Table Content

E-commerce

business. technology. society.

SIXTH EDITION

Kenneth C. Laudon Carol Guercio Traver New York University Azimuth interactive,

PEARSON

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PREFACE

WHAT'S NEW IN THE SIXTH EDITION

Currency

The 6th edition features all new or updated opening, closing and "Insight On' cases.

The text, as well as all of the data, figures and tables in the book, have been updated

through August 2000 with the latest marketing and business intelligence available

from eMarketer, Pew Internet 0-• American Life Project, Forrester Research, Jupiter

Research, Gartner and other industry sources.

New Themes and Content

The 6th edition spotlights lie I llowing new themes and content:

Business

• Impact of the 2009 recession: Despite the recession, e-commerce continues to

thrive.

• Lmergence of ne e-commerce business opportunities for mobile content (the "4th

screen"), software applications, location-based services, shopping on the fly, and

mobile payment

• Continued explosive growth in Web 2.0 services such as 'I -Witter and Facebook and

expansion of social marketing opportunities

• [-books finally take off

• "Free' and "Fremium" business models for digital content.

• New search engines such as Ping and WolframAlpha challenge Google

• Music labels, I Iollywood and TV producers strike deals for Web distribution

• Google's Chrome enters Microsoft's market, threatens to become a new operating

system for Netbooks

1Cchnology

• Rapid growth of the mobile digital platform including smartphones, netbooks, and

ethook readers, coupled with 20 and 40 cellular network expansion

• Cloud computing provides the computing irthastructure for a massive increase in

digital infOrmation

iii

iv

Preface

• Open source software tools such as Drupal and Iladoop, and declining hardware

prices, greatly lower the cost of developing sophisticated Web sites

• Internet security concerns remain high; rivberwarfare incidents increase

• Web 3.0 and the semantic Web continues to inspire technology firms and !Prai-

rie 111 - 8

• Net neutrality supporters reconsider differential pricing

Society

• Growth of the mobile, "always on' culture in business and family life

• Intellectual property issues remain a source of conflict; movement toward resolu-

tion in some areas, such as Google's deal with publishing industry

• Digital piracy remains prevalent, despite the shutdown of P2P network Pirate's Pip'

• Privacy and user control of personal information on social networks conflict with

company attempts to monetize investment

• Most new Internet growth in Asia and China; localization of Web increases

• Venture investing in e-commerce drastically falls off, vet entrepreneurial startup

firms are as numerous as ever

• Growing government surveillance of Internet users and Web sites

WELCOME TO THE NEW E-COMMERCE In the 14 years since it began in 1995, electronic commerce has grown in the I. Mired

States from a standing start to a 5228 billion retail business and a S3.1 trillion

business-to-business juggernaut, bringing about enormous change in business firms,

markets, and consumer behavior. Economies and business firms around the globe, in

Europe, Asia, and Latin America, are being similarly affected. During that short time,

mcommerce has itself been transformed from its origin as a mechanism for online

retail sales in to something much broader. 'Ibday, e-commerce has become the plat-

form for new unique services and ca pabilities that are just impossible in the physical

world. There is no physical world counterpart to Facehook, or TWittter, or Googly

search, or a host of other recent online innovations. Welcome to the new c-com-

merce!

Although emonmierce in 2009 has been impacted by the worldwide economic

recession, in the next five years, e-commerce in all of its forms is still projected to con-

tinue growing at high single-digit rates, becoming the fastest-growing form of com-

merce in the world. Just as automobiles, airplanes, and electronics defined the

twentieth century, so will e-commerce of all kinds define business and society in tire

twenty-first century. The rapid movement toward an e-commerce economy and soci-

ety is being led by both established business firms such as Wal-Mart, laird, 111A1,

JCPennev, and General Electric, and newer entrepreneurial firms such as Googly,

Amazon, Facebook, MySpace, Twitter, YouTube, and Photobucket. Students of busi-

ness and information technology need a thorough grounding in electronic commcrcc in order to he e ffective nd successful managers in the next decade. This book is writ-

ten for tomorrow's managers.

While newer Web 2.0 firms such as Facehook, MvSpace, Youliabe, 'I-Witter, Photo-

bucket, Flickr, and lflinkx have grown explosively in the last two years and grab our

Preface

attention, the traditional forms of retail e-commerce and services also remain vital and have proven to be more resilient than traditional retail channels in facing the economic recession that has occurred during the past year. The experience of these firms over the last fifteen years is also a focus of this book. The defining characteristic of these firms is that they are profitable, sustainable, efficient, and innovative firms with powerful brand names. Many of these now-experienced retail and service firms, such as cBav, Amazon, E*Trade, Priceline, and Expedia, are survivors of the first era of e-commerce, from 1995 to spring 2000. These surviving firms have evolved their business models, integrated their online and offline operations, and changed their revenue models to become prof-itable. Students must understand how to build these kinds of e-commerce businesses in order to help the business firms they manage to succeed in the e-commerce era.

It would he foolish to ignore the lessons learned in the early period of e-commerce. Like so many technology revolutions in the past—automobiles, electricity, telephones, television, and biotechnology—there was an explosion of entrepreneurial effinds, followed by consolidation. By 2005, the survivors of the early period were moving to establish profitable businesses while maintaining rapid growth in revenues. In 2010, e-commerce is entering a new period of explosive entren-prenurial activity focusing on social networks, and the mobile digital platform created by smartphones and netbooks. These technologies and social behaviors are bringing about extraordinary changes to markets, industries, individual businesses, and society as a whole. E-commerce is generating thousands of new jobs for young managers in all fields from marketing to ma nagement, entrepreneurial studies, and information systems. Today, e-commerce has moved into the mainstream life of established businesses that have the market brands and financial muscle required for the long-term deployment of e-commerce technologies and methods. if you are working in an established business, chances arc the firm's e-commerce capabilities and Web presence arc important factors for its success. If you want to start a new business, chances a IV very good that the knowledge you learn in this hook will be very helpful.

BUSINESS. TECHNOLOGY. SOCIETY.

We believe that in order for business and technology students to really understand e-commerce, they must understand the relationships among e-commerce business concerns, Internet technology, and the social and legal context of e-commerce. These three themes permeate all aspects of e-commerce, and therefore in each chapter we present material that explores the business, technological, and social aspects of that chapter's main topic.

Given the continued growth and diffusion of e-coni merce, all students— regardless of their major discipline—must also understand the basic economic and business forces driving e-commerce. E-commerce has created new electronic markets where prices are more transparent, markets are global, and trading is highly efficient, though not perfect. E-commerce has a direct impact on a firm's relationship with sup-pliers, customers, competitors, and partners, as well as how firms market products, advertise, and use brands. Whether you -are interested in marketing and sales, design, production, finance, information systems, or logistics, you will need to know how e- commerce technologies can be used to reduce supply chain costs, increase production

vi

Preface

efficiency, and tighten the relationship with customers. This text is written to help you understand the fundamental business issues in e-commerce.

