Tier 2
I S P s.
• Tier 2 I S P s provide Tier 3 I S P s with Internet access.
• Originally called Network Access Points (N A P s) or Metropolitan Area Exchanges (M A E s).
Tier 3 Internet Service Providers
• Retail providers
– Lease Internet access to home owners, small businesses
– Large providers: Comcast, Verizon, Time Warner Cable
– Smaller local providers
• Services
– Narrowband
– Broadband
– Digital subscriber line (D S L)
– Cable Internet
– Satellite Internet
•
•
•
Local area networks operating within single organization
E.g. N Y U, Microsoft Corporation
Lease Internet access directly from regional and national carriers
Intranets
• T C P/I P network located within a single organization for
communications and processing
• Used by private and government organizations for internal networks
• All Internet applications can be used in private intranets
Who Governs the Internet?
• Organizations that influence the Internet and monitor its operations include:
– Internet Corporation for Assigned Names and Numbers (I C A N N)
– Internet Engineering Task Force (I E T F)
– Internet Research Task Force (I R T F)
– Internet Engineering Steering Group (I E S G)
– Internet Architecture Board (I A B)
– Internet Society (I S O C)
– Internet Governance Forum (I G F)
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– World Wide Web Consortium (W3C)
– Internet Network Operators Groups (N O G s)
Limitations of the Current Internet
– Bandwidth limitations: Slow peak-hour service
– Quality of service limitations: Latency
– Network architecture limitations: Identical requests are processed individually
– Wired Internet: Copper and expensive fiber-optic cables
The Internet2 Project
• Consortium of 450+ institutions collaborating to facilitate revolutionary Internet technologies
• Primary goals:
– Provides leading-edge very-high-speed network for national research community
– Environment for developing and testing new technologies
– Distributed and collaborative computing environments for sciences, health, arts, and
humanities initiatives
The First Mile and the Last Mile
• Most significant private initiatives
– Fiber optic trunk-line bandwidth (first mile)
– Wireless internet services (last mile)
Fiber Optics and the Bandwidth Explosion in the First Mile
• “First mile”: Backbone Internet services that carry bulk traffic over long distances
• Fiber-optic cable: hundreds of glass strands that use light to transmit data
– Faster speeds and greater bandwidth
– Thinner, lighter cables
– Less interference
– Better data security
• Substantial investments in fiber optic by telecommunications firms in last decade
The Last Mile: Mobile Internet Access
• “Last mile”: From Internet backbone to user’s computer, smartphone, and so on
• Two basic types of wireless Internet access:
– Telephone-based (mobile phones, smartphones)
– Computer network–based (wireless local area network–based)
Wireless Local Area Network (W L A N) –Based Internet Access
• Wi-Fi
– High-speed, fixed broadband wireless L A N (W L A N)
– Wireless access point (“hot spots”)
– Limited range but inexpensive
• WiMax
• Bluetooth
Other Innovative Internet Access Technologies: Drones, Balloons, and White Space
• Google: Project Loon
• Facebook: Facebook Connectivity Lab/Acquila drone
• Microsoft: White spaces project
Figure 2.13 Wi-Fi Networks
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The Future Internet
• Latency solutions
– diffserv (differentiated quality of service)
• Guaranteed service levels and lower error rates
• Declining costs
• The Internet of Things (I o T)
– Objects connected via sensors/R F I D to the Internet
– “Smart things”
– Interoperability issues and standards
– Security and privacy concerns
The Web
• 1989–1991: Web invented
– Tim Berners-Lee at C E R N
– H T M L, H T T P, web server, web browser
• 1993: Mosaic web browser w/G U I
– Andreessen and others at N C S A
– Runs on Windows, Macintosh, or Unix
• 1994: Netscape Navigator, first commercial web browser
• 1995: Microsoft Internet Explorer
Hypertext
• Text formatted with embedded links
– Links connect documents to one another, and to other objects such as sound, video, or
animation files
• Uses Hypertext Transfer Protocol (H T T P) and U R L s to locate resources on the Web
– Example U R L: http://megacorp.com/content/features/082602.html
Markup Languages
• Hypertext Markup Language (H T M L)
– Fixed set of pre-defined markup “tags” used to format text
– Controls look and feel of web pages
– H T M L5 the newest version
• eXtensible Markup Language (X M L)
– Designed to describe data and information
– Tags used are defined by user
Web Servers and Web Clients
• Web server software
– Enables a computer to deliver web pages to clients on a network that request this service
by sending an H T T P request
– Basic capabilities: Security services, F T P, search engine, data capture
• Web server
– May refer to either web server software or physical server
– Specialized servers: Database servers, ad servers, and so on
• Web client
– Any computing device attached to the Internet that is capable of making H T T P requests
and displaying H T M L pages
Web Browsers
• Primary purpose is to display web page, but may include added features
– Google’s Chrome: 60% of desktop market, 56% mobile market
▪ Open source
– Internet Explorer: 17% of desktop, >1% mobile
– Mozilla Firefox: 12% desktop, >1% mobile
▪ Open source
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– Apple’s Safari: 4% desktop, 33% mobile
The Internet and Web: Features
• Features on which the foundations of e-commerce are built:
– Communication tools
– Search engines
– Downloadable and streaming media
– Web 2.0 applications and services
– Virtual reality and augmented reality
– Intelligent digital assistants
Communication Tools
• E-mail: Most used application of the Internet
• Messaging Applications: Instant messaging
• Online message boards: Internet telephony
• V O I P: Video conferencing, video chatting, telepresence
Search Engines
• Identify web pages that match queries based on one or more techniques
– Keyword indexes
– Page ranking
• Also serve as:
– Shopping tools
– Advertising vehicles (search engine marketing)
Figure 3.17 How Google Works
– Tool within e-commerce sites
• Top three providers: Google, Bing, Yahoo
Downloadable and Streaming Media
• Downloads:
– Growth in broadband connections enables large
media file downloads
• Streaming technologies
– Enables music, video, and other large files to be
sent to users in chunks so that the file can play
uninterrupted
• Podcasting
• Explosion in online video viewing
Web 2.0 Features and Services
• Online Social Networks
– Services that support communication among
networks of friends, peers
• Blogs
– Personal web page of chronological entries
– Enables web page publishing with no knowledge
of H T M L
• Wikis
– Enables documents to be written collectively and collaboratively
– E.g. Wikipedia
Virtual Reality and Augmented Reality
• Virtual reality
• Augmented reality
–
–
–
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Immersing users within virtual world
Typically uses head-mounted display (H
M D)
Oculus Rift, Vive, PlayStation V R
–
–
Overlaying virtual objects over the real
world, via mobile devices or H M D s
Pokémon GO
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Intelligent Digital Assistants
• Computer search engine using:
– Natural language
– Conversational interface, verbal commands
– Situational awareness
• Can handle requests for appointments, flights, routes, event scheduling, and more.
– Examples:
▪ Apple’s Siri
▪ Google Now
▪ Google Assistant
Mobile Apps
• Use of mobile apps has exploded
– Most popular entertainment media, over T V
– Always present shopping tool
– Almost all top 100 brands have an app
• Platforms
– iPhone/iPad (i O S), Android, Blackberry
• App marketplaces
– Google Play, Apple’s App Store, R I M’s App World, Windows Phone Marketplace
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Chapter 03
Building an E-Commerce
Presence
E-Commerce
By: Ahmad Abdelsalam
Moussa Academy
00201007153601
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Imagine Your E-Commerce Presence
• What’s the idea? The vision includes:
– Mission statement
– Target audience
– Intended market space
– Strategic analysis
– Marketing matrix
– Development timeline
– Preliminary budget
• Where’s the money?
– Business model(s)
– Revenue model(s)
• Who and where is the target audience?
– Demographics, lifestyle, consumption patterns, etc.
• What is the ballpark? Characterize the marketplace
Figure 3.1 S W O T Analysis
– Size, growth, demographics, structure
Where’s the content coming from?
Know yourself—S W O T analysis
Develop an e-commerce presence map
Develop a timeline: Milestones
How much will this cost?
– Simple website: up to $5000
– Small startup: $25,000 to $50,000
– Large corporate website: $100,000+ to
millions
Figure 3.2 E-Commerce Presence Map
•
•
•
•
•
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Building an E-Commerce Site: A Systematic Approach
• Most important management challenges:
– Developing a clear understanding of business objectives
– Knowing how to choose the right technology to achieve those objectives
• Main factors to consider:
– Management
– Hardware architecture
– Software
– Design
– Telecommunications
– Human resources
Planning: The Systems Development Life Cycle
• Methodology for understanding business objectives of a system and designing an appropriate
solution
• Five major steps:
1. Systems analysis/planning
2. Systems design
3. Building the system
4. Testing
5. Implementation
Figure 3.5 Website Systems Development Life Cycle
System Analysis/Planning
• Business objectives:
– List of capabilities you want your site to have
• System functionalities:
– List of information system capabilities needed to achieve business objectives
• Information requirements:
– Information elements that system must produce in order to achieve business objectives
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Table 3.2 System Analysis, Business Objectives, System Functionalities, and Information
Requirements for a Typical E-Commerce Site
Business Objective
System Functionality
Information Requirements
Display goods
Digital Catalog
Dynamic text and graphics catalog
Provide product
information
Product database
Product description, stocking numbers,
inventory levels
Personalize/customize
product
Customer on-site
tracking
Site log for every customer visit; data mining
capability to identify common customer paths
and appropriate responses
Engage customers in
conversations
On-site blog; user
forums
Software with blogging and community
forum functionality
Execute a transaction
Shopping cart/payment
system
Secure credit card clearing; multiple
payment options
Accumulate customer
information
Customer database
Name, address, phone, and e-mail for all
customers; online customer registration
Provide after-sale
customer support
Sales database
Customer I D, product, date, payment,
shipment date
Coordinate
marketing/advertising
Site tracking and
reporting system
Number of unique visitors, pages visited,
products purchased, identified by marketing
campaign
Provide production
and supplier links
Inventory management
system
Product and inventory levels, supplier I D
and contact, order quantity data by product
Systems Design: Hardware and Software Platforms
• System design specification:
– Description of main components of a system and their relationship to one another
• Two components of system design:
– Logical design
▪ Data flow diagrams, processing functions, databases
– Physical design
▪ Specifies actual physical, software components, models, and so on
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Figure 3.6(a) Logical Design for a Simple
Website
Figure 3.6(b) Physical Design for a Simple
Website
(a) Simple Data Flow Diagram
This data flow diagram describes the flow of
information requests and responses for a
sample Web site
Building the System: In-House Versus Outsourcing
• Outsourcing: Hiring vendors to provide services involved in building site
• Build own versus. outsourcing:
– Build your own requires team with diverse skill set; choice of software tools; both risks
and possible benefits
• Host own versus. outsourcing
– Hosting: Hosting company responsible for ensuring site is accessible 24/7, for monthly
fee
– Co-location: Firm purchases or leases Web server (with control over its operation), but
server is located at vendor’s facility
Figure 4.7 Choices in Building and Hosting
Testing the System
– Unit testing
– System testing
– Acceptance testing
– A/B testing (split testing)
– Multivariate testing
Implementation and Maintenance
• Systems break down unpredictably
• Maintenance is ongoing
• Maintenance costs: Similar to development costs
– A $40K e-commerce site may require $40K annually to upkeep
• Benchmarking
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Figure 3.10 Factors in Website Optimization
Simple versus. Multi-Tiered Website Architecture
System
Two-tier
architecture
-Web server and database server
- Arrangement of
software,
Figure 3.11(a) Two-Tier Emachinery, and
Commerce Architecture
tasks in an
information
system needed to
achieve a specific
functionality
Multi-tier
-Web application servers
-Backend, legacy databases
Figure 3.11(b) Multi-Tier ECommerce Architecture
Web Server Software
Apache
•
•
•
Leading web server software
Works with U N I X, Linux operating systems
Reliable, stable, part of open software community
•
•
•
Microsoft’s Internet Information
Server (I I S)
Second major web server software
Windows-based
Integrated, easy-to-use
Table 3.4 Basic Functionality Provided by Web Servers
Functionality
Description
Processing of H T T P requests
Receive and respond to client requests for H T M L pages
Security services (Secure
Sockets Layer)/ Transport Layer
Security
Verify username and password; process certificates and
private/public key information required for credit card
processing and other secure information
File Transfer Protocol
Permits transfer of very large files from server to server
Search engine
Indexing of site content; keyword search capability
Data capture
Log file of all visits, time, duration, and referral source
E-mail
Ability to send, receive, and store e-mail messages
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Functionality
Site management tools
Description
Calculate and display key site statistics, such as unique
visitors, page requests, and origin of requests; check links
on pages
Site Management Tools
• Basic tools included in all web servers
– Verify that links on pages are still valid
– Identify orphan files
• Third-party software for advanced management
– Monitor customer purchases
– Marketing campaign effectiveness
– Keep track of hit counts and other statistics
– E.g. Webtrends Analytics 10
Dynamic Page Generation Tools
• Dynamic page generation:
– Contents stored in database and fetched when needed
• Common tools:
– C G I, A S P, J S P, O D B C, J D B C
• Advantages
– Lowers menu costs
– Permits easy online market segmentation
– Enables cost-free price discrimination
– Enables content management system (C M S)
Application Servers
• Web application servers:
– Provide specific business functionality required for a website
– Type of middleware
▪ Isolate business applications from Web servers and databases
– Single-function applications being replaced by integrated software tools that combine all
functionality needed for e-commerce site
E-Commerce Merchant Server Software
• Provides basic functionality for sales
– Online catalog
▪ List of products available on website
– Shopping cart
▪ Allows shoppers to set aside, review, edit selections, and then make purchase
– Credit card processing
▪ Typically works in conjunction with shopping cart
▪ Verifies card and puts through credit to company’s account at checkout
Merchant Server Software Packages
• Integrated environment that includes most of functionality needed
– Shopping cart
– Merchandise display
– Order management
• Two main options
– E-commerce merchant service sites (e.g. Yahoo Aabaco Small Business)
– Open-source merchant server software
• Key factors in selecting a package
– Functionality
– Support for different business models, including (m-commerce)
– Business process modeling tools
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– Visual site management and reporting
– Performance and scalability
– Connectivity to existing business systems
– Compliance with standards
– Global and multicultural capability
– Local sales tax and shipping rules
Choosing Hardware
• Hardware platform:
– Underlying computing equipment needed for e-commerce functionality
• Objective:
– Enough platform capacity to meet peak demand without wasting money
• Important to understand the factors that affect speed, capacity, and scalability of a site
Right-Sizing Your Hardware Platform: the Demand Side
• Customer demand:
– Most important factor affecting speed of site
• Factors in overall demand:
– Number of simultaneous users in peak periods
– Nature of customer requests (user profile)
– Type of content (dynamic versus. static Web pages)
– Required security
– Number of items in inventory
– Number of page requests
– Speed of legacy applications
Right-Sizing Your Hardware Platform: the Supply Side
• Scalability:
– Ability of site to increase in size as demand warrants
• Ways to scale hardware:
– Vertically
▪ Increase processing power of individual components
– Horizontally
▪ Employ multiple computers to share workload
– Improve processing architecture
– Outsource to cloud service, C D N
Table 3.8 Vertical and Horizontal Scaling Techniques
Technique
Application
Use a faster computer
Deploy edge servers, presentation servers, data servers, etc.
