E-commerce

business. technology. society.

Sixth Edition

Kenneth C. Laudon

Carol Guercio Traver

Copyright 2010 Pearson Education, Inc.

Chapter 1

The Revolution Is Just Beginning

Copyright 2007 2010 Pearson Education, Inc.

Slide 1-2

Facebook and MySpace: Its All About You

Class Discussion

How is Facebook different from MySpace? Have you used Facebook or MySpace, and if so, how often? What was your experience? Why do you think Facebook has overtaken MySpace as the most popular social networking site?

Copyright 2010 Pearson Education, Inc.

Slide 1-3

E-commerce Trends 20092010

New business models based on social technologies, consumer-generated content, and services 2009 a flat year, but growth expected to resume in 2010

Broadband and wireless access continue to grow

Mobile e-commerce begins to take off

Traditional media losing subscribers

Copyright 2010 Pearson Education, Inc.

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The First 30 Seconds

First 15 years of e-commerce
Just the beginning Rapid growth and change

Technologies continue to evolve at

exponential rates
Disruptive business change New opportunities

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What is E-commerce?
Use of Internet and Web to transact

business
More formally:
Digitally enabled commercial transactions

between and among organizations and individuals

Copyright 2010 Pearson Education, Inc.

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E-commerce vs. E-business

E-business:
Digital enablement of transactions

and processes within a firm, involving information systems under firms control commercial transactions involving an exchange of value across organizational boundaries

Does not include

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Slide 1-7

Why Study E-commerce?

E-commerce technology is different, more powerful than previous technologies E-commerce bringing fundamental changes to commerce Traditional commerce:
Passive consumer Sales-force driven Fixed prices Information asymmetry

Copyright 2010 Pearson Education, Inc.

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Unique Features of E-commerce Technology

1. 2. 3. 4. 5. 6. 7. 8.

Ubiquity Global reach Universal standards Information richness Interactivity Information density Personalization/customization Social technology
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Copyright 2010 Pearson Education, Inc.

Web 2.0
Applications, technologies that allow

users to:
Create and share content, preferences, bookmarks, and

online personas Participate in virtual lives Build online communities

Examples
YouTube, Photobucket, Flickr, Google, iPhone MySpace, Facebook, LinkedIn Second Life Wikipedia
Copyright 2010 Pearson Education, Inc. Slide 1-10

Types of E-commerce
Classified by market relationship
Business-to-Consumer (B2C) Business-to-Business (B2B)

Consumer-to-Consumer (C2C)

Classified by technology used

Peer-to-Peer (P2P) Mobile commerce (M-commerce)

Copyright 2010 Pearson Education, Inc.

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The Internet

Worldwide network of computer networks built on common standards Created in late 1960s Services include the Web, e-mail, file transfers, etc.

Can measure growth by looking at number of Internet hosts with domain names
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The Growth of the Internet, Measured by Number of Internet Hosts with Domain Names
Figure 1.3, Page 23

SOURCE: Internet Systems Consortium, Inc., 2009.

Copyright 2010 Pearson Education, Inc.

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The Web
Most popular Internet service Developed in early 1990s Provides access to Web pages
HTML documents that may include text,

graphics, animations, music, videos

Web content has grown exponentially
2 billion Web pages in 2000 At least 4050 billion pages today
Copyright 2010 Pearson Education, Inc. Slide 1-14

Insight on Technology:

Spider Webs, Bow Ties, Scale-Free Networks, and the Deep Web
Class Discussion

What is the small world theory of the Web? What is the significance of the bow-tie form of the Web?

Why does Barabasi call the Web a scale-free network with very connected super nodes?
Slide 1-15

Copyright 2010 Pearson Education, Inc.