We spend a considerable amount of erfort analyzing the business models and strategies of "pure-play" online companies and established businesses now employing "bricks-and-clicks" business models. We explore why many early e-commerce. firms failed and the strategic, financial, marketing, and organizational challenges they faced. We also discuss how e-commerce firms learned from the mistakes of early firms, and how established firms are using e-commerce to succeed. Above all, we attempt to bring a strong sense of business realism and sensitivity to the often exag-gerated descriptions of eaC0111111C Ric. As founders of a ClOt. COM company and partici-pants in the e-commerce revolution, we have learned that the "E" in e-commerce does not stand for "easy."

The Web and e-commerce has caused a major revolution in marketing and advertising in the United States. We spend two chapters discussing how marketing and advertising dollars are moving away from traditional media, and towards online media, creating significant growth in search engine marketing, targeted display advertising, online rich media;video ads, and social marketing techniques.

E-commerce is driven by Internet technology. Internet technology, and information technology in general, is perhaps the star of the show. Without the Internet, e-commerce would be virtually nonexistent. Accordingly, we provide three specific chapters on the Internet and e-commerce technology, and in every chapter we provide continuing coverage by illustrating how the topic of the chapter is being shaped by new information technologies. For instance, Internet technol-ogy drives developments in security and payment systems, marketing strategies and advertising, financial applications, business-to-business trade, and retail e-commerce. We discuss the rapid growth of the mobile digital platform, the emer-gence of cloud computing, new open source software tools and applications that enable Web 2.0, and new types of Internet-based Midi- Illation systems that support electronic business-to-business markets.

E-commerce is not only about business and technology, however. The third part of the equation for understanding e-commerce is society. L-commerce and Internet technologies have important social consequences that business leaders can ignore only at their peril. El-commerce has challenged our concepts of privacy, intellectual property, and even our ideas about national sovereignty and governance. Google, Amazon, and assorted advertising networks maintain profiles On millions of U.S. a nd foreign online shoppers. "lhe proliferation of illegally copied music and videos on the Internet, and the growth of social networking sites often based on displaying copyrighted materials without permission, are challenging the intellectual property rights of record labels, studios, and artists. And many countries—including the United States—are demanding to control the content of Web sites displayed within their borders for political and social reasons. Tax authorities in the United States and Europe are demanding that e-commerce sites pay sales taxes. As a result of these challenges to existing institutions, c-commerce and the Internet are the subject of increasing investigation, litigation, and legislation. Business leaders need to understand these societal developments, and they cannot afford to assume a ny longer

Preface I vii

that the Internet is horderless, beyond social control and regulation, or a place where market efficiency is the only consideration. In addition to an entire chapter devoted to the social and legal implications of e-commerce, each chapter contains material highlighting the social implications of e-commerce.

FEATURES AND COVERAGE

Strong Conceptual Foundation We analyze e-commerce, digital markets, and e-business firms just as we would ordinary businesses and markets using concepts from economics, marketing, finance, philosophy, and information systems. We try to avoid ad hoc theorizing of the sort that sprang breathlessly from the pages of many journals in the early years of e-commerce.

Some of the important concepts from economics and marketing that we use to explore eacommerce are transaction cost, network externalities, perfect digital markets, segmentation, price dispersion, targeting, and positioning. Important concepts from the study of information systems and technologies play an important role in the book, including Internet standards and protocols, client/server computing, multi-tier server systems, cloud computing, mobile digital platform and wireless tech-nologies, and public key encryption, among many others. From the literature on ethics and society, we use important concepts such as intellectual property, privacy, information rights and rights management, governance, public health, and welfare.

From the literature on business, we use concepts such as business process design, return on investment, strategic advantage, industry competitive environment, oligopoly, and monopoly. One of the witticisms that emerged from the early years of e-commerce and that still seems apt is the notion that e-commerce changes everything except the rules of business. Businesses still need to make a profit in order to survive in the long term.

Real-World Business Firm Focus From Akamai Technologies, to Google, Microsoft, Apple, and Amazon, to Facehook, Twitter, and Myspace, to Licmiclation.com and VWSupplyGroutacom, this hook contains well over 100 real-company examples that place coverage in the context of actual dorcom businesses. You'll find these examples in each chapter, as well as in special features such as chapter-opening and chapter- closing cases, and "Insight on" boxes.

In-depth Coverage of B2B E-commerce We devote an entire chapter to an examination of 13211 e-commerce. In writing this chapter, we developed a unique and easily understood classification schema to help students understand this complex arena of e-commerce. This chapter covers four types of Net marketplaces (J-distributors, e-procurement companies, exchanges, and industry consortia ) as well as the development of private industrial networks and collaborative commerce.

Current and Future Technology Coverage Internet and related inliirmation technologies continue to change rapidly. The most important changes for eacommerce include

viii I Preface

dramatic price reductions in e-commerce infrastructure (making it much less expensive to develop sophisticated Web sites), the explosive growth in the mobile digital platform such as iPhones and netbooks, and expansion in the development of social technologies. What was once a shortage of telecommunications capacity has now turned into a surplus, PC prices have continued to fall, new client-side devices have emerged, Internet high-speed broadband connections are now typical and are continuing to show double-digit growth, and wireless technologies such as Wi-Pi and cellular broadband are playing a larger role in mobile Internet access. While we

thoroughly discuss the current Internet environment, we devote considerable attention to describing Web 2.0 and Internet II technologies and applications such as the advanced network infrastructure, fiber optics, wireless Web and IC and 4G tech-nologies, Wi-Fi, II' multicasting, and future guaranteed service levels.

Up-to-Date Coverage of the Research Literature This text is well grounded in the e-commerce research literature. We have sought to include, where appropriate, references and analysis of the latest c-commerce research findings, as well as mane

classic articles, in all of our chapters. We have drawn especially on the disciplines of economics, marketing, and information systems and technologies, as well its law journals and broader social science research journals including sociology and psychology.

Special Attention to the Social and Legal Aspects of E-commerce we have paid special attention throughout the hook to the social and legal context of e-commerce. Chapter 8 is devoted to a thorough exploration of four ethical dimensions of e-commerce: information privacy, intellectual property, governance, and protecting public welfare on the Internet. We have included an analysis of the latest Federal Trade Commission and other regulatory and nonprofit research reports, and their likely impact on the e-commerce environment.

