E-commerce

business. technology. society.

SIXTH

EDITION

Kenneth C. Laudon
New York University

Carol Guercio Traver

Azimuth interactive,

PEARSON

Prentice Hall
Prentice 11111, Upper Saddle River, New Jersey 07458

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Credits and acknowledgements borrowed from other sources and reproduced, with permission, in this textbook appear on page C-1. Microsofte and Windows are registered trademarks of the Microsoft Corporation in the U.S.A. and other countries. Screen shots and icons reprinted with permission from the Microsoft Corporation. This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation.

Copyright 2010, 2009, 2008 by Kenneth C. Laudon and Carol Guercio Traver.
Published by Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458. All rights reserved. Manufactured in the United States of America. this publication is protected by Copyright, and permission should he obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. In obtain permissionisi to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458. Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks. Where those designations appear in this hook, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps. 10 9

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Library of Congress Cataloging-in-Publication Information is Available

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ISBN 13: 978-0-13-610057-7

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

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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 !Prairie 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 resolution 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 platform 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-commerce! 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 continue growing at high single-digit rates, becoming the fastest-growing form of commerce 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 society 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 business 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 written for tomorrow's managers. While newer Web 2.0 firms such as Facehook, MvSpace, Youliabe, 'I-Witter, Photobucket, 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 profitable. 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 pastautomobiles, electricity, telephones, television, and biotechnologythere 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 entrenprenurial 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 disciplinemust 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 suppliers, 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 ecommerce 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 exaggerated descriptions of eaC0111111C Ric. As founders of a ClOt. COM company and participants 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 technology 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 emergence 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 countriesincluding the United Statesare 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

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 technologies, 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 chapterclosing cases, and "Insight on" boxes.

We devote an entire chapter to an e-commerce. In writing this chapter, we developed a unique examination of 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.
In-depth Coverage of B2B E-commerce
13211

Current and Future Technology Coverage Internet and related inliirmation technolo-

gies continue to change rapidly. The most important changes for eacommerce include

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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 technologies, Wi-Fi, II' multicasting, and future guaranteed service levels. 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.
Up-to-Date Coverage of the Research Literature 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 Ithe first Internetand 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

ix

alters need to follow in order to build a commercial Web site. This c-commerce infrastructure chapter covers the systems analysis and design process that should be foll 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, 10 explores the world of

www.azinnith-interactivc.concecommerce6c. Chapter

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 portals. 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.

Preface

CHAPTER OUTLINE
Each chapter contains a number as interesting.

or elements designed to make learning easy as well

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

"Insight on" Cases Each chapter

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

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-competitiveness 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-commerce 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 organization. These cases help students synthesize chapter concepts and apply this knowledge to concrete problems and scenarios such as evaluating the ethics and legality of advertising SpyWale, the 'marketing plans of Liquidation.com , and the business model behind Siemens' Click2procure 132I't marketplace. Chapter-Ending Pedagogy Each chapter con iIts enclokthapter materials designed to reinforce the learning objectives of the chapter. Key Concepts Keyed to the learning objectives, Rey Concepts 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 students 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 payment 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 identify the vision of the company, analyze its financial performance, review its

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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 understanding 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 current 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 representative 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:

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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

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, Bost o 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 University Jason Little, Franklin Pierce University Matthew If. Sauber, Eastern Michigan University Daniel C. Wood, Arizona State Unw ersity Kaimei Zheng, University of Massachusetts, 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 production 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

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Preface

Brief Contents

roduction to E-commerce
1 2
THE REVOLUTION IS JUST BEGINNING 2

E-COMMERCE BUSINESS MODELS AND CONCEPTS

62

PART
3

chnology Infrastructure for E-commerce

120

THE INTERNET AND WORLD WIDE WEB: E-COMMERCE INFRASTRUCTURE

BUILDING AN E-COMMERCE WEB SITE

202

ONLINE SECURITY AND PAYMENT SYSTEMS

262

tress Concepts and Social Issues

6 7 8
E-COMMERCE MARKETING CONCEPTS 340

E-COMMERCE MARKETING COMMUNICATIONS

424

ETHICAL, SOCIAL, AND POLITICAL ISSUES IN E-COMMERCE

490

xv i i

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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

Contents

oduction to E-commerce
1
THE REVOLUTION IS JUST BEGINNING

Learning Objectives

2
3

Facebook and MySpace: It's All About You

1.1 E-commerce: The Revolution Is lust Beginning

The First Thirty Seconds What Is E-commercei' Why Study F.-commerce? Light Unique Features of L14 Ubiquity Global Reach Richness 15 16 17 14 14 11niversal Sta n dards 16 Interactivity Infin mation Density 10 10 17 11
11111111 - Cr

it

The Itifterence between Ii-cornmeref and E-business Teamlogy

Personalization Customization Web 2:0: Play My Version 17

Social Iechnologv: User Content Generation and Social Networking 20 'types of E-commerce Business-to-Consumer (B2C) E-commerce Business-to-Business (0213) L-commerce Consumer-to-Consumer (C2C) Ei-commerce Peerko-Peer (P21') [-commerce Mobile Commerce (M-cornmerce) Growth of the Internet and the Web 22 21 21