Create a cluster of
computers
Use computers in parallel to balance loads.
Use appliance servers
Use special-purpose computers optimized for their task.
Segment workload
Segment incoming work to specialized computers.
Batch requests
Combine related requests for data into groups, process as group.
Manage connections
Reduce connections between processes and computers to a
minimum.
Aggregate user data
Aggregate user data from legacy applications in single data pools.
Cache
Store frequently used data in cache rather than on the disk.
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Table 3.9 Improving the Processing Architecture of Your Site
Architecture Improvement
Description
Separate static content from
dynamic content
Use specialized servers for each type of workload.
Cache static content
Increase R A M to the gigabyte range and store
static content in R A M.
Cache database lookup tables
Use cache tables used to look up database
records.
Consolidate business logic on
dedicated servers
Put shopping cart, credit card processing, and
other C P U-intensive activity on dedicated servers.
Optimize A S P code
Examine your code to ensure it is operating
efficiently.
Optimize the database schema
Examine your database search times and take
steps to reduce access times.
Other E-Commerce Site Tools
• Website design: Basic business considerations
– Enabling customers to find and buy what they need
• Tools for search engine optimization
– Search engine placement
▪ Metatags, titles, content
▪ Identify market niches
▪ Offer expertise
▪ Links
▪ Buy ads
▪ Local e-commerce
E-Commerce Website Features That Annoy Customers
Feature
1. Requiring user to view ad or intro page before going to website content
2. Pop-up and pop-under ads and windows
3. Too many clicks to get to the content
4. Links that don’t work
5. Confusing navigation; no search function
6. Requirement to register and log in before viewing content or ordering
7. Slow loading pages
8. Content that is out of date
9. Inability to use browser’s Back button
10. No contact information available (web form only)
11. Unnecessary splash/flash screens, animation, etc.
12. Music or other audio that plays automatically
13. Unprofessional design elements
14. Text not easily legible due to size, color, format
15. Typographical errors
16. No or unclear returns policy
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Table 3.11 The Eight Most Important Factors in Successful E-Commerce Site Design
Factor
Description
Functionality
Pages that work, load quickly, and point the customer toward your
product offerings
Informational
Links that customers can easily find to discover more about you and
your products
Ease of use
Simple foolproof navigation
Redundant navigation
Alternative navigation to the same content
Ease of purchase
One or two clicks to purchase
Multi-browser
functionality
Site works with the most popular browsers
Simple graphics
Avoids distracting, obnoxious graphics and sounds that the user
cannot control
Legible text
Avoids backgrounds that distort text or make it illegible
Tools for Interactivity and Active Content
• C G I (Common Gateway Interface)
• A S P (Active Server Pages)/A S P.NET
• Java, J S P, and JavaScript
• ActiveX and V B Script
• ColdFusion
• P H P, Ruby on Rails, Django
• Other design elements:
– Widgets, mashups
Personalization Tools
• Personalization: Ability to treat people based on personal qualities and prior history with site
• Customization: Ability to change the product to better fit the needs of the customer
• Cookies: Primary method to achieve personalization
The Information Policy Set
• Privacy policy
– Set of public statements declaring how site will treat customers’ personal information
that is gathered by site
• Accessibility rules
– Set of design objectives that ensure disabled users can effectively access site
Developing a Mobile Website and Building Mobile Applications
• Types of m-commerce software
– Mobile website
▪ Responsive Web design
– Mobile Web app
– Native app
– Hybrid app
▪ Runs inside native container
▪ App distribution
▪ Based on H T M L5, C S S, JavaScript
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Planning and Building a Mobile Presence
• Identify business objectives, system functionality, and information requirements
• Choice:
– Mobile website or mobile Web app
▪ Less expensive
– Native app
▪ Can use device hardware, available offline
Table 3.13 Unique Features That Must be Taken into Account When Designing a Mobile
Presence
Feature
Implications For Mobile Platform
Hardware
Mobile hardware is smaller, and there are more resource
constraints in data storage and processing power.
Connectivity
The mobile platform is constrained by slower connection
speeds than desktop websites.
Displays
Mobile displays are much smaller and require simplification. Some
screens are not good in sunlight.
Interface
Touch-screen technology introduces new interaction
routines different from the traditional mouse and keyboard.
The mobile platform is not a good data entry tool but can
be a good navigational tool.
Mobile Presence Design Considerations
• Platform constraints
– Graphics, file sizes
• Mobile first design
– Desktop website design after mobile design
• Responsive web design (R W D)
– C S S site adjusts layout of site according to device screen resolutions
• Adaptive web design (A W D)
– Server delivers different templates or versions of site optimized for device
Cross-Platform Mobile App Development Tools
• Objective C, Java
• Low cost, open-source alternatives
– Appery.io
– Codiqa
– PhoneGap
– MoSync
– Appcelerator
Mobile Presence: Performance and Cost Considerations
• Mobile first design: Most efficient
• Mobile website:
– Resizing existing website for mobile access is least expensive
• Mobile web app:
– Can utilize browser A P I
• Native app:
– Most expensive; requires more programming
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Chapter 04
E-Commerce Security and
Payment Systems
E-Commerce
By: Ahmad Abdelsalam
Moussa Academy
00201007153601
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The E-Commerce Security Environment
• Overall size and losses of cybercrime unclear
– Reporting issues
Figure 4.1 The E-Commerce Security Environment
• 2017 survey: Average total cost of data breach to
U.S. corporations was $21 million
• Low-cost web attack kits
• Online credit card fraud
• Underground economy marketplace
What is Good E-Commerce Security?
• To achieve highest degree of security
– New technologies
– Organizational policies and procedures
– Industry standards and government laws
• Other factors
– Time value of money
– Cost of security versus. potential loss
– Security often breaks at weakest link
Table 4.3 Customer and Merchant Perspectives on the Different Dimensions of E-Commerce
Security
Dimension
Customer’s Perspective
Merchant’s Perspective
Integrity
Has information I transmitted or
received been altered?
Has data on the site been altered without
authorization? Is data being received
from customers valid?
Nonrepudiation
Can a party to an action with me
later deny taking the action?
Can a customer deny ordering products?
Authenticity
Who am I dealing with? How can I
be assured that the person or
entity is who they claim to be?
What is the real identity of the
customer?
Confidentiality
Can someone other than the
intended recipient read my
messages?
Are messages or confidential data
accessible to anyone other than those
authorized to view them?
Privacy
Can I control the use of
information about myself
transmitted to an
e-commerce merchant?
What use, if any, can be made of
personal data collected as part of an ecommerce transaction? Is the personal
information of customers being used in
an unauthorized manner?
Availability
Can I get access to the site?
Is the site operational?
The Tension between Security and Other Values
• Ease of use
– The more security measures added, the more difficult a site is to use, and the slower it
becomes
• Public safety and criminal uses of the Internet
– Use of technology by criminals to plan crimes or threaten nation-state
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Security Threats in the E-Commerce Environment
• Three key points of vulnerability in e-commerce environment:
1. Client
2. Server
3. Communications pipeline (Internet communications channels)
Figure 4.2 A Typical E-Commerce Transaction
Figure 4.3 Vulnerable Points in an E-Commerce
Transaction
IDIOMS & Explanation
Its Explanation
IDIOM
Malicious Code
Potentially Unwanted
Programs
1.
2.
3.
4.
5.
6.
7.
8.
9.
•
•
•
•
Phishing
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•
Exploits and exploit kits
Malvertising
Drive-by downloads
Viruses
Worms
Ransomware
Trojan horses
Backdoors
Bots, botnets
Browser parasites
– Monitor and change user’s browser
Adware
– Used to call pop-up ads
Spyware
– Track’s users keystrokes, e-mails, I M s, etc.