OVERVIEW OF THE BOOK

The book is organized into four parts. Part 1, "Introduction to E-commerce," provides an introduction to the major

themes of the hook. Chapter I defines c-commerce, distinguishes between e-commerce and e-business, and defines the different types of e-raimmerce. Chapter 2 introduces and defines the concepts of business model and revenue model, describes the major c-commerce business and revenue models for both 112C and 11214

firms, and introduces the basic business concepts required throughout the text tor understanding e-commerce firms including industry structure, value chains, and Man strategy.

Part 2, "Technology Infrastructure for E-commerce," focuses on the technology infrastructure that forms the foundation for all e-commerce. Chapter 11 traces the historical development of Internet I—the first Internet—and thoroughly describes how today's Internet works. A major focus of this chapter is Web 2.0 applications, and the emerging Internet 11 that is now under development and will shape the future of e-commerce. Chapter 4 builds on the Internet chapter by focusing on the steps man-

Preface I ix

alters need to follow in order to build a commercial Web site. This c-commerce infra-

structure chapter covers the systems analysis and design process that should be fol-

l o wed in building an e-commerce Web site; the major decisions surrounding the

decision to outsource site development and/or hosting; and how to choose software,

hardware, and other tools that can improve Web site performance. Chapter 5 focuses

on Internet security and payments, building on the e-commerce infrastructure

discussion of the previous chapter by describing the ways security can be provided

over the Internet. This chapter defines digital information security, describes the

major threats to security, and then discusses both the technology and policy solutions

available to business managers seeking to secure their Firm's sites. This chapter

concludes with a section on Internet payment systems. We identify the stakeholders

in payment systems , the dimensions to consider in creating payment systems, and

the various types of online payment systems (credit cards, stored value payment

systems such as digital wallets such as GOOl41(l Checkout and others).

Part 3, "Business Concepts and Social Issues," focuses directly on the business

concepts and social-legal issues that surround the development of e-commerce.

Chapter 0 tmuscs till e-commerce consumer behavior, the Internet audience, and

introduces the student to the basics of online marketing and branding, including

online marketing technologies and marketing strategies. Chapter 7 is devoted to

online marketing communications, such as online advertising, e-mail marketing, and

search-engine marketing. Chapter 8 provides a thorough introduction to the social and

legal environment of c-commerce. Here, you will find a description of the ethical and

legal dimensions of (l-L0111111elVe, including a thorough discussion of the latest

developments in personal information privacy, intellectual property, Internet

governance, jurisdiction, and public health and welfare issues such as pornography,

gambling, and health information.

Part 4, "E-commerce in Action," fiicuses on real-world e-commerce experiences

in retail and servi( CS, online media, auctions, portals, and social networks, and

business-to-business e-commerce. These chapters take a sector approach rather

than a conceptual approach as used in the earlier chapters. E-commerce is

different in each of these sectors. Chapter ft takes a close look at the experience of

firms in the retail marketplace tbr both goods and services. Chapter ft also includes

an "E-L0111111(!l - f. Action" case that provides a detailed analysis of the business

strategies and financial operating results of Amazon. Additional E-commerce in

Action cases will be available online at the authors' Web site for the text,

www.azinnith-interactivc.concecommerce6c. Chapter 10 explores the world of

online content and digital media, and examines the enormous changes in online

publishing and entertainment industries that have occurred over the last two

years. Chapter II explores the online world of social networks, auctions, and por-

tals. Chapter 1 2 explores the world of 028 eacornmerce, describing both electronic

Net marketplaces and the less-heralded, but very large arena of private industrial

networks and the movement toward collaborative commerce.

x I Preface

CHAPTER OUTLINE

Each chapter contains a number or elements designed to make learning easy as well

as interesting.

Learning Objectives A I ist of learning objectives that highlights the key concepts in the

chapter guides student study.

Chapter-Opening Cases Each chapter opens with rit story about a leading c-commeo

company that relates the key objectives of the chapter to a real-life mcommerce

business venture.

Prelate xi

issiGwr ON 0 SOCIAL NETWORK MARKETING: NEW INFLUENCERS AMONG THE CHATTERING MASSES

"Insight on" Cases Each chapter contains three real-world short cases illustrating the themes of technology, business, a nd society. These cases create an integrated framework and coverage throughout the book for describing and analyzing the full breadth of the field of e-commerce. The cases probe such issues as the ability of governments to regulate Internet content, how to design Web sites for accessibility, the challenges faced by luxury marketers in online marketing, and the potential anti-competitive- ness of Net marketplaces.

Margin Glossary Through-out the text, key terms and their definitions appear in the text margin where they are firstintroduced.

1., yn

Real-Company Examples

Drawn from actual e-com-merce ventures, well Over 100 pertinent examples are used throughout the text to illustrate concepts.

xii Preface

Chapter-C losing Case Studies Each

chapter concludes tvith a robust case

study based on a real-world organiza-

tion. These cases help students syn-

thesize chapter concepts and apply

this knowledge to concrete prob-

lems and scenarios such as

evaluating the ethics and legality

of advertising SpyWale, the 'mar-

keting plans of Liquidation.com ,

and the business model behind

Siemens' Click2procure 132I't

marketplace.

Chapter-Ending Pedagogy

Each chapter con iIts encl-

okthapter materials

designed to reinforce the

learning objectives of the

chapter.

Key Concepts Keyed to the

learning objectives, Rey Con-

cepts present the key points of

the chapter to aid student study.

Review Questions Thought-provoking questions prompt students

to demonstrate their comprehension and apply chapter concepts to

management problem solving.

Projects At the end of each chapter are a number of projects that encourage stu-

dents to apply chapter concepts and to use higher level evaluation skills. Many

make use of the Internet and require students to present their findings in an oral

presentation or written report. For instance, students are asked to evaluate publicly

available information about a company's financials at the SEC Web site, assess pay-

ment system options for companies across international boundaries, or search for

the top ten cookies on their own computer and the sites they are from,

Web Resources A section at the end of the chapter directs students to Web

resources available at www.azimuthanteractive.com ecommercehe that can

extend their knowledge of each chapter with projects and exercises and

additional content. The Web site contains the following content provided by

the authors:

• E-commerce in Action cases analyze the business strategies and financial

operating results public e-commerce companies. For each company, we iden-

tify the vision of the company, analyze its financial performance, review its

Preface xiii

current strategy, and assess the near-term future prospects !Or the firm. These,

cases are ideal real-world instructional guides fbr students interested in under-

standing the financial foundation of e-commerc.e firms, their strategic visions and

customer value propositions, and their changing strategic objectives. They can also

he used as projects where students update the case materials using the most cur-

rent financial and business news, or provide additional analysis.

• Additional projects, exercises, and tutorials.

• In formation on how to build a business plan and revenue models.

• Essays on careers in e-conmuirce.

