Chapter 4
E-Commerce, Digital Markets, Digital Goods
Lecture 7
TIM 50 Autumn 2012
Announcement
1. HW#2 due Next Tuesday, OCT 23
2. Database assignment 1 due Next
Thursday, OCT 25 (submit the
Access file by eCommons. The file
ends in .accdb extention)
3. Business Paper Proposal due Next
Thursday, OCT 25(submit by
eCommons)
2. Computer Lab Hour(if you know Microsoft Access, You may not attend)
Date Time : Oct 18 : 08:00 -09:30 PM
Location: Baskin Engineering Building Room 109
Instructor: TAs.
* Due to space limit: you should arrange Date and time(All class are same)
e- Business, Digital Markets
e - Commerce
Goods, Services
e – Business Systems
e –Business Models
IT Systems
e-Revenue Models
e – Business Entrants
e-Business Challenges
New Directions
DBMS, OLAP, and Data Mining
DBMS
OLAP
Data Mining
Task
Extraction of detailed
and summary data
Summaries, trends and
forecasts
Knowledge discovery
of hidden patterns
and insights
Type of result
Information
Analysis
Insight and
Prediction
Eight unique features of e-commerce
technology
1. Ubiquity
2. Global reach
3. Universal standards
4. Interactivity
5. Richness Interactivity
6. Information density
7. Personalization/Customization:
8. Social technology
Key concepts in e‐commerce
Digital markets reduce: Info Asym., Price.
Digital markets enable: no‐Mediator, Dyn. Price.
E‐commerce business models
Portal, E‐tailer, Content Provider, Transaction Broker,
Market Creator, Service Provider, Community Provider
Digital goods
Goods that can be delivered over a digital network
Cost of producing first unit almost entire cost of product: marginal cost of 2nd unit is about zero
Types of e‐commerce
•Business‐to‐Consumer (B2C)
•Business‐to‐Business (B2B)
•Consumer‐to‐Consumer (C2C)
•Mobile commerce (m‐commerce)
P: People B2P, P2P..
G: Government, B2G, G2B….
TWITTER SEARCHES FOR A BUSINESS MODEL
Based on your reading in this chapter, how would you characterize Twitter’s business model?
If Twitter is to have a revenue model, which of the revenue models described in this chapter would work?
What is the most important asset that Twitter has and how could it monetize this asset?
What impact will a high customer churn rate have on Twitter’s potential advertising revenue?
E‐commerce revenue models
1. Advertising 2. Sales 3. Subscription
4. Free/ Fremium
5. Transaction Fee 6. Affiliate
7….
Necessity , Intelligence(Wisdom), Customer Needs Change the matters
Most popular Web 2.0 service: social networking
Social networking sites sell banner ads, user preference information, and music, videos and e‐books
Social shopping sites
Swap shopping ideas with friends (Kaboodle, ThisNext)
Wisdom of crowds/crowdsourcing (Selective**)
Large numbers of people can make better decisions about topics and products than a single person
Prediction markets: Peer‐to‐peer betting markets on specific outcomes (elections, sales figures, designs for new products)
• Interactive marketing and personalization
• Web sites are bountiful source of details about custo
mer behavior, preferences, buying patterns used to
tailor promotions, products, services, and pricing
• Clickstream tracking tools: Collect data on customer
activities at Web sites
- Used to create personalized Web pages
• Collaborative filtering: Compares customer data to
other customers to make product recommendations
Filtering: to select or pick needed information
FACEBOOK: MANAGING YOUR PRIVACY
FOR THEIR PROFIT
What concepts in the chapter are illustrated in this case?
Describe the weaknesses of Facebook’s privacy policies and features. What management, organization, and technology fact
ors have contributed to those weaknesses?
List and describe some of the options that Facebook managers have in balancing privacy and profitability. How can Facebook better safeguard user privacy? What would be the impact on its profitability and business model?