Any deceptive, online attempt by a third party to obtain confidential
information for financial gain
Tactics
– Social engineering
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Its Explanation
IDIOM
•
•
Hacking, Cybervandalism, and
Hacktivism
•
•
•
Data Breaches
•
•
•
•
Credit Card Fraud/Theft
•
•
•
Identity Fraud/Theft
•
•
Spoofing, Pharming, and Spam
(Junk) Websites
•
•
•
Sniffing and Man-In-TheMiddle Attacks
•
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– E-mail scams and B E C phishing
– Spear phishing
Used for identity fraud and theft
Hacking
– Hackers versus. crackers
– White hats, black hats, grey hats
– Tiger teams
– Goals: cybervandalism, data breaches
Cybervandalism:
– Disrupting, defacing, destroying Web site
Hacktivism
When organizations lose control over corporate information to
outsiders
15 major breaches in 2016, 1.1 billion identities exposed
Yahoo and Equifax two of the most notorious
Leading causes
– Hacking
– Employee error/negligence
– Accidental e-mail/Internet exposure
– Insider theft
Stolen credit card incidences about 0.9% on the Web and about 0.8%
of mobile transactions
Hacking and looting of corporate servers is primary cause
Central security issue: establishing customer identity
– E-signatures
– Multi-factor authentication
– Fingerprint identification
Unauthorized use of another person’s personal data for illegal
financial benefit
– Social security number
– Driver’s license
– Credit card numbers
– Usernames/passwords
2016: Over 15 million U.S. consumers suffered identity fraud
Spoofing
– Attempting to hide true identity by using someone else’s e-mail
or I P address
Pharming
– Automatically redirecting a web link to a different address, to
benefit the hacker
Spam (junk) websites
– Offer collection of advertisements for other sites, which may
contain malicious code
Sniffer
– Eavesdropping program monitoring networks
– Can identify network trouble spots
– Can be used by criminals to steal proprietary information
E-mail wiretaps
– Recording e-mails at the mail server level
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Its Explanation
IDIOM
•
•
Denial of Service (D o S) and
Distributed Denial of Service
(D D o S) Attacks
•
•
•
•
•
•
Insider Attacks
Man-in-the-middle attack
– Attacker intercepts and changes communication between two
parties who believe they are communicating directly
Denial of service (D o S) attack
– Flooding website with pings and page request
– Overwhelm and can shut down site’s web servers
– Often accompanied by blackmail attempts
– Botnets
Distributed Denial of Service (D D o S) attack
– Uses hundreds or thousands of computers to attack target
network
– Can use devices from Internet of Things, mobile devices
D D o S smokescreening
Largest threat to business institutions come from insider
embezzlement
Employee access to privileged information
Poor security procedures
Insiders more likely to be source of cyberattacks than outsiders
Poorly Designed Software
• Increase in complexity of and demand for software has led to increase in flaws and
vulnerabilities
• S Q L injection attacks
• Zero-day vulnerability
• Heartbleed bug; Shellshock (BashBug); F R E A K
Security
Issues
Social Network Security Issues
•
•
Mobile Platform Security Issues
•
•
•
•
•
•
•
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Social networks an environment for:
– Viruses, site takeovers, identity fraud,
malware-loaded apps, click hijacking,
phishing, spam
Manual sharing scams
– Sharing of files that link to malicious sites
Fake offerings, fake Like buttons, and fake apps
Little public awareness of mobile device
vulnerabilities
2016: 18 million mobile malware infections
Vishing
Smishing
S M S spoofing
Madware
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Cloud Security Issues
Internet of Things Security Issues
•
•
•
•
•
•
•
•
•
•
D D o S attacks
Infrastructure scanning
Lower-tech phishing attacks yield passwords and
access
Use of cloud storage to connect linked accounts
Lack of encryption and strong security procedures
Challenging environment to protect
Vast quantity of interconnected links
Near identical devices with long service lives
Many devices have no upgrade features
Little visibility into workings, data, or security
Technology Solutions
• Protecting Internet communications
Figure 4.5 Tools Available to Achieve Site Security
– Encryption
• Securing channels of communication
– S S L, T L S, V P N s, Wi-Fi
• Protecting networks
– Firewalls, proxy servers, I D S, I P S
• Protecting servers and clients
– O S security, anti-virus software
Encryption
• Encryption
– Transforms data into cipher text
readable only by sender and receiver
– Secures stored information and information transmission
– Provides 4 of 6 key dimensions of e-commerce security:
▪ Message integrity
▪ Nonrepudiation
▪ Authentication
▪ Confidentiality
Symmetric Key Cryptography
• Sender and receiver use same digital key to encrypt and decrypt message
• Requires different set of keys for each transaction
• Strength of encryption: Length of binary key
• Data Encryption Standard (D E S)
• Advanced Encryption Standard (A E S)
• Other standards use keys with up to 2,048 bits
Public Key Cryptography
Figure 4.6 Public Key Cryptography: A Simple Case
• Uses two mathematically related digital keys
– Public key (widely disseminated)
– Private key (kept secret by owner)
• Both keys used to encrypt and decrypt message
• Once key used to encrypt message, same key
cannot be used to decrypt message
• Sender uses recipient’s public key to encrypt
message; recipient uses private key to decrypt it
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Public Key Cryptography Using Digital Signatures and Hash Digests
• Sender applies a mathematical algorithm
(hash function) to a message and then
encrypts the message and hash result with
recipient’s public key
• Sender then encrypts the message and hash
result with sender’s private key—creating
digital signature—for authenticity,
nonrepudiation
• Recipient first uses sender’s public key to
authenticate message and then the
recipient’s private key to decrypt the hash
result and message
Figure 4.7 Public Key Cryptography with Digital Signatures
Digital Envelopes
• Address weaknesses of:
– Public key cryptography
▪ Computationally slow,
decreased transmission speed,
increased processing time
– Symmetric key cryptography
▪ Insecure transmission lines
• Uses symmetric key cryptography to encrypt
document
• Uses public key cryptography to encrypt and
send symmetric key
Figure 4.8 Creating a Digital Envelope
Digital Certificates and Public Key Infrastructure (P K I)
• Digital certificate includes:
– Name of subject/company
– Subject’s public key
– Digital certificate serial number
– Expiration date, issuance date
– Digital signature of C A
• Public Key Infrastructure (P K I):
– C A s and digital certificate procedures
– PGP
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Figure 4.9 Digital Certificates and Certification Authorities
Limitations of P K I
• Doesn’t protect storage of private key
– P K I not effective against insiders, employees
– Protection of private keys by individuals may be haphazard
• No guarantee that verifying computer of merchant is secure
• C A s are unregulated, self-selecting organizations
Securing Channels of Communication
• Secure Sockets Layer (S S L)/Transport Layer Security (T L S)
– Establishes secure, negotiated client–server session
• Virtual Private Network (V P N)
– Allows remote users to securely access internal network via the Internet
• Wireless (Wi-Fi) networks
– WPA2
Figure 4.10 Secure Negotiated Sessions Using S S L/T L S
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Protecting Networks
• Firewall
– Hardware or software that uses security policy to filter packets
▪ Packet filters
▪ Application gateways
– Next-generation firewalls
• Proxy servers (proxies)
– Software servers that handle all communications from or sent to the Internet
• Intrusion detection systems
• Intrusion prevention systems
Figure 4.11 Firewalls and Proxy Servers
Protecting Servers and Clients
• Operating system security enhancements
– Upgrades, patches
• Anti-virus software
– Easiest and least expensive way to prevent threats to system integrity
– Requires daily updates
Management Policies, Business Procedures, and Public Laws
• Worldwide, companies spend more than $86 billion on security hardware, software, services
• Managing risk includes:
– Technology
– Effective management policies
– Public laws and active enforcement
A Security Plan: Management Policies
• Risk assessment
• Security policy
• Implementation plan
– Security organization
– Access controls
– Authentication procedures, including biometrics
– Authorization policies, authorization management
systems
• Security audit
Figure 4.12 Developing an E-Commerce Security Plan
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The Role of Laws and Public Policy
• Laws that give authorities tools for identifying, tracing, prosecuting cybercriminals:
– U S A Patriot Act
– Homeland Security Act
• Private and private-public cooperation
– U S-C E R T
– C E R T Coordination Center
• Government policies and controls on encryption software
– O E C D, G7/G8, Council of Europe, Wassener Arrangement
E-Commerce Payment Systems
• In U.S., credit and debit cards are primary online payment methods
– Other countries have different systems
• Online credit card purchasing cycle
• Credit card e-commerce enablers
• Limitations of online credit card payment
– Security, merchant risk
– Cost
– Social equity
Figure 4.14 How an Online Credit
Transaction Works
Alternative Online Payment Systems
• Online stored value systems:
– Based on value stored in a
consumer’s bank, checking, or credit
card account
– Example: PayPal
• Other alternatives:
– Pay with Amazon
– Visa Checkout, Mastercard’s MasterPass
– Bill Me Later
– W U Pay, Dwolla, Stripe
Mobile Payment Systems
• Use of mobile phones as payment devices
– Established in Europe and Asia
– Expanding in United States
▪ Apple Pay, Android Pay, Samsung Pay, PayPal, Square
• Near field communication (N F C)
• Social/Mobile Peer-to-Peer Payment Systems
• Sending money through mobile app or Web site
• Regulation of mobile wallets and rechargeable cards
Digital Cash and Virtual Currencies
• Digital cash
– Based on algorithm that generates unique tokens that can be used in “real” world
– Example: Bitcoin
• Virtual currencies
– Circulate within internal virtual world
– Example: Linden Dollars in Second Life
– Typically used for purchasing virtual goods
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Electronic Billing Presentment and Payment (E B P P)
• Online payment systems for monthly bills
• Over 55% of all bill payments
• Four E B P P business models:
– Online banking model (most widely used)
– Biller-direct
– Mobile
– Consolidator
• All models are supported by E B P P infrastructure providers
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Chapter 05
E-Commerce Business Strategies
E-Commerce
By: Ahmad Abdelsalam
Moussa Academy
00201007153601
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E-Commerce Business Models
• Business model
– Set of planned activities designed to result in a profit in a marketplace
• Business plan
– Describes a firm’s business model
• E-commerce business model
– Uses/leverages unique qualities of Internet and Web
Eight Key Elements of a Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
1. Value Proposition
• “Why should the customer buy from you?”
• Successful e-commerce value propositions:
o Personalization/customization
o Reduction of product search, price discovery costs
o Facilitation of transactions by managing product delivery
2. Revenue Model
• “How will you earn money?”
• Major types of revenue models:
o Advertising revenue model
o Subscription revenue model
▪ Freemium strategy
o Transaction fee revenue model
o Sales revenue model
o Affiliate revenue model
3. Market Opportunity
• “What marketspace do you intend to serve and what is its size?”
o Marketspace: Area of actual or potential commercial value in which company intends to
operate
o Realistic market opportunity: Defined by revenue potential in each market niche in which
company hopes to compete
• Market opportunity typically divided into smaller niches
4. Competitive Environment
• “Who else occupies your intended marketspace?”
o Other companies selling similar products in the same marketspace
o Includes both direct and indirect competitors
• Influenced by:
o Number and size of active competitors
o Each competitor’s market share
o Competitors’ profitability
o Competitors’ pricing
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5. Competitive Advantage
• “What special advantages does your firm bring to the marketspace?”
o Is your product superior to or cheaper to produce than your competitors’?
• Important concepts:
o Asymmetries
o First-mover advantage, complementary resources
o Unfair competitive advantage
o Leverage
o Perfect markets
6. Market Strategy
• “How do you plan to promote your products or services to attract your target audience?”
o Details how a company intends to enter market and attract customers
o Best business concepts will fail if not properly marketed to potential customers
7. Organizational Development
• “What types of organizational structures within the firm are necessary to carry out the business
plan?”
• Describes how firm will organize work
o Typically, divided into functional departments
o As company grows, hiring moves from generalists to specialists
8. Management Team
• “What kind of backgrounds should the company’s leaders have?”
• A strong management team:
o Can make the business model work
o Can give credibility to outside investors
o Has market-specific knowledge
o Has experience in implementing business plans
Raising Capital
• Seed capital
• Elevator pitch
• Traditional sources
– Incubators, angel investors
– Commercial banks, venture capital firms
– Strategic partners
• Crowdfunding
– J O B S Act
Categorizing E-Commerce Business Models
• No one correct way
• Text categorizes according to:
– E-commerce sector (e.g., B2B)
– E-commerce technology (e.g., m-commerce)
• Similar models appear in different sectors
• Companies may use multiple business models (e.g., eBay)
• E-commerce enablers
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B2C Business Models
1. E-tailer
2. Community provider (social network)
3. Content provider
4. Portal
5. Transaction broker
6. Market creator
7. Service provider
• Online version of traditional retailer
• Revenue model: Sales
• Variations:
– Virtual merchant
B2C Models: E-Tailer
– Bricks-and-clicks
– Catalog merchant
– Manufacturer-direct
• Low barriers to entry
• Provide online environment (social network) where people
with similar interests can transact, share content, and
communicate
B2C Models: Community
– Examples: Facebook, LinkedIn, Twitter, Pinterest
Provider
• Revenue models:
– Typically hybrid, combining advertising,
subscriptions, sales, transaction fees, and so on
• Digital content on the Web:
– News, music, video, text, artwork
• Revenue models:
– Use variety of models, including advertising,
subscription; sales of digital goods
B2C Models: Content Provider
– Key to success is typically owning the content
• Variations:
– Syndication
– Aggregators
• Search plus an integrated package of content and services
• Revenue models:
– Advertising, referral fees, transaction fees,
subscriptions for premium services
B2C Business Models: Portal
• Variations:
– Horizontal/general
– Vertical/specialized (vortal)
– Search
• Process online transactions for consumers
– Primary value proposition—saving time and
money
• Revenue model:
B2C Models: Transaction
– Transaction fees
Broker
• Industries using this model:
– Financial services
– Travel services
– Job placement services
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•
B2C Models: Market Creator
•
•
•
B2C Models: Service Provider
•
B2B Business Models
• Net marketplaces
– E-distributor
– E-procurement
– Exchange
– Industry consortium
• Private industrial network
B2B Models: E-Distributor
•
B2B Models: E-Procurement
•
•
•
•
•
B2B Models: Exchanges
•
•
•
•
•
B2B Models: Industry
Consortia
•
•
•
•
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Create digital environment where buyers and sellers can
meet and transact
– Examples: Priceline, eBay
– Revenue model: Transaction fees, fees to
merchants for access
On-demand service companies (sharing economy):
platforms that allow people to sell services
– Examples: Uber, Airbnb
Online services
– Example: Google—Google Maps, Gmail, and so
on
Value proposition
– Valuable, convenient, time-saving, low-cost
alternatives to traditional service providers
Revenue models:
– Sales of services, subscription fees, advertising,
sales of marketing data
Version of retail and wholesale store, M R O goods, and
indirect goods
Owned by one company seeking to serve many customers
Revenue model: Sales of goods
Example: Grainger
Creates digital markets where participants transact for
indirect goods
– B2B service providers, S a a S and P a a S providers
– Scale economies
Revenue model:
– Service fees, supply-chain management, fulfillment
services
Example: Ariba
Independently owned vertical digital marketplace for direct
inputs
Revenue model: Transaction, commission fees
Create powerful competition between suppliers
Tend to force suppliers into powerful price competition;
number of exchanges has dropped dramatically
Industry-owned vertical digital marketplace open to select
suppliers
More successful than exchanges
– Sponsored by powerful industry players
– Strengthen traditional purchasing behavior
Revenue model: Transaction, commission fees
Example: SupplyOn
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Private Industrial Networks
•
•
•
Digital network used to coordinate among firms engaged in
business together
Typically evolve out of large company’s internal enterprise
system
– Key, trusted, long-term suppliers invited to network
Example: Walmart’s network for suppliers
How E-Commerce Changes Business
• E-commerce changes industry structure by changing:
– Rivalry among existing competitors
– Barriers to entry
– Threat of new substitute products
– Strength of suppliers
– Bargaining power of buyers
• Industry structural analysis
Industry Value Chains
• Set of activities performed by suppliers,
manufacturers, transporters, distributors,
and retailers that transform raw inputs into
final products and services
• Internet reduces cost of information and
other transactional costs
• Leads to greater operational efficiencies,
lowering cost, prices, adding value for
customers
Firm Value Chains
• Activities that a firm engages in to create
final products from raw inputs
• Each step adds value
• Effect of Internet:
– Increases operational efficiency
– Enables product differentiation
– Enables precise coordination of
steps in chain
Firm Value Webs
• Networked business ecosystem
• Uses Internet technology to coordinate the value
chains of business partners
• Coordinates a firm’s suppliers with its own
production needs using an Internet-based supply
chain management system
Figure 2.6 Internet-Enabled Value Web
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Business Strategy
• Plan for achieving superior long-term returns on capital invested: that is, profit
• Five generic strategies
– Product/service differentiation
– Cost competition
– Scope
– Focus/market niche
– Customer intimacy
E-Commerce Technology and Business Model Disruption
• Disruptive technologies
• Digital disruption
• Sustaining technology
• Stages
– Disruptors introduce new products of lower quality
– Disruptors improve products
– New products become superior to existing products
– Incumbent companies lose market share
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Chapter 06
E-commerce Marketing and
Advertising
E-Commerce
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Moussa Academy
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Consumers Online: The Internet Audience and Consumer Behavior
• Over 75% (94 million) U.S. households have broadband Internet access in 2016
• Growth rate has slowed
• Intensity and scope of use both increasing
• Some demographic groups have much higher percentages of online usage
– Income, education, age, ethnic dimensions
• Broadband and mobile
– Significant inequalities in broadband access
– Older adults, lower income, lower educational levels
– Non-broadband household still accesses Internet via mobile or other locations
• Community effects
– Role of social emulation in consumption decisions
– “Connectedness”
• Top 10–15% are more independent
• Middle 50% share more purchase patterns of friends
– Recommender systems - co-purchase networks
• Consumer behavior models
– Study of consumer behavior; social science discipline
– Attempt to predict or explain wide range of consumer decisions
– Based on background demographic factors and other intervening, more immediate
variables
• Profiles of online consumers
– Consumers shop online primarily for convenience
Figure 6.1 A General Model of Consumer Behavior
The Online Purchasing Decision
• Five stages in consumer decision process
– Awareness of need
– Search for more information
– Evaluation of alternatives
– Actual purchase decision
– Post-purchase contact with firm
• Decision process similar for online and
offline behavior
• General online behavior model
– User characteristics
– Product characteristics
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•
– Website features: latency, usability, security
– Attitudes toward online purchasing
– Perceptions about control over Web environment
Clickstream behavior
Figure 6.3 A Model of Online Consumer Behavior
Shoppers: Browsers and Buyers
• Shoppers: Over 90% of Internet users
– Over 78% are buyers
– 13.2% are browsers (purchase offline)
• Online research influenced over $2.1 trillion of retail
purchases in 2016
• Online traffic also influenced by offline brands and shopping
• E-commerce and traditional commerce are coupled: Part of a continuum of consuming behavior
What Consumers Shop for and Buy Online
• Big ticket items ($1000 or more)
– Travel, computer hardware, electronics
– Consumers now more confident in purchasing costlier items
• Small ticket items ($100 or less)
– Apparel, books, office supplies, software, etc.