SUPPORT PACKAGE

The following supplementary materials a re available to qualified instructors

through the Online Instructor Resource Center. Contact your Prentice 1lall sales rep-

resentative for- intairmation about how to access them.

• Instructor's Manual with solutions This comprehensive manual pulls together

a wide variety of teaching tools so that instructors can Use the text easily and

effectively. Lach chapter contains an overview of key topics, a recap of the key

learning objectives, lecture tips, discussion of the chapter-ending case, and answers

to the Case Study Questions, Review Questions, and Student Projects.

• Test Bank For quick test preparation, the author-created Test Bank contains

multiple-choice, true 'false, and short-essay questions that focus both on content

and the development of critical 'creative thinking about the issues evoked by the

chapter. The Test Bank is available in Microsoft Word and TristGen format.

The TestGen is also available in WelaCT and BlackBoard-ready format. TestGen

allows instructors to view, edit, and add questions.

• PowerPoint lecture presentation slides These slides illustrate key points, tables,

and figures from the text in lecture-note format. The slides can he easily converted

to transparencies or viewed electronically in the classroom.

ACKNOWLEDGMENTS

Pearson Education sought the advice of many excellent reviewers, all of whom

strongly influenced the organization and substance of this book. The following

individuals provided extremely useful evaluations of this and previous editions of the

text:

xiv Contents

Carrie Andersen, Madison Area

Technical College

Dr. Shirley A. Becker, Northern Arizona

University

Prasad Bingi, Indiana-Purdue

University, Fort Wayne

Christine Barnes, Lakeland Community

College

Cliff Butler, North Seattle Community

College

Joanna Broder, University of Arizona

James Buchan, College of the Ozarks

Ashley Bush, Florida State University

Andrew Ciganek, Jacksonville State

University

Daniel Connolly, University of Denver

"Ibm Critzer, Miami University

Dursan Delen, Oklahoma State

University

Abhijit Deshmukh, University of

Massachusetts

Brian L. Dos Santos, University of

Louisville

Robert Drevs, University of Notre Dame

Akram El-Tannir, I lariri Canadian

University, Lebanon

Kimberly Furumo, University of I LI iaii

at Hilo

John H. Gerdes, University of

California, Riverside

Philip Gordon, University of California

at Berkeley

Allan Greenberg, Brooklyn College

Peter Haried, University of

Wisconsin-Milwaukee

Sherri Harms, University of Nebraska at

Kearney

Sharon Heckel, St. Charles Community

College

David Hite, Virgina Intermont College

Ellen Kraft, Georgian Court University

Gilliean Lee, Lander t lniversity

Zoonkv Lee, University of Nebraska,

Lincoln

Andre Lemaylleux, Boston University,

Brussels

Haim Levkowitz, University of

Massachusetts, Lowell

Yair Levy, Nova Southeastern

University

Richard Lucic, Duke University

John Mendonca, Purdue University

Dr. Abdulrahman Mirza, DePaul

University

Kent Palmer, MatiMurrav College

Karen Palumbo, University of St.

Francis

Wayne Pauli, Dakota State University

Jamie Pinchot, Theil College

Barry Quinn, University of Ulster,

Northern Ireland

Jay Rhee, San Jose State University

Jorge Romero, Thwson University

John Sagi, Anne Arundel Coninutnitv

College

Patricia Sendai', Merrimack College

Dr. Carlos Serrao, ISCTE DOE],

Portugal

Neerja Sethi, Nanyang Business School,

Singapore

Amber Settle, DePaul (Ti

Vivek Shah, Texas State University-San

Marcos

Seung Jae Shin, Mississippi State

University

Sunlit Sircar, University of 'exits at

Arlington

Hongjun Song, University of Memphis

Pamela Specht, University of Nebraska

at Omaha

Esther Swaney, Kansas State University

Tony Townsend, Iowa State University

Contents I xv

Bill Troy, I Iniversity of New Hampshire

Susan VandeVen, Southern Polytechnic

State University

I Iiep Van Dong, Madison Area

technical College

Mary Vitrano, Palm Beach Community

College

Andrea \Vachtet, Point Park University

Catherine Wallace, Massey University,

NeW Zealand

Riau Wang, Bosto n University

Hariv Washington, Lincoln University

Rolf Wigand, University of Arkansas at

Little Rock

Erin Wilkinson, Johnson is \Vales

University

Alice Wilson, Cedar Crest College

Dezhi Wu, Southern Utah University

Gene \Jelin, SONY Institute of

Iitchnologv

David Zolzer, Northwestern State

University

5e Reviewers:

Andrew P. Ciganek, Jacksonville State

University

tarry J. Foxwell, George Mason Uni-

versity

Jason Little, Franklin Pierce University

Matthew If. Sauber, Eastern Michigan

University

Daniel C. Wood, Arizona State Unw er-

sity

Kaimei Zheng, University of Massachu-

setts, Amherst

We would like to thank eMarketer, Inc. and David iankelevich for their permission to

include data and liguICS front their research reports in our text. eMarketer is one of

the leading independent sources for statistics, trend data, and original analysis

covering many topics related to the Internet, e-business, and emerging technologies.

eMarketer aggregates c-business data from multiple sources worldwide.

In addition, we would like to thank all those at Prentice I fall who have worked

so hard to make sure that this hook is the very best that it can be. We want to thank

Poll Horan, Executive Editor of the Prentice flail MIS list and Kelly Loftus, Assistant

Lditor for their editorial support; Judy Leale and Karalyn Holland tor overseeing pro-

duction of this project; and Steve Frini thr the outstanding cover design. Very special

thanks to Megan Miller and Will Anderson at Azimuth Interactive, Inc., and Ann

Cohen, tor all their hard work on the production of, and supplements for, this hook.

A special thanks also Susan Hartman, Executive Editor tor the first and second

editions and to flank Ruggirello, Publisher at Addison-Wesley when we began this

project, and now Publisher at Benjamin-Cummings.

Finally, last but not least, we would like to thank our family and friends, without

whose support this hook would not have been possible.