17

20 20

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Contents

Origins and Growth of E-commerce

24 24

Technology and E-commerce in Perspective

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
:30 34

E-commerce 1995-2000: Innovation E-commerce 2001-2006: Consolidation

Insight on Business: The Internet Investment Roller Coaster

E-commerce 2006-Present: Reinvention 37 Assessing E-commerce: Successes, Surprises and Failures Predictions for the Future: More Surprises
-

35
38

40

1.3 Understanding E commerce: Organizing Themes

Technology: Infrastructure Business: Basic Concepts 43 44

43

Society: Taming the ,Iuggernaut

Insight on Society: Privacy Online: Does Anybody Care

Academic Disciplines Concerned with E-commerce Technical Approaches Behavioral Approaches 49 50 49

46

1.4 Case Study: Internet Piracy: The Pirate Bay 1.5 Review 57
Key Concepts Questions Projects 61 61 60 57

51

Web Site Resources

E COMMERCE BUSINESS MODELS AND CONCEPTS

-

62

Learning Objectives

62

Tweet Tweet: What's Your Business Model

63 66
66

2.1 E.-commerce Business Models

Introduction 66 Eight Key Elements of a Business Model Value Proposition Revenue Model Market Opportunity 67 69 70 71 67

Competitive Environment Competitive Advantage Market Strategy 73

Cont en ts

xxi

Organizational Development Management Te a m 71

73

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

h-toiler 30

78

Insight on Technology: Can Bing Bong Google? Content Provider

Transaction Broker Market Creator Service Provider Lonununity Provider
-

87

110

n'7
28

2.3 ,Major Business to Business (13213) Business Models

h-distributor h-procinement 1::xchanges 01 02 9 .2
93

89

90 91

Industry Consortia

Private Industrial Networks

2.4 Business Models in Emerging E-00111111CrCe Areas

Consumer-to-Consumer (C2C) Business Models Peel-to-Peer (P2P) Business Models M-coninierLe Business Models 95 94 94

Insight on Society: Where R U

96
93

has9cmcyce Enablers: The Gold Rush Model

2.5 1 low the Internet and the Web Change Business: Strategy), Structure, 99 and Process
Industry St ructure Industry Value Chains Finn Value Chains Firm Value Webs Business Stnit(-7y 104 105 1(10 103

2.6 Case Study: Pricelinc.com and the Search for a Business Model that It 109 113 2.7 Review 113 kcy Lout opts
Questions Projects 113 110 117

Web Site Resoorces

xxii

Contents

hnology Infrastructure for E-commerce

THE INTERNET AND WORLD WIDE WEB: E-COMMERCE INFRASTRUCTURE

Learning Objectives 120

120

Wikitude.me

121 124
125 12(3

3.1 The Internet: Technology Background

The Evolution of' the Internet 1961The Present The Internet: Key 'technology Concepts Packet Switching 129

transmission Control Protocol 'Internet Protocol (TCP II' Addresses 131 133

Domain Names, DNS, and I11215 Client, Server Computing 133

Insight on Business: P2P Dukes It Out with Streaming Video The New Client: The Emerging Mobile PlatfOrm
Service 139 141 138

136

Internet "Cloud Computing" Model: Software and Hardware as

Other Internet Protocols and Utility Programs

Internet Protocols: HTTP, E-mail Protocols, FTP, Telnet, and SSL. Utility Programs: Ping, Tracert, and Pathping 142

141

3.2

The Internet Today 1fie Internet Backbone

Internet Exchange Points

143
145 146 146

Campus Area Networks (CANS) Internet Service Providers Intranets and Extrancts Who Governs the Internet .? 118 ISO 150

Insight on Society: Government Regulation and Surveillance of the Internet

3.3.

752

Internet II: The Future Infrastructure

Limitations of the Current Internet The Internet2 , ": Project 156 155

/ 55

The Larger Internet II Technology Environment: The First Mile and the Last Mile 157 153

Fiber Optics and the Bandwidth Explosion in the First Mile

Contents

xxiii

The List Mile: Mobile Wireless Internet Access Benefits of Internet II Technologies 11' Multicasting Latency Solutions 166 168 166

159

Guaranteed Service Levels and Lower Error Rates Declining Costs 168

168

3.4

The World Wide Web

I lppertext
170 172 Markup Languages

169

Standardized Generalized Markup Lan g uage (SGMLl lyperil'ext Markup Language (11TML) Extensible Markup Language (XML) Web Servers and Clients Web Browsers 176 175 172 172

172

The Internet and the Web: Features

E-mail 177 177 178 181 182 Instant Messaging Search Engines

177

Intelligent Agents (Hots) Online Forums and Chat Streaming Media Cookies 183 182

Web 2.0 Features and Services Blogs 183

183

Really Simple Syndication (RSS) Podcasting Wikis 185 184

184

NCW M usic and Video Services Internet Telephony Internet Television 186 187

185

Telepresence and Video Conferencing

188 188

Online Software and Web Services: Web Apps, Widgets and Gadgets M-commerce Applications: The Next Big Thing 189