• Sales of bulky goods, furniture and large appliances, rapidly expanding
How Consumers Shop
• How shoppers find online vendors
– Highly intentional, goal-oriented
– Search engines
– Marketplaces (Amazon, eBay)
– Specific retail site
• About 8% of Internet users don’t shop online
– Trust factor
– Hassle factors (shipping costs, returns, etc.)
Trust, Utility, and Opportunism in Online Markets
• Two most important factors shaping decision to purchase online:
– Utility:
▪ Better prices, convenience, speed
– Trust:
▪ Perception of credibility, ease of use, perceived risk
▪ Sellers develop trust by building strong reputations for honesty, fairness, delivery
Digital Commerce Marketing and Advertising: Strategies and Tools
• Features of Internet marketing (versus. traditional)
– More personalized
– More participatory
– More peer-to-peer
– More communal
• The most effective Internet marketing has all four features
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Multi-Channel Marketing Plan
• Website
• Traditional online marketing
– Search engine, display, e-mail, affiliate
• Social marketing
– Social networks, blogs, video, game
• Mobile marketing
– Mobile/tablet sites, apps
• Offline marketing
– Television, radio, newspapers
Strategic Issues and Questions
• Which part of the marketing plan should you focus on first?
• How do you integrate the different platforms for a coherent message?
• How do you allocate resources?
– How do you measure and compare metrics from different platforms?
– How do you link each to sales revenues?
Establishing the Customer Relationship
• Website functions to:
– Establish brand identity and customer expectations
▪ Differentiating product
– Anchor the brand online
▪ Central point for all marketing messages
– Inform and educate customer
– Shape customer experience
Online Marketing and Advertising
• Online advertising
– Display, search, mobile messaging, sponsorships, classifieds, lead generation, e-mail
– Advantages:
▪ 18–34 audience is online
▪ Ad targeting to individuals
▪ Price discrimination
▪ Personalization
Traditional Online Marketing and Advertising Tools
1. Search engine marketing and advertising
2. Display ad marketing
3. E-mail marketing
4. Affiliate marketing
5. Viral marketing
6. Lead generation marketing
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Search Engine Marketing and
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Display Ad Marketing
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E-Mail Marketing
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Search engine marketing (S E M)
– Use of search engines for branding
Search engine advertising
– Use of search engines to support direct
sales
Types of search engine advertising
– Paid inclusion
– Pay-per-click (P P C) search ads
• Keyword advertising
• Network keyword advertising
(context advertising)
Search engine optimization (S E O)
Google search engine algorithms
Social search
– Utilizes social contacts and social graph
to provide fewer and more relevant
results
Search engine issues
– Paid inclusion and placement practices
– Link farms, content farms
– Click fraud
Banner ads
Rich media ads
– Interstitial ads
Video ads
– Far more effective than other display
formats
Sponsorships
Native advertising
Content marketing
Advertising networks
Ad exchanges, programmatic advertising, and
real-time bidding (R T B)
Display advertising issues
– Ad fraud
– Viewability
– Ad blocking
Direct e-mail marketing
– Messages sent directly to interested users
– Benefits include
▪ Inexpensive
▪ Average around 3% to 4% clickthroughs
▪ Measuring and tracking
responses
▪ Personalization and targeting
Three main challenges
– Spam(Some details about spam under the
table)
– Anti-spam software
– Poorly targeted purchased e-mail lists
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Other Types of Traditional Online
Marketing
•
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Affiliate marketing
– Commission fee paid to other websites
for sending customers to their website
Viral marketing
– Marketing designed to inspire customers
to pass message to others
Lead generation marketing
– Services and tools for collecting,
managing, and converting leads
Spam
• Unsolicited commercial e-mail
• Around 55% of all e-mail in 2017
• Most originates from bot networks
• Efforts to control spam have largely failed:
– Government regulation (C A N - S P A M)
– State laws
– Voluntary self-regulation by industries (D M A)
– Canada’s stringent anti-spam laws
Social, Mobile, and Local Marketing and Advertising
Social marketing and
Mobile marketing and
advertising
advertising
• Use of online social
• Use of mobile platform
networks and communities • Influence of mobile apps
Local marketing
•
•
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Geotargeting
Display ads in hyperlocal
publications
Coupons
Multi-Channel Marketing
• Integration of online and offline marketing
• Increasing percentage of American media consumers use several media at once
• Reinforce branding messages across media
• Most effective multi-channel campaigns use consistent imagery across media
Other Online Marketing Strategies
• Customer retention strategies
– One-to-one marketing (personalization)
– Behavioral targeting (interest-based advertising)
– Retargeting
• Customization and customer co-production
• Customer service
– F A Qs
– Real-time customer service chat systems
– Automated response systems
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Pricing Strategies
• Pricing: integral part of marketing strategy
• Traditional pricing based on fixed costs, variable costs, demand curve
– Marginal costs
– Marginal revenue
• Piggyback strategy
• Price discrimination
• Free and freemium
• Versioning
• Bundling
• Dynamic pricing
– Auctions
– Yield management
– Surge pricing
– Flash marketing
Long Tail Marketing
• Internet allows for sales of obscure products with little demand
• Substantial revenue because
– Near zero inventory costs
– Little marketing costs
– Search and recommendation engines
Internet Marketing Technologies
• Internet’s main impacts on marketing:
– Scope of marketing communications broadened
– Richness of marketing communications increased
– Information intensity of marketplace expanded
– Always-on mobile environment expands marketing opportunities
Web Transaction Logs
• Built into web server software
• Record user activity at website
• Provides much marketing data, especially combined with:
– Registration forms
– Shopping cart database
• Answers questions such as:
– What are major patterns of interest and purchase?
– After home page, where do users go first? Second?
Cookies and Tracking Files
• Types of tracking files
– Cookies
– Flash cookies
– Web beacons (“bugs”)
– Tracking headers (supercookies)
• Other tracking methods
– Deterministic cross-device tracking
– Probabilistic cross-device tracking
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Databases
• Enable profiling
• Store records and attributes
• Database management system (D B M S):
• S Q L (Structured Query Language):
– Industry-standard database query and manipulation language used in a relational
database
• Relational databases
Data Warehouses and Data Mining
• Data warehouse:
– Collects firm’s transactional and customer data in single location for offline analysis by
marketers and site managers
• Data mining:
– Analytical techniques to find patterns in data, model behavior of customers, develop
customer profiles
• Query-driven data mining
• Model-driven data mining
• Rule-based data mining
Hadoop and the Challenge of Big Data
• Big data
– Petabyte, exabyte range
– Web traffic, e-mail, social media, content
– Traditional D B M S unable to process these Internet of Things
• Hadoop
– Open-source software framework
– Processes any type of data, even unstructured
– Distributed processing
Marketing Automation and Customer Relationship Management (C R M) Systems
• Marketing automation systems
– Track steps in lead generation
• C R M systems
– Manage relationship with customers once
purchase is made
– Create customer profiles
• Customer data used to:
– Develop and sell additional products
– Identify profitable customers
– Optimize service delivery, and so on
Online Marketing Metrics: Lexicon
• Audience size/market share metrics
– E.g. impressions, click-through rate (C T R), page views, viewability rate, stickiness,
loyalty, reach, recency
• Conversion to customer metrics
– E.g. acquisition rate, conversion rate, browse-to-buy ratio, cart conversion rate,
abandonment rate
• Video ad metrics
– E.g. view time, completion rate
• E-mail campaign metrics
– E.g. open rate, delivery rate, click-through rate, bounce-back rate
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Figure 6.11 An Online Consumer Purchasing Model
How Well Does Online Advertising Work?
• Use R O I to measure ad campaign
• Difficulty of cross-platform attribution
• Highest click-through rates: Search engine ads, permission e-mail campaigns
• Online channels compare favorably with traditional
• Most powerful marketing campaigns use multiple channels, including online, catalog, T V, radio,
newspapers, stores
The Costs of Online Advertising
• Pricing models
– Barter, cost per thousand (C P M), cost per click (C P C), cost per action (C P A), hybrid,
sponsorship
• Measuring issues
– Correlating online marketing to online or offline sales
• In general, online marketing is more expensive on C P M basis, but more efficient in producing
sales
• Effective cost-per-thousand (e C P M)
Marketing Analytics
• Software that analyzes data at each stage of the customer conversion process
– Awareness
– Engagement
– Interaction
– Purchase activity
– Loyalty and post-purchase
• Helps managers
– Optimize R O I on website and marketing efforts
– Build detailed customer profiles
– Measure impact of marketing campaigns
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Figure 6.12 Web Analytics and the Online Purchasing Process
Careers in E-Commerce
• Position: Category specialist in E-commerce Retail Program (could be U X Designer,
Cybersecurity Threat Management Team Trainee, Assistant Manager of E-business or Digital
Marketing Assistant)
• Qualification/Skills
• Preparing for the Interview
• Possible Interview Questions
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Chapter 07
Social, Mobile, and Local
Marketing
E-Commerce
By: Ahmad Abd-Elsalam
Moussa Academy
00201007153601
➢ At the end of this chapter, we`ll cover
7.1 Understand the difference between traditional
online marketing and the new social-mobile-local
marketing platforms and the relationships between
social, mobile, and local marketing.
7.2 Understand the social marketing process from fan
acquisition to sales and the marketing capabilities of
social marketing platforms such as Facebook, Twitter,
and Pinterest.
7.3 Identify the key elements of a mobile marketing
campaign.
7.4 Understand the capabilities of location-based local
marketing.
Introduction to Social, Mobile, and Local Marketing
• New marketing concepts
– Conversations
– Engagement
• Impact of smartphones and tablets
• Social-mobile-local nexus
– Strong ties between consumer use of social
networks, mobile devices, and local
shopping
Social Marketing
• Traditional online marketing goals
– Deliver business message to the most consumers
• Social marketing goals
– Encourage consumers to become fans and engage and enter conversations
– Strengthen brand by increasing share of online conversation
Social Marketing Players
• The most popular sites account for over 90% of all social network visits
– Facebook, Twitter, LinkedIn, Pinterest, Instagram, Snapchat, Tumblr
– Unique visitors versus. engagement
▪ Engagement measures the amount and intensity of user involvement
▪ Facebook dominates in both measures
– Dark social – sharing outside of major social networks (e-mail, I M, texts, etc.)