K(nIn(flit C. Lifit(107/

(.010/ GIICIC10

xvi

Preface

THE INTERNET AND WORLD WIDE WEB: E-COMMERCE INFRASTRUCTURE 3 120

ONLINE SECURITY AND PAYMENT SYSTEMS

262

BUILDING AN E-COMMERCE WEB SITE

202

ETHICAL, SOCIAL, AND POLITICAL ISSUES IN E-COMMERCE 8 490

6 E-COMMERCE MARKETING CONCEPTS 340

7 E-COMMERCE MARKETING COMMUNICATIONS 424

Brief Contents

roduction to E-commerce

1 THE REVOLUTION IS JUST BEGINNING 2

2 E-COMMERCE BUSINESS MODELS AND CONCEPTS 62

chnology Infrastructure for E-commerce PART

tress Concepts and Social Issues

xv i i

xviii Preface

erce in Action

9

10

11

12

ONLINE RETAILING AND SERVICES 570

ONLINE CONTENT AND MEDIA 648

SOCIAL NETWORKS, AUCTIONS, AND PORTALS 716

B2B E-COMMERCE: SUPPLY CHAIN MANAGEMENT AND COLLABORATIVE COMMERCE 770

THE REVOLUTION IS JUST BEGINNING 2 1

Contents

oduction to E-commerce

Learning Objectives 2

Facebook and MySpace: It's All About You 3

1.1 E-commerce: The Revolution Is lust Beginning 6

The First Thirty Seconds it

What Is E-commercei' 10

The Itifterence between Ii-cornmeref and E-business 10

Why Study F.-commerce? 11

Light Unique Features of L- 11111111 -Cr Team°logy 17

Ubiquity 14

Global Reach 14

11niversal Sta n dards 14

Richness 15

Interactivity 16

Infin mation Density 16

Personalization Customization 17

Social Iechnologv: User Content Generation and Social Networking 17

Web 2:0: Play My Version 17

'types of E-commerce 20

Business-to-Consumer (B2C) E-commerce 20

Business-to-Business (0213) L-commerce 20

Consumer-to-Consumer (C2C) Ei-commerce

Peerko-Peer (P21') [-commerce 21

Mobile Commerce (M-cornmerce) 21

Growth of the Internet and the Web 22

xix

xx Contents

Origins and Growth of E-commerce 24

Technology and E-commerce in Perspective 24

Insight on Technology: Spider Webs, Bow Ties, Scale-Free Networks, and the Deep Web 26

Potential Limitations on the Growth of B2C E-commerce 28

1.2 E-commerce: A Brief History 30

E-commerce 1995-2000: Innovation :30

E-commerce 2001-2006: Consolidation 34

Insight on Business: The Internet Investment Roller Coaster 35

E-commerce 2006-Present: Reinvention 37

Assessing E-commerce: Successes, Surprises and Failures 38

Predictions for the Future: More Surprises 40

1.3 Understanding E -commerce: Organizing Themes 43 Technology: Infrastructure 43

Business: Basic Concepts 44

Society: Taming the ,Iuggernaut

Insight on Society: Privacy Online: Does Anybody Care 46

Academic Disciplines Concerned with E-commerce 49

Technical Approaches 49

Behavioral Approaches 50

1.4 Case Study: Internet Piracy: The Pirate Bay 51

1.5 Review 57

Key Concepts 57

Questions 60

Projects 61

Web Site Resources 61

E - COMMERCE BUSINESS MODELS AND CONCEPTS 62


Tweet Tweet: What's Your Business Model 63

2.1 E.-commerce Business Models 66

Introduction 66

Eight Key Elements of a Business Model 66

Value Proposition 67

Revenue Model 67

Market Opportunity 69

Competitive Environment 70

Competitive Advantage 71

Market Strategy 73

Cont en ts xxi

Organizational Development 73

Management Te a m 71

E-C1)11111ICIVC Business Modals: Some Difficulties 74

Insight on Business: Online Grocers: Finding and Executing the Right

Model 75

2.2 Major Business-to-Consumer (132C) Business Models 78

h-toiler 30

Insight on Technology: Can Bing Bong Google? 87

Content Provider

Transaction Broker

Market Creator 110

Service Provider n ''7

Lonununity Provider 28

2.3 ,Major Business - to - Business (13213) Business Models 89

h-distributor 90

h-procinement 91

1::xchanges 01

Industry Consortia 02

Private Industrial Networks 9 .2

2.4 Business Models in Emerging E-00111111CrCe Areas

9 3

Consumer-to-Consumer (C2C) Business Models 94

Peel-to-Peer (P2P) Business Models 94

M-coninierLe Business Models 95

Insight on Society: Where R U 96

has9cmcyce Enablers: The Gold Rush Model 93

2.5 1 low the Internet and the Web Change Business: Strategy), Structure, and Process 99

Industry St ructure

Industry Value Chains 103

Finn Value Chains 104

Firm Value Webs 105

Business Stnit(-7y 1(10

2.6 Case Study: Pricelinc.com and the Search for a Business Model that It 109

2.7 Review 113

kcy Lout opts 113

Questions 113

Projects 110

Web Site Resoorces 117

THE INTERNET AND WORLD WIDE WEB: E-COMMERCE INFRASTRUCTURE 120 3

hnology Infrastructure for E-commerce

xxii Contents


Wikitude.me 121

3.1 The Internet: Technology Background 124

The Evolution of' the Internet 1961—The Present 125

The Internet: Key 'technology Concepts 12(3

Packet Switching 129

transmission Control Protocol 'Internet Protocol (TCP

II' Addresses 131

Domain Names, DNS, and I11215 133

Client, Server Computing 133

Insight on Business: P2P Dukes It Out with Streaming Video 136

The New Client: The Emerging Mobile PlatfOrm 138

Internet "Cloud Computing" Model: Software and Hardware as

Service 139

Other Internet Protocols and Utility Programs 141

Internet Protocols: HTTP, E-mail Protocols, FTP, Telnet, and SSL. 141

3.2

Campus Area Networks (CANS) 146

Internet Service Providers 118

Intranets and Extrancts ISO

Who Governs the Internet .? 150

Insight on Society: Government Regulation and Surveillance of the Internet 752

3.3. Internet II: The Future Infrastructure / 55

Limitations of the Current Internet 155

The Internet2 ,": Project 156

The Larger Internet II Technology Environment: The First Mile and the

Last Mile 157

Fiber Optics and the Bandwidth Explosion in the First Mile 153

Utility Programs: Ping, Tracert, and Pathping 142

The Internet Today 143

1fie Internet Backbone 145

Internet Exchange Points 146

Contents xxiii

The List Mile: Mobile Wireless Internet Access 159

Benefits of Internet II Technologies 166

11' Multicasting 166

Latency Solutions 168

Guaranteed Service Levels and Lower Error Rates 168

Declining Costs 168

3.4 The World Wide Web 169

I lppertext 170

Markup Languages 172

Standardized Generalized Markup Lan guage (SGMLl 172

lyperil'ext Markup Language (11TML) 172

Extensible Markup Language (XML) 172

Web Servers and Clients 175

Web Browsers 176

The Internet and the Web: Features 177

E-mail 177

Instant Messaging 177

Search Engines 178

Intelligent Agents (Hots) 181

Online Forums and Chat 182

Streaming Media 182

Cookies 183

Web 2.0 Features and Services 183

Blogs 183

Really Simple Syndication (RSS) 184

Podcasting 184

Wikis 185

NCW M usic and Video Services 185

Internet Telephony 186

Internet Television 187

Telepresence and Video Conferencing 188

Online Software and Web Services: Web Apps, Widgets and Gadgets 188

M-commerce Applications: The Next Big Thing 189

Insight on Technology: All Mashed Up 190

3.6 Case Study: A kamai Technologies: The Web's Invisible Accelerator 192

3.7 Review 196

Key Concepts 196

Questions 200

Projects 200


BUILDING AN E-COMMERCE WEB SITE 202 4

xxiv Contents


Right-Sizing a Web Site 203

4.1 Building an E-commerce Web Site: A Systematic Approach 206

Pieces of the Site-Building Puzzle 206

Planning: The Systems Development Lib: Cycle 207

Systems Analysis/ Planning: Identify Business Objectives, System Functionality, and Information Requirements 208