Do you anticipate that Facebook will be successful in developing a business model that monetizes their site traffic?
Why or why not?
E‐commerce marketing
Internet provides marketers with new ways of identifying and communicating with customers
Long tail marketing: Ability to reach a large audience inexpensively
Behavioral targeting: Tracking online behavior of individuals on thousands of Web sites
Advertising formats include search engine marketing, display ads, rich media, and e‐mail
WEB SITE VISITOR TRACKING
E-commerce Web sites have tools to track a shopper’s every step through an o
nline store. Close examination of customer behavior at a Web site selling wome
n’s clothing shows what the store might learn at each step and what actions it c
ould take to increase sales.
WEB SITE PERSONALIZATION
Firms can create
unique personaliz
ed Web pages
that display
content or ads for
products or
services of special
interest to
individual users,
improving the
customer
experience and
creating
additional value.
• Blogs
• Personal web pages that contain series of
chronological entries by author and links to related
Web pages
• Has increasing influence in politics, news
• Corporate blogs: New channels for reaching
customers, introducing new products and services
• Blog analysis by marketers
• Customer self-service
• Web sites and e-mail to answer customer questions or
to provide customers with product information
• Reduces need for human customer-support expert
HOW AN ADVERTISING NETWORK
SUCH AS DOUBLECLICK WORKS
Advertising
networks have
become
controversial
among privacy
advocates
because of
their ability to
track individual
consumers
across the
Internet.
Business‐to‐business e‐commerce
Electronic data interchange (EDI)
Computer‐to‐computer exchange of standard transactions such as invoices, purchase orders
Major industries have EDI standards that define structure and information fields of electronic documents for that industry
More companies increasingly moving away from private networks to Internet for linking to other firms
E.g. Procurement: Businesses can now use Internet to locate most low‐cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, etc.
EDI
Uses private communications networks (VANs)
to transmit standardized transaction data betw
een business partners and suppliers
Automating transactions using EDI
Drastically reduced the amount of paperwork
and the need for human intervention
Internet
Provided the ideal platform for conducting EDI
transactions
VAN: Value added network, special secured private extranet
ELECTRONIC DATA INTERCHANGE (EDI)
Companies use EDI to automate transactions for B2B e-commerce and continuous
inventory replenishment. Suppliers can automatically send data about shipments
to purchasing firms. The purchasing firms can use EDI to provide production and
inventory requirements and payment data to suppliers.
Private industrial networks (private exchanges)
Large firm using extranet to link to its suppliers, distributors and other key business partners Owned by buyer Permits sharing of:
Product design and development
Marketing
Production scheduling and inventory management
Unstructured communication (graphics and e‐mail)
A PRIVATE INDUSTRIAL NETWORK
A private industrial
network, also
known as a private
exchange, links a
firm to its supplie
rs, distributors,
and other key
business partners
for efficient supply
chain managemen
t and other
collaborative
commerce
activities.
Net marketplaces (e‐hubs)
Single market for many buyers and sellers
Industry‐owned or owned by independent intermediary
Generate revenue from transaction fees, other services
Use prices established through negotiation, auction, RFQs, or fixed prices
May focus on direct or indirect goods
May be vertical or horizontal marketplaces
Exostar: BAE System, Boeing, Lockheed Martin, Raytheon, Rolls-Royce
-Defense marketplace for 16,000 Companies
A NET MARKETPLACE
Net marketplaces are
online marketplaces
where multiple buyers
can purchase from
multiple sellers.