Figure 7.4 The Social Marketing Process
•
Facebook
Marketing
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Basic Facebook features
– News Feed
– Timeline (Profile)
– Search
Social density of audience is magnified
– Facebook is largest repository of deeply personal information
– Facebook geared to maximizing connections between users
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Marketing Tools
Twitter
Marketing
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Reactions Buttons
Brand Pages
News Feed Page Post Ads
Right-Hand Column Sidebar Ads
Facebook Life
Video Ads/Mobile Ads
Facebook Messenger
Facebook Exchange (F B X)
Typical Facebook
Establish Facebook brand page
Marketing
Use comment and feedback tools to develop fan comments
Campaign
Develop a community of users
Encourage brand involvement through video, rich media, contests
Use display ads for other Facebook pages and social search
Display Like button liberally
Measuring
Basic metrics:
Facebook
1. Fan acquisition (impressions)
Marketing Results
2. Engagement (conversation rate)
3. Amplification (reach)
4. Community
5. Brand strength/sales
• Facebook analytics tools
1. Facebook Page Insights
2. Social media management systems (HootSuite)
3. Analytics providers (Google Analytics, Webtrends)
• Real-time interaction with consumers
• Around 328 million active users worldwide
– Over 90% access Twitter from mobile device
• Basic features
– Tweets, retweets, followers, message (D M), hashtag, mention, reply, links
– Moments tab, Timeline
Marketing Tools
• Promoted Tweets
• Promoted Trends
• Promoted Accounts
• Enhanced Profile Page
• Amplify
• Promoted Video
• Television Ad Retargeting
• Lead Generation Cards
• Mobile Ads
Typical Twitter
• Follow others relevant to your content and conversation
Marketing
• Experiment with simple Promoted Tweets
Campaign
• For larger budgets, use Promoted Trends and T V ad retargeting
• For retail business local sales, build Lead Generation Card
Measuring Twitter • Similar to Facebook results
Marketing Results
– Fan acquisition, engagement, amplification, community,
brand strength/sales
• Analytics tools
– Twitter’s real-time dashboard
– Twitter’s Timeline activity and Followers dashboards
– Third-party tools
• TweetDeck, Twitalyzer, BackTweets
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One of the fastest-growing and largest image-sharing sites
Enables users to talk about brands using pictures rather than words
Features include:
– Pins and re-pins to boards
– Share
– Follow
– Contributors
– Links to U R L S
– Price displays
Marketing Tools
• Rich Pins, Promoted Pins, Cinematic Pins
• Buyable Pins/Shop Our Picks
• Promoted Video
• Add Pin It and Follow buttons
Pinterest
• Pin as display ad
Marketing
• Theme-based (lifestyle) boards
• Brand pages
• U R L link to stores
• Integration with other social sites
• Network with users, followers, others
Typical Pinterest
• Create Pinterest brand page and multiple lifestyle-themed boards
Marketing
– Improve quality of photos, use U R L links and keywords
Campaign
• Utilize Pinterest Rich Pins and/or Product pins, Pin It buttons
• Integrate with Facebook and Twitter
• Follow and interact with other pinners and boards
• Measuring Pinterest Marketing Results
– Same dimensions as Facebook, Twitter
Instagram
Brand profiles, ad campaigns (display and video), Buy buttons,
Marquee ads
Marketing Snapchat
Snapchat Stories, Live Stories, Discover, Snap Ads, Sponsored
on Other
Geofilters, Sponsored Lenses
Social
LinkedIn
Company profiles, showcase pages, Career Page, Display ads
Networks
(Feeds), self-service ads or Advertising Partner Solutions, sponsored
inMail, LinkedInPulse
The Downside of Social Marketing
• Loss of control
– Where ads appear in terms of other content
– What people say
▪ Posts
▪ Comments
▪ Inaccurate or embarrassing material
• In contrast, T V ads maintain near complete control
Mobile Marketing
Figure 7.5 The Growth of M-Commerce
• Almost 265 million Americans use mobile phones;
around 168 million use tablet computers
– Devices used multiple times per day
• By 2021, m-commerce will account for more than 50%
of all retail and travel e-commerce.
• Challenges: Mobile search
– Motivating consumers to click
– Raising fees for each click
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Average of about 3 1/4 hours hours daily on mobile devices
– 44% entertainment
– 20% social networks
How People Actually
– 70% occur in home
Use Mobile Devices • Activities are similar to desktop activities
• Rapidly growing smartphone m-commerce sales
• Mobile devices currently used more for communicating and entertainment than for
shopping and buying
Mobile use
App marketing
– Smartphone apps—50% of total o Most effective are in-app ads
In-App Experiences
o Placed in most popular apps
digital time
and Ads
o Targeted to immediate activities and
▪ Almost 75% of app time
interests
spent on user’s top 3 apps
– Users use about 25 apps/month.
• Consumers becoming multi-platform
– Desktops, smartphones, tablets, T V
– 90% of multi-device users use multiple devices to complete action
How the Multi▪ View ad on T V, search on smartphone, purchase on tablet
Screen Environment
Changes the
• Marketing implications
Marketing Funnel
– Consistent branding
– Responsive design
– Increased complexity, costs
• Mobile marketing over 70% of all online marketing
• Dominant players are Google, Facebook
• Mobile device features
– Personal communicator and organizer
– Screen size and resolution
– G P S location
- Web browser
– Ultraportable and personal
- Apps
– Multimedia capable
Mobile Marketing
– Touch/haptic technology
Features
Figure 7.8 the Top U.S. Mobile Marketing Firms by U.S. Revenue
•
Mobile Marketing
Tools: Ad Formats
•
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Mobile marketing formats
– Search ads
– Display ads
– Video
– Text/video messaging
– Other: e-mail, classifieds,
generation
Mobile interface versions of
social network techniques
lead
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Mobile website
Facebook and Twitter brand
pages
Mobile versions of display
advertising campaigns
• Ad networks
Mobile Marketing • Interactive content aimed at
mobile
Campaigns
user
• Tools for measuring
responses
– Key dimensions follow
desktop and social
marketing metrics
Local and Location-Based Marketing
• Location-based marketing
– Targets messages to users based on location
– Marketing of location-based services
• Location-based services
– Provide services to users based on location
▪ Personal navigation
▪ Point-of-interest
▪ Reviews
▪ Friend-finders, family trackers
• Consumers have high likelihood of responding to local ads
The Growth of Local and Location-Based Mobile Marketing
• Prior to 2005, nearly all local advertising was non-digital
– Google Maps (2005)
o Enabled targeting ads to users based on I P
address and general geographic location
– Smartphones, Google’s mobile maps app (2007)
o Enabled targeting ads based on G P S
• Location-based mobile marketing
– Expected to triple over next five years
Location-Based Marketing Platforms
▪ Google(Android O S, Google Maps, Google Places, AdMob, AdWords)
• Facebook
• Apple(i O S)
• Twitter
• Others: Y P, Pandora, Millennial Media
Location-Based Mobile Marketing Technologies
• Two types of location-based marketing techniques
– Geo-aware techniques
▪ Identify location of user’s device and target ads, recommending actions within reach
– Proximity marketing
▪ Identify a perimeter around a location and target ads and recommendations within that
perimeter
• Identifying locations
– G P S signals
– Cell-tower locations
– Wi-Fi locations
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Why is Local Mobile Attractive to Marketers?
• Mobile users more active, ready to purchase than desktop users
• Over 80% of U.S. consumers use mobile devices to search for local products, services
– 50% of smartphone users visit a store within 1 day of local search
– 18% of smartphone users make a purchase
Location-Based Marketing Tools
• Geo-social-based services marketing
• Location-based services marketing
• Mobile-local social network marketing
• Proximity marketing
• In-store messaging
• Location-based app messaging
Location-Based Marketing Campaigns
• Location-based considerations
– Action-based, time-restrained offers and opportunities
– Target demographic and location-aware mobile user demographics
– Strategic analysis of marketspaces
• Measuring marketing results
– Same measures as mobile and Web marketing
– Metrics for unique characteristics
▪ Inquire
▪ Reserve
▪ Click-to-call
▪ Friend
▪ Purchase
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Chapter 08
Ethical, Social, and Political Issues
inE-commerce
E-Commerce
By: Ahmad Abd-Elsalam
Moussa Academy
00201007153601
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➢ At the end of this chapter, we`ll cover
8.1 Understand why e-commerce raises ethical, social,
and political issues.
8.2 Understand basic concepts related to privacy and
information rights, the practices of e-commerce
companies that threaten privacy, and the different
methods that can be used to protect online privacy.
8.3 Understand the various forms of intellectual
property and the challenges involved in protecting it.
8.4 Understand how the Internet is governed and why
taxation of e-commerce raises governance and
jurisdiction issues.
8.5 Identify major public safety and welfare issues
raised by e-commerce.
Understanding Ethical, Social, and Political Issues in E-Commerce
• Internet, like other technologies, can:
– Enable new crimes
– Affect environment
– Threaten social values
• Costs and benefits must be carefully considered, especially when there are no clear-cut legal or cultural
guidelines
A Model for Organizing the Issues
• Issues raised by Internet and e-commerce can be viewed at individual, social, and political levels
•
Four major categories of issues:
Figure 8.1 The Moral Dimensions of an Internet Society
– Information rights
– Property rights
– Governance
• Public safety and welfare
Basic Ethical Concepts
• Ethics
– Study of principles used to determine right
wrong courses of action
• Responsibility
• Accountability
• Liability
– Laws permitting individuals to recover damages
• Due process
– Laws are known, understood
– Ability to appeal to higher authorities to ensure laws applied correctly
Analyzing Ethical Dilemmas
Process for analyzing ethical dilemmas:
1. Identify and clearly describe the facts
2. Define the conflict or dilemma and identify the higher-order values involved
3. Identify the stakeholders
4. Identify the options that you can reasonably take
5. Identify the potential consequences of your options
Candidate Ethical Principles
• Golden Rule
• Universalism
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• Slippery Slope
• Collective Utilitarian Principle
• Risk Aversion
• No Free Lunch
• The New York Times Test
• The Social Contract Rule
Privacy and Information Rights
Privacy
Moral right of individuals to be left
alone, free from surveillance or
interference from other individuals,
organizations, or state
Information privacy: 4 premises
– Right to control information collected about them
▪ “Right to be forgotten”
– Right to know when information is collected and give consent
▪ “Informed consent”
– Right to personal information due process
– Right to have personal information stored in a secure manner
Table 8.2 The F T C’s Fair Information Practice Principles
Principle
Description
Notice/Awareness (core
principle)
Sites must disclose their information practices before collecting data.
Includes identification of collector, uses of data, other recipients of data,
nature of collection (active/inactive), voluntary or required,
consequences of refusal, and steps taken to protect confidentiality,
integrity, and quality of the data.
Choice/Consent (core
principle)
There must be a choice regime in place allowing consumers to choose
how their information will be used for secondary purposes other than
supporting the transaction, including internal use and transfer to third
parties. Opt-in/opt-out must be available.
Access/Participation
Consumers should be able to review and contest the accuracy and
completeness of data collected about them in a timely, inexpensive
process.
Security
Data collectors must take reasonable steps to assure that consumer
information is accurate and secure from unauthorized use.
Enforcement
There must be a mechanism to enforce F I P principles in place. This can
involve self-regulation, legislation giving consumers legal remedies for
violations, or federal statutes and regulation.
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Privacy in The Public Sector: Privacy
Rights of Citizens
• Public sector privacy rights have long
history
– First Amendment
– Fourth Amendment
– Fourteenth Amendment
• Constitutional, implied privacy rights did
not cover collection and use of personal
information
• 1974 Privacy Act
• Federal and state law to protect
individuals against unreasonable
government intrusion
Privacy in The Private Sector: Privacy Rights of
Consumers
• Privacy issues rose with first large-scale, nationwide
computerized systems
– Credit card systems, credit rating agencies
• Piecemeal federal and state privacy legislation,
applying to specific industries
– Spokeo v. Robins: what harm must be shown in
order to sue?
• Historically, few claims to privacy in public, open
markets such as in e-commerce
• Emergence of Internet has created enormous
collections of personal data
– Ideal environment for business and government
to invade personal privacy of consumers
– Google, Amazon, Netflix, etc.
Information Collected by Websites
• Data collected includes
– Personally identifiable information (P I I)
– Anonymous information
• Types of data collected
– Name, address, phone, e-mail, social security
– Bank and credit accounts, gender, age, occupation, education
– Preference data, transaction data, clickstream data, browser type
Key Issues in Online Privacy of Consumers
• Top concerns
– Profiling and ad targeting
– Social network privacy
– Sharing of information by marketers
– Mobile phone privacy
– Digital assistant privacy
Marketing: Profiling, Behavioral Targeting, and Retargeting
• Profiling
– Creation of data images that characterize online individual and group behavior
– Anonymous profiles
– Personal profiles
– Facial recognition a new dimension
• Advertising networks
– Track consumer and browsing behavior on Web
– Dynamically adjust what user sees on screen
– Build and refresh profiles of consumers
• Google’s new privacy policy
• Business perspective:
– Increases effectiveness of advertising, subsidizes content
– Enables sensing of demand for new products
• Critics’ perspective:
– Undermines expectation of anonymity and privacy
– Enables price discrimination
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Social Networks: Privacy and Self-Revelation
• Social networks
– Encourage sharing personal details
– Pose unique challenge to maintaining privacy
• Facebook
– Massive database
– Serving ads to users not on Facebook
– Sharing information with third parties
• Personal control over personal information versus. Organization’s desire to monetize social network
Mobile Devices: Privacy Issues
• Mobile apps
– Funnel personal information to mobile advertisers for targeting ads
– Track and store user locations
– Track users’ use of other apps
• Persistent location tracking
• U.S. Supreme Court rules that police need warrant prior to searching a cell phone for information
Consumer Privacy Regulation: the F T C
• Fair Information Practice (F I P) principles
• Informed consent: Opt-in and opt-out
• Harm-based approach
• “Do Not Track” mechanism
• Recent emphasis is to give consumer rights regarding collected personal information
• F T C’s new privacy framework
– Scope:
• Applies to all commercial entities
– Privacy by Design:
• Companies should promote consumer privacy throughout the organization and at all stages
in the development of products
– Simplified Choice
• Companies should simplify consumer choice
– Greater Transparency
Consumer Privacy Regulation: the Federal Communications Commission (F C C)
• 2015 classification of broadband I S P s as similar to public utility services and subject to F C C
regulation
• 2016 F C C approved new privacy rules for broadband I S P s
– Must notify users of privacy options or obtain user consent to collect information
– Service cannot be contingent on users surrendering privacy
• 2017 Congress voted to repeal privacy rules for broadband I S P s
Privacy Policies
• Website Terms of Use Notices
• Recent study showed these polices would take average reader 8 hours to read policies
• Have conflicting statements
• Little oversight and comparison between policies of different companies
Privacy Protection in Europe
• European privacy protection much stronger than in United States
• 1998 European Commission’s Directive on Data Protection (1998)
– Safe harbor
• 2016 E. U. General Data Protection Regulation (G D P R)
– Privacy Shield
• Privacy environment has turned against U.S. firms like Facebook and unfettered collection and use of
personal data
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Industry Self-Regulation
• Privacy seal programs
• Network Advertising Initiative (N A I)
• Ad Choices Program
• In general, self-regulation has not succeeded in reducing American fears of privacy invasion or
reducing the level of privacy invasion
Technology Solutions
• Solutions include
– Spyware blockers
– Pop-up blockers and ad blockers
– Secure e-mail, anonymous remailers
– Cookie managers
– Disk/file erasing programs
– Public key encryption
• None address core issues of consumer privacy
– What information is collected and how it is used
– Consumer rights
Privacy Protection
• Privacy protection as a business
• Privacy advocacy groups
Limitations on The Right to Privacy
• Edward Snowden & N S A Prism program
• Law enforcement and surveillance
• U S A Freedom Act
• Apple’s iPhone 6 and encryption
• Use of personal data by government agencies
Intellectual Property Rights
Intellectual property: All tangible and intangible products of human mind
Major ethical issue:
How should we treat property that belongs to others?