System Design: Hardware and Software Platforms 210

Building the System: In-House versus Outsourcing 210

Build Your Own versus Outsourcing 210

Host Your Own versus Outsourcing 211

Insight on Business: Curly Hair and MotorMouths: Getting Started on the Cheap 275

Testing the System 217

Implementation and Maintenance 217

Factors in Optimizing Web Site Performance 218

Web Site Budgets 219

4.2 Choosing Software 220

Simple versus Multi-tiered Web Site Architecture 220

Web Server Software 2 2 2

Site Management Tools 222

Dynamic Page Generation "Fools 224

Application Servers 226

[-commerce Merchant Server Software Functionality 226

Online Catalog 227

Shopping Carts 227

Credit-Card Processing 228

Merchant Server Software Packages (E-commerce Suites) 2 2 8

Choosing an [-commerce Suite 228

Building Your Own [-commerce Site: Web Services and Open Source Options 230

4.3 Choosing the Hardware for an E -commerce, Site 231

Right-Sizing Your Hardware Platform: The Demand Side 2:32

Right-Sizing Your Hardware Platlibrim . 1he Supply Side 2:13

4.4 Other E -commerce Site Tools 238

Web Site Design: Basic Business Considerations 2:39

Tools for Web Site Optimization 240

Tools for Interactivity and Active Content 2.32

Contents xxv

Blind tor Your Blom Web 2.0 Design Elements 242

CCil (Common Gateway Interface) 243

Active Server Pages (ASP) 243

Java, lava Server Pages (JSP), and JavaScript 243

ActiveX and VBScript 244

Insight on Technology: Pumping Up the Customer Experience Using AJAX and

Flash 245

Coldl usion

Personalization Tools 247

The Infbrmation Policy Set 241

Insight on Society: Designing for Accessibility with Web 2.0 249

4.5 Case Study: RU Climbs the Web Mountain 252

4.6 Review 257

Key Concepts 257

Questions 26(1

Projects 260


ONLINE SECURITY AND PAYMENT SYSTEMS 262


Cyberwar Becomes a Reality 263

5.1 The U-commerce Security Fnvironment 265

[lie Scope of the Problem 265

The Underground Economy Marketplace: The Value of Stolen

IntOrmation 268

What Is Good [-commerce Security? 260

Dimensions of P.-commerce Security 270

The 'elision Between Security and Other Values 271

Ease of I Ise 272

Public Safety and the Criminal Uses of Security 777

5.2 Security Threats in the E -commerce Environment 273

Malicious Code 274

Untvanted Programs

Phishing and Identity Theft 277

Ilacking and Cybervanchilism 280

Credit Card Fraud , Thell 281

Spoofing ( ['harming), Spam (Junk) Web Sites, and Splogs 28.;

Denial of Service (DoS) and Distributed Denial or service (dDoS) Attacks 283

Sniffing 2114

Insider Attacks 235

xxvi Contents

Poorly Designed Server and Client Software 285

5.3 Technology Solutions 286

Protecting Internet Communications 286

Encryption 286

Symmetric: Key Encryption 287

Public Key Encryption 289

Public Key Encryption Using Digital Signatures and Hash Digests 489

Digital Envelopes 292

Digital Certificates and Public Key Infrastructure (PKI) 292

Limitations to Encryption Solutions 295

Securing Channels of Communication 295

Secure Sockets Laver (SSL) 295

Insight on Society: In Pursuit of E-mail Security 296

Secure Hypertext Minster Protocol (S-IITTP) 298

Virtual Private Networks 299

Protecting Networks 299

Firewalls 299

Protecting Servers and Clients 300

Operating System Security Enhancements 300

Anti-Virus Software 3(11

5.4 Management Policies, Business Procedures, and Public Laws 302

A Security Plan: Management Policies 302

The Role of Laws and Public: Policy 304

Insight on Technology: Securing Your Information: Cleversafe Hippie Storage 305

Private and Private-Public Cooperation Ettorts 308

Government Policies and Controls on Encryption Software 308

OECD Guidelines 308

5.5 Payment Systems 309

Types of Payment Systems

Cash 31)9

Checking Transfer

Credit Card 310

Stored Value 311

Accumulating Balance 311

5.6 E-commerce Payment Systems 313

Online Credit Card Transactions 314

Credit Card E-commerce Enablers 315

Limitations of Online Credit Card Payment Systems 316

Digital Wallets 316

Digital Cash 317

Online Stored Value Systems :117

Digital Accumulating Balance Payment Systems 319

Contents xxvii

Digital Lk rking Payment Systems :119

Wireless Payment SN'StCms 320

5.7 Vlectronic Billing Presentment and Payment 321

Market Size and Growth 321

Insight on Business: Mobile Payment's Future: WavePayMe, TextPayMe 322

EBIT Business Models 324

5.8 Case Study: PayPal has Company 326

5.9 Reuiew 331

Key Concepts

Questions 335

Projects 337

Web Siw Resources .137 7

usiness Concepts and Social Issues

E - COMMERCE MARKETING CONCEPTS 340


Netflix Develops and Defends Its Brand 341

6.1 Consumers Online: The Internet Audience and Consumer

Behavior 344

[he inter - net Audience 341

Internet 'traffic: Patterns: The Online Consumer Profile 345

Intensity and Scope of Usage 3/5

Demographics and Access :145

Type of Internet Connection: Broadband Impacts 347

Corr Intinity Effects: Social Contagion 340

Lifestyle and Sociological Impacts 350

Media Choices and Multitasking : The Internet versus Other Media

Channels 350

Consumer Behavior Models 350

Profiles of Online Consuniers 353

The Online Purchasing Decision 354

A Model of Online Consumer Behavior 355

Shoppers: Browsers and Buyers 358

What Consumers Shop for and Buy Online 3130

Intentional Acts: I low Shoppers Find Vendors Online 3(ie

Why More People Don't Shop Online 361

xxviii I Contents

Trust, Utility, and Opportunism in Online Markets 363

6.2 Basic Marketing Concepts 362

Feature Sets 363

Products, Brands, and the Branding Process 3144

Segmenting, Targeting, and Positioning 366

Are Brands Rationab' 367

Do Brands Last Forever?

