Trends in E-Commerce with a focus on small & medium enterprises.

APEC OVOP Training Workshop on E-Commerce Taipei, Taiwan August 2007

Sandeep Krishnamurthy, Ph.D. Associate Professor of E-Commerce & Marketing University of Washington http://faculty.washington.edu/sandeep sandeep@u.washington.edu

E-Commerce
Leveraging the Internet and World Wide Web to generate revenue.

Big Picture

Supply of Information

Market Intermediaries

Demand for Information

E-Commerce Business Model

Online firms make money in these ways Commerce
Digital products (e.g. software, music) Non-digital products (e.g. book, clothing)

Advertising
Banner, text ads, rich media

Fees
Affiliate fees/commission

Trend # 1- E-commerce is Doing Well.

Business-to-Consumer electronic commerce is growing.
But, the growth rate has gone down.

There is considerable potential for growth.

Key players have shifted from a retailer business model to a platform model.
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US E-Commerce Trend
(Source: Forrester Research)
$250 51% 48% $200 $176 40% $150 US$B $100 $76 $50 $114 24% $141 25% 25% 30% % YOY growth $220 50% 60%

20%

10%

$0 2002 2003 2004 2005 2006

0%

Amazon + eBay, Revenue Trend

(in thousands, USD)
6,000,000

5,000,000

4,000,000 Amazon 3,000,000 2,000,000 eBay TOTAL

1,000,000

q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 2002 2003 2004 2005 2006 2007

Amazon + eBay, Indexed

(2002 q1 indexed as 100)
600.000

500.000

400.000

300.000 200.000

100.000

0.000 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 2002 2003 2004 2005 2006 2007

Trend # 2- The Web is now Worldwide

After all these years, the World Wide Web is living up to its name. The World Wide Web is now a dynamic global communication platform.
New patterns of trading.
Buyers/Sellers from around the world.

New patterns of communication.

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Global Picture

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Amazon.coms International Sales As a Percent of Total Sales

60.00%

50.00%

40.00%
Media

30.00%

Electronics+general TOTAL

20.00%

10.00%

0.00%

q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q2 q1
2002 2003 2004 2005 2006 2007

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eBays International Sales As a Percent of Total Sales

60.00%

50.00%

40.00%

30.00% 20.00%

10.00%

0.00% q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2

2004

2005

2006

2007

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Baidu.com vs. Google.com

Baidu.com, Google.com

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Trend # 3- Advertising is growing faster than commerce.

Online advertising is replacing commerce as the killer business model. As content grows, advertising grows. Search dominating online advertising with 40% of revenue.
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Online advertising growth trend

(source: iab.net, figures in millions)
6,000 5,000

4,000

3,000

2,000

1,000

q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1 q2 q3 q4 q1
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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(Google+Yahoo) vs. (Amazon+eBay)

6,000,000

5,000,000

4,000,000 Google+Yahoo Amazon+eBay

3,000,000 2,000,000

1,000,000

q2 q3 2006 q4 q1 2007

All figures in thousands. 19

Advertising vs. Commerce

Commerce is a seasonal business.
Tends to peak in Q4 of each year due to holiday shopping. Advertising is not seasonal.

Advertising requires low infrastructure.

Advertising is a low risk option for a publisher. Commerce still requires non-trivial infrastructure.
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Trend # 4- User-generated Content

Top blog on the Internet (Xu Jinglei)

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User-generated content popular everywhere.

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Wikipedia, Blogger,Youtube

Wikipedia.org, Blogger.com, Youtube.com, Amazon.com

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Youtube vs. Amazon (reach)

Youtube.com, Amazon.com

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Youtube vs. Amazon (page views)

Youtube.com, Amazon.com

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Youtube vs. eBay (reach)

Youtube.com, eBay.com

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Youtube vs. eBay (page views)

Youtube.com, eBay.com

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Trend # 5- Emergence of Global Sourcing Platforms.

Global Sourcing Platforms help small and medium enterprises find buyers for their products. Two prime examples
Alibaba.com Globalsources.com

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How can a Small and Medium Enterprise Benefit From E-Commerce?

Commerce
Selling direct (risky) Selling through a platform (preferred)
Amazon.com, eBay.com, Yahoo.com Alibaba.com, Globalsources.com

Advertising
Googles AdSense, Yahoo, MSN/Live.com

Affiliate
Amazon.coms Affiliate Program
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Sandeep Krishnamurthy University of Washington

sandeep@u.washington.edu http://faculty.washington.edu/sandeep

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