Origins & Growth of E-commerce

Precursors:
Baxter Healthcare Electronic Data Interchange (EDI) French Minitel (1980s videotext system) None had functionality of Internet

1995: Beginning of e-commerce

First sales of banner advertisements

Since then, e-commerce fastest growing form of commerce in the United States
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The Growth of B2C E-commerce

Figure 1.4, Page 25

SOURCES: eMarketer, Inc., 2009a; U.S. Census Bureau, 2009b; authors estimates.
Copyright 2010 Pearson Education, Inc. Slide 1-17

The Growth of B2B E-commerce

Figure 1.5, Page 28

SOURCES: U.S. Census Bureau, 2009a; authors estimates.

Copyright 2010 Pearson Education, Inc. Slide 1-18

Technology and E-commerce in Perspective

The Internet and Web: Just two of a long list of technologies that have greatly changed commerce
Automobiles Radio

E-commerce growth will eventually cap as it confronts its own fundamental limitations.
Slide 1-19

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Potential Limitations on the Growth of B2C E-commerce

Expensive technology Sophisticated skill set

Persistent cultural attraction of physical markets and traditional shopping experiences Persistent global inequality limiting access to telephones and computers
Saturation and ceiling effects
Slide 1-20

Copyright 2010 Pearson Education, Inc.

E-commerce: A Brief History

19952000: Innovation
Key concepts developed Dot-coms; heavy venture capital investment

20012006: Consolidation
Emphasis on business-driven approach

2006Present: Reinvention
Extension of technologies New models based on user-generated content, social

networking, services
Copyright 2010 Pearson Education, Inc. Slide 1-21

Early Visions of E-commerce

Computer scientists:
Inexpensive, universal communications and computing

environment accessible by all

Economists:
Nearly perfect competitive market and friction-free

commerce Lowered search costs, disintermediation, price transparency, elimination of unfair competitive advantage

Entrepreneurs:
Extraordinary opportunity to earn far above normal

returns on investmentfirst mover advantage

Copyright 2010 Pearson Education, Inc. Slide 1-22

Insight on Business

The Internet Investment Rollercoaster

Class Discussion

What explains the rapid growth in private investment in e-commerce firms in the period 19982000? Was this investment irrational?

What was the effect of the big bust of March 2000 on ecommerce investment?
What is the value to investors of a company such as YouTube which has yet to show profitability? Why do you think investors today would be interested in investing in or purchasing e-commerce companies? Would you invest in an e-commerce company today?
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Copyright 2010 Pearson Education, Inc.

Assessing E-commerce
Many early visions not fulfilled
Friction-free commerce
Consumers less price sensitive Considerable price dispersion

Perfect competition
Information asymmetries persist

Disintermediation First mover advantage

Fast-followers often overtake first movers
Copyright 2010 Pearson Education, Inc. Slide 1-24

Predictions for the Future

Technology will propagate through all commercial activity

Prices will rise to cover the real cost of doing business

E-commerce margins and profits will rise to levels more typical of all retailers

Cast of players will change

Traditional Fortune 500 companies will play dominant role New startup ventures will emerge with new products, services

Number of successful pure online stores will remain smaller than integrated offline/online stores Growth of regulatory activity worldwide Influence of cost of energy
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Copyright 2010 Pearson Education, Inc.

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
Copyright 2010 Pearson Education, Inc. Slide 1-26

The Internet and the Evolution of Corporate Computing

Figure 1.9, Page 44

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Insight on Society

Privacy Online: Does Anybody Care?

Class Discussion

What techniques of privacy invasion are described in the case? Which of these techniques is the most privacyinvading? Why? Is e-commerce any different than traditional markets with respect to privacy? Dont merchants always want to know their customer? How do you protect your privacy on the Web?
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Copyright 2010 Pearson Education, Inc.

Academic Disciplines Concerned with E-commerce

Technical approach
Computer science Management science

Behavioral approach
Information systems Economics

Information systems

Marketing
Management Finance/accounting Sociology

Copyright 2010 Pearson Education, Inc.

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2010 Pearson Education, Inc.

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