Can Brands Survive the Internet .: Brands and Price Dispersion on the

Internet 369

6.3 Internet Marketing Technologies 371

The Revolution in Internet Marketing 1hchnologies 372

Web Transaction Togs 373

Supplementing the Logs: Cookies and Web Bogs 376

Insight on Society: Marketing with Web Bugs 378

Databases, Data Warehouses, and Data Mining: Developing Profiles

Databases 38()

Data Warehouses and Data Mining 381

Insight on Technology: The Long Tail: Big Hits and Big Misses 384

Customer Relationship Management (CRM) Systems 386

6.4 B2C and B2I3 E-commerce Marketing and Branding Strategics .388 Market Entry Strategies 388

Establishing the Customer Relationship 390

Advertising Networks :391

Permission Marketing 393

Affiliate Marketing 393

Viral Marketing in the Web 2.0 Milieu 394

Blog Marketing 395

Social Network Marketing and Social Shopping :1-16

Insight on Business: Social Network Marketing: New Influencers Among the

Chattering Masses 397

Marketing Based on the Wisdom of Crowds

Leveraging Brands 401

Customer Retention: Strengthening the Customer Relationship 401

Personalization and One-to-One Marketing 401

Customization and Customer Co-Production 403

iransactive Content 404

Customer Service 101

Net Pricing Strategies 406

f ree and freemium 408

Versioning 409

Bundling 409

Dynainic Pricing 411

Contents xxix

Channel Strategies: Managing Channel Conflict 412

6.5 Case Study: Liquidation.com: 132B Marketing Success Story 413

6.6 Review 418

Rev Concepts 418

Questions 421

Projects 427


NEE E-COMMERCE MARKETING COMMUNICATIONS 424


Video Ads Cure Banner Blindness: String Master 425

7.1 Marketing Communications 429

Online Advertising 429

Display Ads: Banners and Pop-Ups 431

Rich Media 432

Video Ads 434

Search Engine Advertising: Paid Search Engine Inclusion and Placement 435

Sponsorships 412

Referrals (Affiliate Relationship Marketing) 442

[-mail Marketing and the Spam Explosion 443

Online Catalogs 447

Social Marketing: Rings, Social Networks and Eames 49

log Advertising 442

Social Network Advertising 450

Came Advertising 450

Behavioral targeting: Getting Personal 451

Insight on Society: Marketing to Children of the Web in the Age of Social

Networks 452

Mixing Offline and Online Marketing Communications 457

7.2 Understanding the Costs and Benefits of Online Marketing Communications 458

Insight on Business: Are the Very Rich Different from You and Me? 459

Online Marketing Metrics: Lexicon 492

How Well Does Online Advertising Work? 49. 6

The Costs of Online Advertising 498

Software tor Measuring Online Marketing Results 470

7.3 The Web Site as a Marketing Communications Tool 470

Domain Narnes 471

Search Engine Optimization 472

Insight on Technology: Its 10 PM. Do You Know Who Is On Your Web

Site? 473

ETHICAL, SOCIAL, AND POLITICAL ISSUES IN E-COMMERCE 490 8

xxx I Co n tent s

Web Site Functionality 470

7.4 Case Study: Adware„Spyware, Ad Bombs, Ambush Marketing, and Customer Hijacking: Invasive Marketing Techniques Grow on the Web 480

7.5 Review 485

Key Concepts 485

Questions 187

Projects 488



Discovering Law and Ethics in a Virtual World 497

8.1 Understanding Ethical, Social, and Political Issues itt E-commerce 494

A Model For Organizing the Issues 405

Basic Ethical Concepts: Responsibility, Accountability, and Liability 407

Analyzing Ethical Dilemmas 409

Candidate Ethical Principles 500

8.2 Privacy and information Rights 501

Information Collected at E-commerce Sites .502

Social Networks and Privacy 504

Profiling and Behavioral Targeting 50.5

The Internet and Government invasions of I'ti vat E-commerce Surveillance 500

Legal Protections 510

Intbrmed Consent .512

The FTC's Fair Information Practices Principles 513

'The European Directive on Data Protection 51(i

Private Industry Selt-Regulation 510

Privacy Advocacy Groups 518

Technological Solutions 3111

Insight on Business: Chief Privacy Officers 519

Insight on Technology: The Privacy Tug of War 524

8.3 Intellectual Property Rights 527

Types of intellectual Property Protection 528

Copyright: The Problem of Perfect Copies and Encryption 528

Look and Feel 520

Fair Use Doctrine 530

The Digital Millennium Copyright Act of 1098 .531

Patents: Business Methods and Processes 533

Contents

G-o nn Patents 534

Patent Reform 537

Tradernarks: Online Infringement and Dilution 537

"Fradenorks and the Internet 538

Cybersquatting 530

Cyberpiracy 510

Meta tag- gi ng 541

Kevrvording 542

Linking .543

Framing 543

Challenge: Balancing the Protection of Property with Other Values 544

8.4 Governance 545

Who Governs F.-commerce and the Internet? 546

Can the Internet Be Controlled? 546

Public Government and Law 548

Taxation 548

Net Neutrality 550

8.5 Public Safety and Welfare 551

Protecting Children 551

Cigarettes, Gambling, and Drugs: Is the Web Really Borderless? 553

Insight on Society: The Internet Drug Bazaar 554

8.6 Case Study: The Google Book Settlement: Is it Fair? 558

8.7 Review 562

Rey Concepts 562

Questions 3115

Projects 560


fierce in Action


Blue Nile Sparkles For Your Cleopatra 577

9.1 The Online Retail Sector 575

The Retail Industry 570

Online Retailing 578

Lwommerce Retail: The Vision 5711

The Online Retail Sector Today 380

xxxii Contents

Multi-channel Integration 582

9.2 Analyzing the Viability of Online Firms 583

Strategic Analysis 583

Financial Analysis 584

9.3 E -commerce in Action: E- tailing Business Models 586

Virtual Merchants 586

E-commerce in Action: Amazon.com 587

Multi-channel Merchants: Brick-and-Clicks 595

Catalog Merchants 597

Manufacturer-Direct 598

Common Themes in Online Retailing 599

Insight on Technology: Using the Web to Shop 7711 You Drop 601

9.4 The Service Sector: Offline and Online 603

What Are Services":' 604

Categorizing Service Industries 604

Knowledge and Information Intensity (504

Personalization and Customization 605

9.5 Online Financial Services 605

Financial Services Industry Trends 605

Online Financial Consumer Behavior 608

Online Banking and Brokerage 609

Multi-channel vs. Pure Online Financial Services Firms 610

Financial Portals and Account Aggregators 611

Online Mortgage and Lending Services 612

Online Insurance Services 61:1

Online Real Estate Services 613

9.6 Online Travel Services 618

Why Are Online Travel Services So Popular'? 618

Insight on Society: Turf Wars—Antitrust and the Online Real Estate Market 619 The Online "Fravel Market 622