Major social issue:
Is there continued value in protecting intellectual property in the Internet age?
Major political issue: How can Internet and e-commerce be regulated or governed to protect intellectual
property?
Intellectual Property Protection
• Main types of protection:
– Copyright
– Patent
– Trademark law
– Trade secrets law
• Goal of intellectual property law:
– Balance two competing interests—public and private
• Maintaining this balance of interests is always challenged by the invention of new technologies
Copyright
• Protects original forms of expression (not ideas) from being copied by others for a period of time
• Fair use doctrine
• Digital Millennium Copyright Act of 1998
– First major effort to adjust copyright laws to Internet age
– Implements W I P O treaty that makes it illegal to make, distribute, or use devices that
circumvent technology-based protections of copyrighted materials
– Safe-harbor provisions
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Patents
• Grant owner 20-year monopoly on ideas behind an invention
• Invention must be new, non-obvious, novel
• Encourages inventors
• Promotes dissemination of new techniques through licensing
• Stifles competition by raising barriers to entry
E-Commerce Patents
• 1998 State Street Bank & Trust v. Signature Financial Group
– Business method patents
• 2014 Alice Corporation lawsuit:
– Supreme Court rules that software does not make a basic business method or abstract idea
patentable
• E-commerce patents
– Amazon: One-click purchasing
– Akamai: Internet content delivery global hosting system
Trademarks
• Identify, distinguish goods, and indicate their source
• Purpose
– Ensure consumer gets what is paid for/expected to receive
– Protect owner against piracy and misappropriation
• Infringement
• Dilution
– Federal Trademark Dilution Act and Trademark Dilution Revision Act
• Uniform Rapid Suspension System (U R S)
Trademarks and the Internet
• Cybersquatting and brand-jacking
– Anticybersquatting Consumer Protection Act (A C P A)
• Cyberpiracy
– Typosquatting
• Metatagging
• Keywording
• Linking and deep linking
• Framing
Trade Secrets
• Business procedures, formulas, methods of manufacture and service delivery
• May not be unique or novel
• Trade secrets are
– (a) secret
– (b) have commercial value to owner
– (c) owner has taken steps to protect
• 2016 Defend Trade Secrets Act
Who Governs the Internet and E-Commerce?
• Mixed mode environment
– Self-regulation, through variety of Internet policy and technical bodies, co-exists with limited
government regulation
• I C A N N : Domain Name System
• Internet can be easily controlled, monitored, and regulated from a central location
Taxation
• Non-local nature of Internet commerce complicates governance and jurisdiction issues
• Sales taxes
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– Governments in Europe and U.S. rely on sales taxes
• M O T O retailing tax subsidies
• E-commerce tax subsidy
• Internet Tax Freedom Act
Net Neutrality
• All Internet activities charged the same rate, regardless of bandwidth used
• Netflix and YouTube together consume about 50% of bandwidth in United States
• Prior to 2015, I S P s could throttle high-volume users
• February 2015, F C C ruled that broadband I S P s should be viewed and regulated as public utilities
• Under Trump administration, net neutrality regulations likely to be repealed
Public Safety and Welfare
• Protection of children against pornography and privacy infringement
– Passing legislation that will survive court challenges has proved difficult
• Efforts to control gambling and restrict sales of drugs and cigarettes
– Prevent All Cigarette Trafficking Act
– Unlawful Internet Gambling Enforcement Act
• Increase in number of states allowing online gambling
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Chapter 09
Online Media
E-Commerce
By: Ahmad Abd-Elsalam
Moussa Academy
00201007153601
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➢ At the end of this chapter, we`ll cover
9.1 Understand the major trends in the consumption of
media and online content, the major revenue models
for digital content delivery, digital rights management,
and the concept of media convergence.
9.2 Understand the key factors affecting the online
publishing industry.
9.3 Understand the key factors affecting the online
entertainment industry.
Trends in Online Content
• Mobile platform accelerates the transition to digital content
• Tech companies become significant players in content production business
• Continued growth of number of Americans who watch digital video and T V online
• E-book sales growth slows
• Digital music sales top physical sales
• Console games flatten as mobile games soar
• Netflix the largest consumer of bandwidth
• Cloud storage serves huge market for mobile device content
• Conflict continues over net neutrality rules
• Time spent with digital media exceeds time spent with television
Content Audience and Market
• Average American adult spends 4,400 hours/year
various media
• Over 50% U.S. population watches T V online
• Desktop and mobile use: 5.8 hours/day
•
Internet and Traditional Media
•
Cannibalization versus. complementary
– Does time on Internet reduce time spent with other media?
– Massive shift of audience to Web, tablets,
smartphones
Television viewing, music consumption remains
reading has increased
Impact of Internet:
– Increase in total demand for media, including
traditional products like books
– Physical products replaced by digital
consuming
Figure 9.1 Annual Media Consumption in the United States
•
•
strong,
Figure 9.2 U.S. Media Revenues by Channel
Digital Content Revenue Models
• Online content delivery revenue models
– Subscription
– A la carte
– Advertising supported (free/freemium)
• Free content can drive users to paid content
• Users increasingly paying for high-quality, unique
content
Figure 9.3 Online Content Consumption in the United States
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Free or Fee
• Early years: Internet audience expected free content but willing to accept advertising
– Early content was low quality
• With advent of high-quality content, fee models successful
– iTunes
– Millions of users buy from legal music sites
– YouTube cooperating with Hollywood and New York film production studios
Digital Rights Management (D R M)
• Technical and legal means to protect digital content from unlimited reproduction and distribution
• D R M hardware and software encrypts content
• Streaming content
– Difficult to copy
– Walled garden
Media Industry Structure
• Three separate segments(Print, Movies, Music)
• Each dominated by few key players with little crossover
• Delivery platform firms now becoming content producers
• Two dominant players in each distribution market
– A T & T’s proposed merger with Time Warner
– Verizon's purchase of A O L and Yahoo
Media Convergence
• Technological convergence
– Hybrid devices
• Content convergence
– Three aspects: Design, production,
distribution
– New tools for digital editing and
processing
• Industry convergence
– Merger of media enterprises into firms
that create and cross-market content on
different platforms
Figure 10.5 Convergence and the Transformation of Content: Books
Online Publishing Industry
• $80 billion based originally in print, moving rapidly to Internet
• Three segments
– Online newspapers
– E-books
– Online magazines
• Most troubled segment of publishing industry
– Revenues shrunk from $60 billion in 2002 to about $29 billion in 2016
• Four factors in decline
Online
– Growth of Web, mobile devices as alternative medium
Newspapers
– Alternative digital sources for news
– Failure to develop suitable new business models
– Rise of social media and role of directing traffic to newspaper content
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Figure 9.6 Newspaper Revenues 1981–2016
Figure 9.7 Online Newspaper Models 1995-2017
Strengths and Challenges
Magazines
Rebound
E-Books
and Online
Publishing
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Strength: Newspaper audience size
and growth
Challenge: Digital ad revenue
Strength: Content is king
Challenge: Finding a revenue model
Challenge: Growth of pure digital
competitors
Challenge: Can newspapers survive
digital disruption
• Physical magazine circulation falls after 2001
– Exception is special interest magazines
• Digital replica magazines
– Ad revenue growing
– Total audience size increasing
– Popular websites drive traffic to online magazines
– The New Yorker Today app
– iPad Subscription Service
– Magazine aggregators
• After several years of explosive growth, e-book sales have flattened in recent
years—$7.9 billion in 2017
– 30% of all consumer book sales
• New channel for self-publishing authors
• Major publishers still dominant source of book content
• While some large bookstore chains have disappeared, small independent
bookstores have grown 27% since 2009.
Amazon and Apple: The New • E-book hardware, software, combined with
Digital Media Ecosystems
online megastores
– Amazon Kindle: Linked to Amazon
store and cloud storage
– Apple iPad: Multipurpose tablet,
linked to Apple stores
• Authors able to bypass traditional agent,
publisher channels
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E-Book Business Models
•
•
•
Challenges of E-Book
Platform
•
•
•
•
E-book industry composition
– Intermediary retailers (booksellers),
traditional publishers, technology
developers, device makers (e-readers),
vanity presses
Wholesale model
– Retailers pay wholesale price and
establish retail price
Agency model
– Distributor as agent must charge
publisher’s retail price
Apple and book publisher price-fixing
Control over pricing
– Amazon controls largest market share
for e-books
– Amazon’s own book publishing brand
Further evolution of digital distribution
platform
– Kindle Unlimited subscription service
– Digital marketplace exchanges for
peer sharing of digital files
Converging technologies
– Interactive books, iBook Author, iBook
Textbooks
Figure 9.11 E-Book Sales
Online Entertainment Industry
• Four traditional players, one newcomer
– Television
- Radio broadcasting
– Hollywood films
- Music
– Games
• Internet is transforming industry:
– Mobile devices
- Social networks featuring video streaming
– Download and streaming services - Growth in broadband access
– Closed streaming platforms reduce need for D R M
• Emergence of very large-scale, integrated technology media companies
– Amazon, Google, Apple, and Netflix.
Figure 9.13 Projected Growth in U.S. Online Entertainment Revenue
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Television
• Transition to new Internet delivery platforms
– Streaming and downloading services
– O T T: Over-the-top (Internet) delivery
– Mobile platform
• Binge watching versus. linear T V
• Social T V
• F C C’s proposed “open set top box plan”
• Social network influences
• Uncertain future for cable T V growth
Feature-Length Movies
• Hollywood maintaining control of content creation, delivery and revenue
– D V Ds, rental D V Ds
– Electronic Sell Through (E S T) – downloading
movies
– Subscription streaming
– Video On Demand (V O D)
• Challenges
– Digital formats produce less revenue than physical
– Pressure to change release windows
– Growing strength of online movie distributors like
Netflix
– Sites streaming or providing downloads of pirated content Figure 9.16 Major Online Movie Distributors
Music
Games
• Most disrupted of content industries
• Online gaming has had explosive growth
– Move from physical to digital product
– Pokemon GO
– Distributor market dominated by Apple’s
– Mobile platform
iTunes
• Types of digital gamers
• Digital revenues: 78% of all revenues
– Casual
• Two types of digital music services
– Social
– Streaming subscription services (Internet
– Mobile—fastest growing market
radio)
– Massively multiplayer online (M M O)
– Digital download (download to own)
– Console
• Business models in flux
• E-sports, Twitch.tv
Figure 9.17 U.S. Music Revenues: Digital Versus. Physical
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Figure 9.20 Online Gaming Audience
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Chapter 10
Online Communities
E-Commerce
By: Ahmad Abd-Elsalam
Moussa Academy
00201007153601
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➢ At the end of this chapter, we`ll cover
10.1 Describe the different types of social networks
and online communities and their business models.
10.2 Describe the major types of auctions, their
benefits and costs, how they operate, when to use them,
and the potential for auction abuse and fraud.
10.3 Describe the major types of Internet portals
and their business models.
Social Networks and Online Communities
• Internet began as communications medium for scientists
• Early communities were bulletin boards, newsgroups (e.g., the Well)
• Today social networks, photo/video sharing, blogs have created new era of online socializing
• Social networks now one of most common Internet activities
What is an Online Social Network?