Exchanges
Independently owned third‐party Net marketplaces
Connect thousands of suppliers and buyers for spot purchasing
Typically provide vertical markets for direct goods for single industry (food, electronics)
Proliferated during early years of e‐commerce; many have failed
Competitive bidding drove prices down and did not o
ffer long‐term relationships with buyers or services to make lowering prices worthwhile
Vertical, Horizontal Markets: steps of producing
Direct Goods, indirect Goods ; source to the producing
M‐commerce
Although m‐commerce represents small fraction of total e‐commerce transactions, revenue has been steadily growing
Location‐based services
Banking and financial services
Wireless advertising and retailing
Games and entertainment
Methods for delivering m-commerce services
Directly from cell phone service providers
Via mobile Internet or Web applications
Location-based m-commerce applications
Using Short Message Service (SMS) text messaging or
Multimedia Messaging Service (MMS)
Using short-range wireless technology, such as infrared
Proximity payment system
Technologies and standards
Wireless Application Protocol (WAP)
a communication standard used by developers
to create m-commerce applications
Wireless Markup Language (WML)
Infrared or Bluetooth wireless networking
technology
Near Field Communications (NFC)
Open Mobile Alliance (OMA)
Hundreds of mobile operators, device and
network suppliers and companies have joined
together to create standards and interoperability
between mobile devices
CONSOLIDATED MOBILE COMMERCE REVENUES
Mobile e-commerce is the fastest growing type of B2C e-commerce although
it represents only a small part of all e-commerce in 2010.
• Digital payments systems for m-commerce
• Three types of mobile payment systems in use in
Japan
• Stored value system charged by credit cards or
bank accounts
• Mobile debit cards
• Mobile credit cards
• In the U.S., the cell phone has not yet evolved into
a mobile payment system
• Limitations in mobile’s access of Web information
• Data limitations
• Small display screens
• Wireless portals (mobile portals)
• Feature content and services optimized for mobil
e devices to steer users to information they are
most likely to need
Building an e-Commerce Web Site
Business decisions drive the technology ‐ not the reverse Business objectives Capabilities the site should have
System functionality E.g. execute a transaction payment
Technological capability to achieve this objective
E.g. a shopping cart or other payment system
Information requirements
E.g. secure credit card clearing, multiple payment options
Assembling a team with the skills required to make decisions about:
Technology
Site design
Social and information policies
Hardware, software, and telecommunications infrastructure
Customer’s demands should drive the site’s technology and design
Implementing e-commerce
Requires large investment and expertise
E-Commerce host
A company that takes on some or all of the
responsibility of setting up and maintainin
g an e-commerce system for a business or
organization
Check Off List for the e-Business Establishment
Alternatives in building the Web site Completely in‐house
Mixed responsibility
Completely outsourced
Co‐location
Web site budgets
Several thousand to millions / year
50% of a budget is system maintenance and content creation
CHOICES IN BUILDING AND HO
STING WEB SITES
You have a number of alternatives to con
sider when building and hosting an e-co
mmerce site.
COMPONENTS OF A WEB SITE BUDGET
• Types of electronic payment systems
• Digital wallet
• Stores credit card and owner identification
information and enters the shopper’s name, credit
card number, and shipping information
automatically when invoked to complete
a purchase
• Accumulated balance digital payment systems
• Used for micropayments ($10 or less)
• Accumulating debit balance that is paid
periodically on credit card or telephone bills
proximity payment system
allows customers to transfer funds wirelessly between
their mobile device and a point-of-sale terminal
Electronic cash (e-cash or digital cash)
Provides a private and secure method of transferring
funds from a bank account or credit card to online
vendors or individuals
PayPal: Best-known e-cash provider
E-cash benefits
Privacy - hides account information from vendors
Convenient if seller cannot process a credit card
Smartcards
Credit cards with embedded microchips that can store
and process data and can be used as electronic wallets
• Stored value payment systems
• Enable online payments based on value stored in on
line digital account
• May be merchant platforms or peer-to-peer (PayPal)
• Digital checking
• Extend functionality of existing checking accounts to
be used for online payments
• Electronic billing presentment and payment systems
• Paying monthly bills through electronic fund
transfers or credit cards
Major consideration?