Insight on Business: Zipcars 623

Online Travel Industry Dynamics 626

Opportunities for Disintermecliation and Re-intermediation 627

9. 7 Online Career Services 628

Its Just Information: The Ideal Web Business:' 629

Recruitment Market Segments 631

Online Recruitment Industry Dynamics: Consolidation, DiversitIcat

Localization, and Job Search Engines 632

9.8 Case Study: Open Table: Your Reservation Is Waiting 634

9.9 Review 638

Key Concepts 638

Contents xxxiii

(Zwstions 645

Projects 10)1

\Vet) Site Resources 647


Information Wants to Bc Expensive 649

10.1 Online Content 653

Content Audience and Market: Where Are the Eyeballs and the Money?

6.53

Media I itilization 653

Internet and Traditional Media: Cannibalization Versus

Complementaritv 655

Media Revenues 656

Two Models of the Digital Content Delivery: Paid and User-Generated

(301 -new 657

Free or Fee: Attitudes About Paving for Content and the Tolerance lift

Advertising 660

Media Industry Structure 660

Media Convergence: Technology, Content, and Industry Structure 661

Thchnological Convergence 1161

Content Convergence 661

Industry Convergence 663

Online Content Revenue Models and Business Processes 664

Making a Profit with Online Content: From Free to Fee 666

Key Challenges Facing Content Producers and Owners 667

lichnology 667

Cost 068

Distribution Channels and Cannibalization 669

Digital Rights Management (DRA) 669

10.2 The Online Publishing Industry 6'70

Online Newspapers 671)

Insight on Business.- ORM: Who Owns Your Files? 671

Audience Size and Growth 675

Newspaper Business Models 1176

COnv(gence 678

(:hallenges: Disruptive Technologies 080

Books: The Evolution or C-books 680

k-books 6II2

Book .Audience Size and Growth 684

Content: Advantages and Disadvantages of C-hooks 680

II-book Industry Revenue Models 646

SOCIAL NETWORKS, AUCTIONS, AND PORTALS 716 11

xxxiv Contents

Convergence (18/1

Insight on Society: The Future of Books 691

10.3 The Online Entertainment Industry 693

Online Entertainment Audience Size and Growth (103

Online Traditional Entertainment rift')

User-Generated Content: Where Does It Fit3 (105

Content 6117

Online Entertainment industry Revenue Models 600

Convergence (100

Insight on Technology: Hollywood Meets the Internet: Round 2 702

10.4 Case Study: Google and YonTnbe Together: Pass the Popcorn While This Ad Plays 704

10.5 Review 709

Key Concepts 709

Questions 714

Projects 713

Weh Site Resources 715


Social Network Fever Spreads to the Professions 717

11.1 Social Networks and Online Communities 719

What Is an Online Social Network:' 720

Dithinince Between Social Networks and Portals 721

The Growth of Social Networks and Online Communities 721

'Brining Social Networks Into Businesses 723

iPopes of Social Networks and Their Business Models 723

Social Network Features and Technologies 725

The Future of Social Networks 723

11.2 Online Auctions 726

Insight on Technology: Social Operating Systems: Facebook vs. GoolliC 727

Defining and Measuring the Growth of Auctions and Dynamic Pricing 7-'0

Why Are Auctions So Popular .: Benefits and Costs of Auctions 731

Benefits of Auctions 731

Risks and Costs ofAuctions (Or Consumers and Businesses

Market-Maker Benefits: Ancthms as an L-commerce Business Model

7:34

Types and Examples of Auctions 734

interne( Auction Basics 734

Types of Auctions 730

When to Ilse Auctions (and ror What) in Business 741

B2B E-COMMERCE: SUPPLY CHAIN MANAGEMENT AND COLLABORATIVE COMMERCE 768 12

Contents xxxv

Seller and Consumer Behavior at Auctions 743

Seller Prolits: Arrival Rate, Auction Length, and Number of Units 743

Auction Prices: Are They the Lowest? 713

Consumer Trust in Auctions 745

When Auction Markets Fail: Fraud and Abuse in Auctions 745

Insight on Society: Swoopo: Online Auction or Game of Chance? 746

11.3 E-commerce Portals 748

Me tooirth and Evolution of Portals 750

Types of Portals: General Purpose and Vertical Market 750

Insight on Business: The Transformation of AOL 751

Portal Business Models 756

11.4 Case Study: eBay Fine-Tunes Its Strategy 758

11.5 Review 761

Key Concepts 761

Questions 766

Projects 767



Volkswagen Builds Its 828 Net Marketplace 769

12.1 B2B E-commerce and Supply Chain Management 772

Defining (Ind Measuring the Growth of 02B Commerce 77 3

The Evolution of B2B Commerce 773

The (irowth of B20 E-cornmerce 2009-2013 775

Industry Forecasts 775

Potential Benefits of 11211 F-commerce 776

The Procurement Process and the Supply Chain 777

Types of ProCurement 778

The Role of Existing Legacy Computer Systems 779

Trends in Supply Chain Management and Collaborative Commerce 780

Supply Chain Simplification 781

Electronic Data Interchange (EDI) 781

Supply Chain Management Systems 781

Collaborative Commerce 785

Insight on Technology: RF1D Autoidentification: Making Your Supply

Chain Visible 786

1n166 Types of Internet-based 132B Commerce 780

12.2 Net Marketplaces 789

The Variety and Characteristics of Net Marketplaces 700

xxxvi Contents

Types of Net Marketplaces 700

[-distributors 792

E-procurement 70:1

Exchanges 794

Industry Consortia 796

The Long-Term Diminnics of Nut Marketplaces 799

12.3 Private Industrial Networks 800

Insight on Society: Are Net Marketplaces Anti-competitive Cartels? 801

What Are Private Industrial Networks? 802

Characteristics of Private Industrial Networks 004

Insight on Business: Wal-Mart Develops a Private Industrial Network 805

Private Industrial Networks and Collaborative Commerce 000

Implementation Barriers 008

Industry-Wide Private Industrial Networks 808

The Long-Term Dynamics of Private Industrial Networks 810

12.4 Case Study: Elemica: Cooperation, Collaboration, and Community 811

12.5 Review 816

Key Concepts 816

Questions 820

Projects 821

Web Situ Resources 822

References R - 1

Index 1-1

Credits C-1

Documents

Table Content