• Working definition of social network
– Group of people
– Shared social interaction
– Common ties
– Sharing an area for period of time
• Online social network
– Internet removes geographic and time limitations of offline social networks
The Growth of Social Networks and Online
Communities
• Top social networks: over 90% of social networking
activity
• Facebook users: More than 35% are 44+
• Growth of new social networks like Pinterest,
Instagram, Snapchat
• Search engine advertising still generates more revenue
than advertising on social networks
Figure 10.1: Top U.S. Social Networks 2017
Turning Social Networks into Businesses
• Most social networks monetize audiences through
advertising
– LinkedIn – fees for premium services
– Twitter – struggling to make profits
• Business use of social networks
– Marketing and branding
– Reaching younger audience
– Listening tool, monitoring online reputation
– Collaboration tool
Figure 10.2: U.S. Ad Spending on Social Networks, 2017
Types of Social Networks and Their Business Models
• General communities:
– Offer opportunities to interact with general audience organized into general topics
– Advertising supported by selling ad space on pages and videos
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•
Practice networks:
– Offer focused discussion groups, help, and knowledge related to area of shared practice
– May be profit or nonprofit; rely on advertising or user donations
• Interest-based social networks:
– Offer focused discussion groups based on shared interest in some specific subject
– Usually advertising supported
• Affinity communities:
– Offer focused discussion and interaction with other people who share same affinity (self or group
identification)
– Advertising and revenues from sales of products
• Sponsored communities:
– Created by government, nonprofit, or for-profit organizations for purpose of pursuing
organizational goals
Social Network Features and Technologies
• Algorithms, computer algorithms
– Produce relationship-based content
– Affinity groups
• Profiles, Newsfeed, Timeline, Favorites (Like)
• Friends networks, Groups, Network discovery
• Games and apps
• Instant messaging, Message boards
• Storage
Online Auctions
• C2C auctions, e.g. eBay
• B2C auctions
• Several hundred different auction sites in United States alone
• Online retail sites are adding auctions
• Can be used to
– Sell goods and services
– Allocate resources
– Allocate and bundle resources
Benefits of Auctions
Risks and Costs of Auctions
•
•
•
•
•
•
•
Liquidity
Price discovery
Price transparency
Market efficiency
Lower transaction costs
Consumer aggregation
Network effects
•
•
•
•
•
•
Delayed consumption costs
Monitoring costs
– Possible solutions include fixed pricing
Equipment costs
Trust risks
– Possible solution—rating systems
Fulfillment costs
Merchants also face risks; e.g. nonpayment, false
bidding, bid rigging, and so on
Auctions as an E-Commerce Business Model
• No inventory
• No fulfillment activities
– No warehouses, shipping, or logistical facilities
• eBay makes money from every stage in auction cycle
– Transaction fees, listing fees, financial services fees, advertising or placement fees
• Difficulty in establishing audience
– eBay dominates online auction market
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Types of Auctions
English auction:
Dutch Internet auction:
Penny (bidding fee) auction
• Single item up for sale to single seller
• Highest bidder wins
• Public ascending price, multiple units
• Final price is lowest successful bid, which sets price for all
higher bidders
• Must purchase bids ahead of time
• Items owned by the site
• Timed auction; last and highest bidder wins
• Users specify what they are willing to pay for goods or
services and multiple providers bid for their business
• Prices do not descend and are fixed
Name Your Own Price
• Consumer offer is commitment to buy at that price
Auction
• Enables sellers to unload unsold excess capacity
• Example: Priceline
Table 10.6: Factors to Consider When Choosing Auctions
Considerations
Description
Type of product
Rare, unique, commodity, perishable
Stage of product life cycle
Early, mature, late
Channel-management issues
Conflict with retail distributors; differentiation
Type of auction
Seller versus. buyer bias
Initial pricing
Low versus. high
Bid increment amounts
Low versus. high
Auction length
Short versus. long
Number of items
Single versus. multiple
Price-allocation rule
Uniform versus. discriminatory
Information sharing
Closed versus. open bidding
Auction Prices: Are They the Lowest?
• Auction prices not necessarily the lowest
• Auctions are social events
• Herd behavior
• Unintended results:
– Winner’s regret
– Seller’s lament
– Loser’s lament
• Consumer trust an important motivating factor in auctions
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Fraud and Abuse in Auctions
• Fraud produces information asymmetries between buyers and sellers, causing auctions to fail
• Types include:
– Bid rigging, price matching, shill feedback, feedback extortion, shill bidding, bid siphoning
• Fraud prevention solutions include:
– Rating systems, watch lists, proxy bidding
– Investigation units
E-Commerce Portals
• Most frequently visited sites on Web
• Original portals were search engines
– As search sites, attracted huge audiences
• Today provide:
– Navigation of the Web
– Commerce
– Content (owned and others’)
• Goal is to keep visitors present and viewing ads
• Enterprise portals
– Help employees find important
organizational content
Figure 10.4 the Top U.S. Portal/Search Engines, 2017
Types of Portals
• General purpose portals:
– Attempt to attract very large general
audience
– Retain audience by providing in-depth
vertical content channels
– Example: Yahoo
• Vertical market portals:
– Attempt to attract highly-focused, loyal
audiences with specific interest in:
▪ Community
▪ Specialized content
Figure 10.5 Two General Types of Portals: General Purpose and Vertical
Market Portals
Portal Business Models
• General advertising revenue
• Tenancy deals
– Fixed charge for number of impressions, exclusive
partnerships, “sole providers”
• Commissions on sales
• Subscription fees
– Charging for premium content
• Applications and games
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Chapter 11
E-commerce Retail
E-Commerce
By: Ahmad Abd-Elsalam
Moussa Academy
00201007153601
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➢ At the end of this chapter, we`ll cover
11.1 Understand the environment in which the online retail sector
operates today.
11.2 Explain how to analyze the economic viability of an online firm.
11.3 Identify the challenges faced by the different types of online
retailers.
11.4 Describe the major features of the online service sector.
11.5 Discuss the trends taking place in the online financial services
industry.
11.6 Describe the major trends in the online travel services industry
today.
11.7 Identify current trends in the online career services industry.
11.8 Understand the business models of on-demand service companies.
What’s New in Online Retail
• Retail mobile e-commerce exploding
• Social networks experiment with social e-commerce
• Local e-commerce skyrockets to around $80 billion
• Online retail still the fastest growing retail channel
• Selection of goods increases, includes luxury goods
• Specialty retail sites show rapid growth
• New subscription based model for online retailing
• Big data used for predictive marketing
The Online Retail Sector
• Most important theme in online retailing is effort to integrate online and offline operations
• $19.25 trillion U.S. economy
• U.S. retail market
– Personal consumption of goods and services accounts for $13.3 trillion (about 69%) of total
gross domestic product (G D P)
The Retail Industry
• 7 segments (clothing, durable goods, etc.)
– For each, uses of Internet may differ
▪ Information versus. direct
purchasing
• Mail order/telephone order (M O T O)
sector
– Most similar to online retail sector
– Sophisticated order entry, delivery,
inventory control systems
Figure 11.1 Composition of the U.S. Retail Industry
E-Commerce Retail: The Vision
• The Vision
– Reduced search and transaction costs; customers able to find lowest prices
– Lowered market entry costs, lower operating costs, higher efficiency
– Traditional physical store merchants forced out of business
– Some industries would be disintermediated
• Few of these assumptions were correct—structure of retail marketplace has not been revolutionized
• Internet has created new venues for omni-channel firms and supported a few pure-play merchants
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The Online Retail Sector Today
• Smallest segment of retail industry (9%)
• Growing at faster rate than offline segments
• Apparel and accessories generate highest
percentage of revenue
• 78% of Internet users bought online in 2017
• Primary beneficiaries:
– Established offline retailers with online
presence (e.g., Staples)
– Pure-play online retailers (e.g., Amazon)
• Omni-channel integration
– Integrating web operations with physical
store operations
• Leverage value of physical store
• Types of integration, e.g. online
order, in-store pickup
• Social e-commerce growth
• Location-based marketing of local goods and
services
• Rapidly growing mobile platform
Figure 11.2 Online Retail Revenues by Category, 2016
Figure 11.3 The Growth of Online Retail in the United States
Analyzing the Viability of Online Firms
• Economic viability:
– Ability of firms to survive as profitable business firms during specified period (i.e., 1–3 years)
• Two business analysis approaches:
– Strategic analysis
▪ Focuses on both industry as a whole and firm itself
– Financial analysis
▪ How firm is performing
Strategic Analysis Factors
• Key industry strategic factors
– Barriers to entry
- Power of suppliers
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– Power of customers
- Existence of substitute products
– Industry value chain
Nature of intra-industry competition
• Firm-specific factors
– Firm value chain
- Core competencies
– Synergies
- Technology
– Social and legal challenges
Financial Analysis Factors
• Statements of Operations
– Revenues
- Cost of sales
– Gross margin
- Operating expenses
– Operating margin
- Net margin(Pro forma earnings—E B I T D A)
• Balance sheet
– Asset
- Current assets
– Liabilities
- Current liabilities
– Long-term debt
- Working capital
E-Commerce in Action: Amazon.Com
Vision:
Earth’s biggest selection, lowest prices, most customer-centric
Business model:
Retail, Third-Party Merchants, and Amazon Web Services
Financial analysis:
Continued explosive revenue growth, profitable
business
Maximize sales volume, lower costs and prices, acquisitions, mobile
strategy:
shopping, new products and services
competition: Online and offline general and catalog merchandisers, Web services
Strategic analysis
technology:
Largest, most sophisticated collection of online retailing
technologies available
social, legal: Sales tax, patent lawsuits
Future prospects:
– Amazon has turned corner to sustainable profitability
– Landmark $879 profit in 2016 Q2
– Increased profits from Amazon Web Services
– Amazon Prime
– Continues to invest in future products and services
E-Tailing Business Models
• Virtual merchant
– Amazon, Newegg, Overstock, Wayfair, Blue Nile
• Omni-channel merchants (bricks-and-clicks)
– Walmart, Macy’s, J C Penney, Staples, Target
• Catalog merchant
– Lands’ End, L.L. Bean, C D W Corp, Cabela’s
• Manufacturer-direct
– Apple, Dell, Sony
– Digital native verticals: Warby Parker, Everlane Figure 11.4 Share of Online Retail Sales by Company Type
Common Themes in Online Retailing
• Online retail fastest growing channel in retail commerce
– Profits for startup ventures have been difficult to achieve
• Disintermediation has not occurred
• Established merchants need to create integrated shopping experience to succeed online
• Growth of online specialty merchants (e.g., Blue Nile)
• Extraordinary growth of social, local, and mobile e-commerce
• Increasing use of big data analytics by retailers
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The Service Sector: Offline and Online
• Service sector:
– Largest and most rapidly expanding part of economies of advanced industrial nations
– Concerned with performing tasks in and around households, business firms, and institutions
▪ Includes doctors, lawyers, accountants, business consultants, and so on
– Employs 4 out of 5 U.S. workers
– 80% of U.S. G D P
Service Industries
• Major service industry groups:
– Finance
- Insurance
– Real estate
- Travel
– Professional services—legal, accounting
– Business services—consulting, advertising, marketing, and so on
– Health services
- Educational services
Online Financial Services
• E-commerce has transformed banking and financial services
– Major institutions deploy online services
• Online financial consumer behavior
– Most online consumers use financial services sites
▪ Check balances
▪ Pay bills
– Experienced users move on to more complex financial services
Online Banking and Brokerage
• Established brand-name national banks have taken substantial lead in market share
• Over 60% of U.S. adults use online banking
• Online banking provides significant savings for bank
• Early innovators in online brokerage (E*Trade) have been displaced by established brokerages
(Fidelity, Schwab)
• Online financial advisors
Multi-Channel versus. Pure Online Financial Service Firms
• Online consumers prefer multi-channel firms with physical presence
• Multi-channel firms
– Growing faster than pure online firms
– Lower online customer acquisition costs
• Pure online firms
– Cannot provide all services that require face-to-face interaction
Financial Portals and Account Aggregators
• Financial portals
– Comparison shopping services, independent financial advice, financial planning
– Revenues from advertising, referrals, subscriptions
– Example: Yahoo! Finance, Quicken, M S N Money
• Account aggregation
– Pulls together all of a customer’s financial data at a personalized website
– Privacy concerns: control of personal data, security, and so on
– Example: Yodlee
Online Mortgage and Lending Services
• Market is slowly growing; dominated by:
– Established online banks, brokerages, and lending organizations
– Traditional mortgage vendors
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– Pure online mortgage firms
• Online mortgage industry has not transformed process of obtaining mortgage
• Rocket Mortgage
• Online lending services
Online Insurance Services
• Online term life insurance
– One of few online insurance with lowered search costs, increased price comparison, lower prices
– Commodity
• Most insurance not purchased online
• Online industry geared more toward
– Product information, search
– Price discovery
– Online quotes
– Influencing the offline purchasing decision
Online Real Estate Services
• Early vision: Disintermediation of a complex industry
• However, major impact is influence of purchases offline
– Impossible to complete property transaction online
– Main services are online property listings, loan calculators, research and reference material,
with mobile apps increasing
• Despite revolution in available information, there has not been a revolution in the industry value chain
Online Travel Services
• One of the most successful B2C e-commerce segments
– More travel is booked online than offline
– Online travel services revenues in 2017: Almost
$190 billion
• For consumers: More convenient than traditional
travel agents
• For suppliers: A singular, focused customer pool that
can be efficiently reached through onsite advertising
• Travel an ideal service/product for Internet
– Information-intensive product
– Electronic product—travel arrangements can
be accomplished for the most part online
– Does not require inventory
Figure 11.5 Online Travel Services Revenues
– Does not require physical offices with multiple employees
– Suppliers are always looking for customers to fill excess capacity
– Does not require an expensive multi-channel presence
The Online Travel Market
• Four major sectors:
– Airline tickets
▪ Greatest source of revenue
– Hotel reservations
– Car rentals
– Travel packages
• Corporate online-booking solutions (C O B S)
Online Travel Industry Dynamics
• Intense competition among online providers
• Price competition difficult
• Industry consolidation
• Industry impacted by meta-search engines
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– Commoditize online travel
• Mobile applications are also transforming industry
• Social media content, reviews have an increasing influence on travel purchases
Online Career Services
• Two main players: CareerBuilder, Monster
– Indeed, Glassdoor, SimplyHired, LinkedIn
• Five traditional recruitment tools:
– Classified and print ads, career expos, on-campus recruitment, staffing firms, internal referral
programs
• Online recruiting
– More efficient, cost-effective, reduces total time-to-hire
– Enables job hunters to more easily distribute resumes while conducting job searches
• Ideally suited for Web due to information-intense nature of process
It’s Just Information: The Ideal Web Business?