No Physical Substances, networked, S/W
There are significant privacy and security
concerns
Public network
No buyer or seller identity verification
Hacker attacks
Digital certificate
A type of electronic business card
Attached to Internet transaction data
Verifies the sender of the data
Provided by certification authorities
Encryption
Uses high-level mathematical functions and
computer algorithms to transform data so t
hat it is unintelligible to all but the intended
recipient
Securing data in transit
Secure Sockets Layer (SSL)
Digital certificates combined allows for encrypte
d communications to occur between Web brows
er and Web server
Transport Layer Security (TLS)
A URL associated with this begins with https
Allow for encrypted communication to occur bet
ween browsers and servers
Secures usernames, passwords, credit card infor
mation
Great pains are taken to ensure that transaction
processing systems remain in working order
Business resumption planning (BRP)
Takes into account every possible disaster
and provides courses of action to minimize
negative effects
The goal is to protect data and keep key
systems operating until order is resumed
Summary of Class
Types of e‐commerce
•Business‐to‐Consumer (B2C)
•Business‐to‐Business (B2B)
•Consumer‐to‐Consumer (C2C)
•Mobile commerce (m‐commerce)
P, G ??
E‐commerce revenue models
1.
2.
3.
4.
5.
6.
Advertising Sales Subscription
Free/ Fremium
Transaction Fee Affiliate
Most popular Web 2.0 service: social networking
Social shopping sites
Wisdom of crowds/crowdsourcing (Selective**)
Prediction markets: • Interactive marketing and personalization
E‐commerce marketing
Long tail marketing
Behavioral targeting
Advertising formats
Business‐to‐business e‐commerce
Electronic data interchange (EDI)
Net marketplaces (e‐hubs)
Single market for many buyers and sellers
Industry‐owned or owned by independent intermediary
Generate revenue from transaction fees, other services
Use prices established through negotiation, auction, RFQs, or fixed prices
May focus on direct or indirect goods
May be vertical or horizontal marketplaces
A NET MARKETPLACE
Net marketplaces are
online marketplaces
where multiple buyers
can purchase from
multiple sellers.
M‐commerce
Although m‐commerce represents small fraction of total e‐commerce transactions, revenue has been steadily growing
Location‐based services
Banking and financial services
Wireless advertising and retailing
Games and entertainment
Methods for delivering m-commerce services
Directly from cell phone service providers
Via mobile Internet or Web applications
Location-based m-commerce applications
Using Short Message Service (SMS) text messaging or
Multimedia Messaging Service (MMS)
Using short-range wireless technology, such as infrared
Proximity payment system
• Limitations in mobile’s access of Web information
• Data limitations
• Small display screens
• Wireless portals (mobile portals)
• Feature content and services optimized for mobil
e devices to steer users to information they are
most likely to need
Building an e-Commerce Web Site
System functionality Technological capability to achieve this objective
Information requirements
CHOICES IN BUILDING AND HO
STING WEB SITES
You have a number of alternatives to con
sider when building and hosting an e-co
mmerce site.
COMPONENTS OF A WEB SITE BUDGET
Major consideration
There are significant privacy and security
concerns
Public network
No buyer or seller identity verification
Hacker attacks
Digital certificate
A type of electronic business card
Attached to Internet transaction data
Verifies the sender of the data
Provided by certification authorities
Encryption
Uses high-level mathematical functions and
computer algorithms to transform data so t
hat it is unintelligible to all but the intended
recipient
Securing data in transit
Secure Sockets Layer (SSL)
Digital certificates combined allows for encrypte
d communications to occur between Web brows
er and Web server
Transport Layer Security (TLS)
A URL associated with this begins with https
Allow for encrypted communication to occur bet
ween browsers and servers
Secures usernames, passwords, credit card infor
mation
Great pains are taken to ensure that transaction
processing systems remain in working order
Business resumption planning (BRP)
Takes into account every possible disaster
and provides courses of action to minimize
negative effects
The goal is to protect data and keep key
systems operating until order is resumed