• Recruitment ideally suited for the Web
– Information-intense process
– Initial match-up doesn’t require much personalization
• Saves time and money for both job hunters and employers
• One of most important functions:
– Ability to establish market prices and terms (online national marketplace)
Online Recruitment Industry Trends
• Social recruiting
– 87% recruiters use social recruiting, LinkedIn
• Mobile
– Millennials and Gen X use primarily mobile devices
• Job search engines/aggregators:
• Data analytics and algorithms
• Hiring by algorithm
– Sifting online applications for key words
On-Demand Service Companies
• Platforms for users to share/lease assets and resources
– Bikes, cars, homes, rooms with beds, etc.
– Fees collected from sellers and buyers
• Use of online reputation systems, peer review
• Successful firms are disrupters, lowering cost of services
– Uber
– Airbnb
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Chapter 12
B2B E-Commerce: Supply Chain
Management and Collaborative
Commerce
E-Commerce
By: Ahmad Abd-Elsalam
Moussa Academy
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➢ At the end of this chapter, we`ll cover
12.1 Discuss the evolution and growth of B2B e-commerce, as well
as its potential benefits and challenges..
12.2 Understand how procurement and supply chains relate to B2B
e-commerce.
12.3 Identify major trends in supply chain management and
collaborative commerce.
12.4 Understand the different characteristics and types of Net
marketplaces.
12.5 Understand the objectives of private industrial networks, their
role in supporting collaborative commerce, and the barriers to their
implementation.
Trends in B2B E-Commerce
• Flexibility: growing emphasis on rapid-response and optimal supply chains
• Resurgence in Net marketplaces bringing together hundreds of suppliers and thousands of buying firms
• Supply chain visibility—real time
• Social/mobile commerce and customer intimacy
• Cloud computing
• Big data and growing use of business analytics
• Internet of Things
• Accountable and sustainable supply chains
Basic Definitions
B2B commerce:
– All types of computer-enabled inter-firm trade
– Before Internet, B2B transactions called trade or procurement process
B2B e-commerce:
The portion of B2B commerce enabled by the Internet
Supply chains
– Organizations, people, business processes, technology, information required to
produce products efficiently
– Often global
The Evolution of B2B Commerce
• Automated order-entry systems
– Seller-side solution
• Electronic data interchange (E D I)
– Buyer-side solution
– Hub-and-spoke system
– Serve vertical markets
• B2B e-commerce websites
• Net marketplaces
• Private industrial networks
The Growth of B2B E-Commerce
Figure 12.1 Evolution of the Use of Technology Platforms in B2B Commerce
• B2B e-commerce will grow to 50% of total U.S. inter-firm trade by 2021
• Private industrial networks continue to play dominant role in B2B
• Non-E D I B2B e-commerce most rapidly growing type of e-commerce
• E D I continues as workhorse of B2B commerce
• Not all industries similarly affected by B2B e-commerce
• Not all industries would benefit equally
• Factors influencing move to e-commerce
o Significant utilization of E D I
o Large investments in I T and Internet infrastructure
o Market concentrated on purchasing or selling
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Figure 12.2 Growth of B2b E-Commerce in the United States
Potential Benefits and Challenges of B2B E-Commerce
1. Lower administrative costs
2. Lower search costs for buyers
3. Reduced inventory costs
4. Lower transaction costs
5. Increased production flexibility by ensuring just-in-time parts delivery
6. Improved quality of products by increasing cooperation among buyers and sellers
7. Decreased product cycle time
8. Increased opportunities for collaboration
9. Greater price transparency
10. Increased visibility, real-time information sharing
11. However, some risk is posed by increased globalization and consolidation
The Procurement Process and the Supply Chain
• Procurement process:
– The way firms purchase materials they need to make products
• Steps in procurement process
– Deciding who to buy from and what to pay
– Completing transaction
– Each step is composed of many business processes and subactivities requiring data to be
recorded in seller, buyer, and shipper information systems
Figure 12.3 The Procurement Process
Types of Procurement
• Firms purchase two types of goods
– Direct goods: Integrally involved in production process
– Indirect goods: All goods not directly involved in production process (M R O goods)
• Firms use two methods to purchase
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– Contract purchasing:
▪ Involves long-term written agreements to purchase specified products, with agreed-upon
terms and quality
– Spot purchasing:
▪ Involves purchase of goods based on immediate needs in larger marketplaces that involve
many suppliers
• Procurement is highly information intensive and labor intensive
– Requires managing information among many corporate systems
– Involves over 1 million U.S. workers
• Purchasing managers
– Key players in procurement process
– Key decision-makers for adoption of B2B e-commerce solutions
Multi-Tier Supply Chain
• Complex series of transactions between firm and
thousands of suppliers, supplying thousands of goods
• Challenges
– Supply chain visibility
– Demand forecasting
– Production scheduling
– Order management
– Logistics management
The Role of Existing Legacy Computer Systems
• Legacy computer systems
Figure 12.4 The Multi-Tier Supply Chain
– Generally, older mainframe and minicomputer systems used to manage key business processes
within firm
• Enterprise systems
– Corporate-wide
– Support/control all aspects of production, including
▪ Procurement
▪ Finance
▪ Human resources
Trends in Supply Chain Management
• Supply chain management (S C M)
– Activities used to coordinate procurement process
• Major trends in S C M
– Continual efforts to improve process
– Trends include: Just-in-time and lean production, supply chain simplification, adaptive
supply chains, sustainable supply chains, electronic data interchange, supply chain
management (S C M) systems
Just-In-Time and Lean Production
• Just-in-Time production
– Method of inventory cost management
– Seeks to keep excess inventory at a bare minimum
• Lean production
– Set of production methods and tools
– Focuses on elimination of waste throughout customer value chain, not just inventory
Supply Chain Simplification
• Reducing size of supply chain
– Working with strategic group of suppliers to reduce product and administrative costs and
improve quality
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•
•
Essential for just-in-time production models
May involve:
– Joint product development and design
– Integration of computer systems
– Tight coupling
▪ Ensuring precise delivery of ordered parts at specific times
Adaptive Supply Chains
• Reducing centralization
– Reduce risks caused by relying on single suppliers who are subject to local instability
▪ For example: European financial crisis, Japanese earthquake
• Creating regional- or product-based supply chains
– Allowing production to be moved to temporary safe harbors in case of local manufacturing
disruptions
– Focus on “optimal-cost”, distributed manufacturing, and flexible supply chains that can shift to
low-risk areas
Accountable Supply Chains
• Labor conditions in low-wage, under-developed producer countries are acceptable to consumers
– Slave/forced and child labor
– Routine exposure to toxic substances
– More than 48 hours/week
– Harassment, abuse, and sexual exploitation
– Adequate compensation
• Efforts to make global supply chains more accountable and transparent to reporters and citizens
– Fair Labor Association
– National Consumers League, Human Rights First, and more
Sustainable Supply Chains
• Taking social and ecological interests into account
– For example: water usage, air pollution
• Using most efficient environment for production, distribution, logistics
– Good business, over long-term
▪ Good risk management
– Create value for consumers, investors, communities
Electronic Data Interchange (E D I)
• Communications protocol for exchanging documents among
computers
– Each industry has own standards
• Developed in 1970s, 80s to automate exchange and reduce
cost and errors in purchase orders, shipping documents,
and more
• Today, provides for exchange of critical business
information between computer applications supporting wide
variety of business processes
• Suited to small set of strategic partners
Mobile B2B
Figure 12.5 The Evolution of E D I as a B2B Medium
• Mobile devices increasingly important in all aspects of B2B e-commerce
– Used in all phases of purchase process
– Users increasingly expect B2B e-commerce sites to be accessible from mobile devices
• Bring Your Own Device (B Y O D) policies
• Supply chain software and network providers providing support for mobile platform
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B2B in the Cloud
• Cloud-based B2B systems
– Shift much of the expense of B2B systems from firm to B2B network provider (data hub or B2B
platform)
• Cloud platform owner provides
– Computing/telecommunications capabilities
– Software
– Connectivity
– Data cleansing and quality
– File storage
• Network effects: Costs spread out over all members
• Cloud-based solutions can be implemented rapidly
Supply Chain Management Systems
• Continuously link activities of buying, making, and moving
products from suppliers to purchasing firms
– S A P and Oracle Mobile apps for smartphones,
tablets
• Integrates demand side of business equation by including
order entry system in the process
• With S C M system and continuous replenishment, inventory
is eliminated and production begins only when order is
received
• Hewlett Packard’s S C M system: Elapsed time from order
entry to shipping P C is 48 hours
Figure 12.7 Supply Chain Management Systems
Collaborative Commerce
• Use of digital technologies for organizations to collaboratively design, produce, and manage products
through life cycles
• Moves focus from transactions to relationships among
supply chain participants
• Unlike E D I, more like an interactive teleconference
among members of supply chain
• Use of Internet technologies for rich communications
environment
– Sharing designs, documents, messages, network
meetings, videconferencing
Social Networks and B2B
Figure 12.8 Elements of a Collaborative Commerce System
• Social networks can provide personal connections that can help decision making in supply chain
• Example: Dell’s YouTube channel
• Example: Cisco’s Facebook pages for product campaigns for business clients
B2B Marketing
• More interpersonal than traditional retail marketing
• B2B contract selling
– Very long-standing relationships between suppliers and buyers
• Spot purchase markets for M R O, commodities
– More similar to B2C marketing tactics
– Mobile advertising
– Predictive analytics
– Sales enablement systems
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Net Marketplaces
• Ways to classify Net marketplaces:
– Pricing mechanism, nature of market served,
ownership
• By business functionality
– What businesses buy (direct versus. indirect goods)
– How businesses buy (spot purchasing versus. longterm sourcing)
– Four main types
▪ E-distributors
▪ E-procurement
▪ Exchanges
▪
Industry consortia
Table 12.3 Characteristics of Net Marketplaces: A B2B Vocabulary
Figure 12.9 Pure Types of Net Marketplaces
Characteristic
Meaning
Bias
Sell-side versus. buy-side versus. neutral. Whose interests are advantaged: buyers,
sellers, or no bias?
Ownership
Industry versus. third party. Who owns the marketplace?
Pricing mechanism
Fixed-price catalogs, auctions, bid/ask, and R F P s/R F Q s
Scope/focus
Horizontal versus. vertical markets
Value creation
What benefits do they offer customers or suppliers?
Access to market
In public markets, any firm can enter, but in private markets, entry is by invitation
only
E-Distributors
• Most common type of Net marketplace
• Electronic catalogs representing products of thousands
of direct manufacturers
• Typically, independently owned intermediaries
• Offer industrial customers single source to purchase
indirect goods (M R O) on spot basis
• Typically, horizontal
• Usually, fixed price discounts for large customers
• Example: W.W. Grainger, Amazon Business
E-Procurement Net Marketplaces
• Independently owned intermediaries
• Connect hundreds of suppliers of indirect goods
• Firms pay fees to join market
• Long-term contractual purchasing of indirect
goods
• Revenues from transaction fees, licensing
consultation services and software, network fees
• Offer value chain management (V C M) services
• Many-to-many market
• Example: Ariba
Figure 12.10 E-Distributors
Figure 12.11 E-Procurement Net Marketplaces
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Exchanges
• Independently owned online marketplaces
• Connect hundreds to thousands of suppliers and buyers in
dynamic, real-time environment
• Vertical market, spot purchasing, single industry
• Typically charge commission fees on transaction
• Tend to be buyer-biased; suppliers disadvantaged by
competition
• Many have failed due to low liquidity
Industry Consortia
• Industry-owned vertical markets
• Purchase of direct inputs from set of invited participants
• Emphasize long-term contractual purchasing, stable
relationships, creation of data standards
• Aim to unify supply chain within entire industry through
common platform
• Revenue from transaction and subscription fees
Figure 12.12 Exchanges
Private Industrial Networks
• Most prevalent form of B2B e-commerce
• Web-enabled networks for coordination of transorganizational business processes (collaborative
commerce)
Figure 12.13 Industry Consortia
– Direct descendant of E D I; closely tied to E R P systems
– Manufacturing and support industries
– Single, large manufacturing firm
sponsors network
• Range in scope from single firm to entire
industry
• Example: Procter & Gamble
• Objectives include:
– Efficient purchasing and selling
industry-wide
– Increasing supply chain visibility
– Closer buyer–supplier relationships
– Global scale operations
Figure 12.14 P&G’s Private Industrial Network
• Focus on continuous business process coordination
• Typically, focus on single sponsoring company that “owns” the
network
Private Industrial Networks and Collaborative Commerce
• Forms of collaboration:
– Collaborative resource planning, forecasting, and
replenishment (C P F R):
– Demand chain visibility
– Marketing coordination and product design
▪ Can ensure products fulfill claims of marketing
▪ Feedback enables closed loop marketing
Figure 12.15 Pieces of the Collaborative Commerce Puzzle
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Implementation Barriers
• Concerns about sharing of proprietary, sensitive data
• Integration of private industrial networks into existing E R P systems and E D I networks difficult,
expensive
• Requires change in mindset and behavior of employees and suppliers
– All participants lose some independence
Careers in E-Commerce
• Position:
– Social Media Associate,
– E-commerce Privacy Research Associate,
– Digital Audience Development Specialist,
– Social Marketing Specialist, :
– Associate, E-commerce Initiatives
– Junior Supply Chain Analyst
• Qualification/Skills
• Preparing for the Interview
• Possible Interview Questions
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