Insight on Technology: All Mashed Up

3.6

190

Case Study: A kamai Technologies: The Web's Invisible Accelerator 192 196
196 200 200 201 Key Concepts Questions Projects

3.7 Review

Web Site Resources

xxiv

Contents

BUILDING AN E-COMMERCE WEB SITE

202 202 203

Learning Objectives Right-Sizing a Web Site

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

Pieces of the Site-Building Puzzle 206 207 Planning: The Systems Development Lib: Cycle

206

Systems Analysis/ Planning: Identify Business Objectives, System Functionality, and Information Requirements 208 System Design: Hardware and Software Platforms Building the System: In-House versus Outsourcing Build Your Own versus Outsourcing Host Your Own versus Outsourcing 210 211 210 210

Insight on Business: Curly Hair and MotorMouths: Getting Started on the Cheap 275 Testing the System 217 217 218 Implementation and Maintenance Web Site Budgets 219

Factors in Optimizing Web Site Performance

4.2 Choosing Software

Web Server Software

220
220 222 222 224 226

Simple versus Multi-tiered Web Site Architecture Site Management Tools Application Servers 226

Dynamic Page Generation "Fools

[-commerce Merchant Server Software Functionality Online Catalog 227 Shopping Carts 227 228 Credit-Card Processing

Merchant Server Software Packages (E-commerce Suites) Choosing an [-commerce Suite 228

228

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

4.3 Choosing the Hardware for an E commerce, Site

-

231
2:32 2:13

Right-Sizing Your Hardware Platform: The Demand Side Right-Sizing Your Hardware Platlibrim . 1he Supply Side

4.4 Other E commerce Site Tools

-

238
2:39

Web Site Design: Basic Business Considerations 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 CCil (Common Gateway Interface) Active Server Pages (ASP) ActiveX and VBScript
244

242

243 243

243

Java, lava Server Pages (JSP), and JavaScript

Insight on Technology: Pumping Up the Customer Experience Using AJAX and Flash 245

Coldl usion Personalization Tools 247

241 249

The Infbrmation Policy Set

Insight on Society: Designing for Accessibility with Web 2.0

4.5 Case Study: RU Climbs the Web Mountain 4.6 Review 257 252

Key Concepts Questions Projects 26(1 260

257

Web Site Resources

761
262

ONLINE SECURITY AND PAYMENT SYSTEMS

Learning Objectives
Cyberwar Becomes a Reality

262
263
265

5.1 The U-commerce Security Fnvironment [lie Scope of the Problem

The

265 Underground Economy Marketplace: The Value of Stolen 268 IntOrmation 260 What Is Good [-commerce Security? 270 Dimensions of P.-commerce Security The 'elision Between Security and Other Values Ease of I Ise 5.2 272 777
273

271

Public Safety and the Criminal Uses of Security

-

Security Threats in the E commerce Environment

Malicious Code

274 277 280 28.; 283

Untvanted Programs Phishing and Identity Theft Ilacking and Cybervanchilism 281 Credit Card Fraud , Thell

Spoofing ( ['harming), Spam (Junk) Web Sites, and Splogs Sniffing 2114 235

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

xxvi

Contents

Poorly Designed Server and Client Software 5.3

285

Technology Solutions
Encryption 286

286
286

Protecting Internet Communications

Symmetric: Key Encryption Public Key Encryption 289

287

Public Key Encryption Using Digital Signatures and Hash Digests Digital Envelopes 292 292

489

Digital Certificates and Public Key Infrastructure (PKI) Limitations to Encryption Solutions Securing Channels of Communication Secure Sockets Laver (SSL) 295 295 295

Insight on Society: In Pursuit of E-mail Security

Secure Hypertext Minster Protocol (S-IITTP) Virtual Private Networks Protecting Networks Firewalls 299 300 299 299

296
298

Protecting Servers and Clients

Operating System Security Enhancements Anti-Virus Software 3(11

300

5.4 Management Policies, Business Procedures, and Public Laws

A Security Plan: Management Policies The Role of Laws and Public: Policy 302 304

302

Insight on Technology: Securing Your Information: Cleversafe Hippie Storage

Private and Private-Public Cooperation Ettorts 308 308 Government Policies and Controls on Encryption Software OECD Guidelines 5.5 308

305

Payment Systems
Cash 31)9

309

Types of Payment Systems

Checking Transfer Credit Card Stored Value 310 311 311

Accumulating Balance

5.6

E commerce Payment Systems

-

313
314 315 316

Online Credit Card Transactions

Credit Card E-commerce Enablers

Limitations of Online Credit Card Payment Systems Digital Wallets Digital Cash 316 317 :117 319

Online Stored Value Systems

Digital Accumulating Balance Payment Systems

Contents

xxvii

Digital Lk rking Payment Systems Wireless Payment SN'StCms 320

:119

5.7

Vlectronic Billing Presentment and Payment

Market Size and Growth

321

321 322

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

EBIT Business Models 324

5.8 Case Study: PayPal has Company

326

5.9

Reuiew

331

Key Concepts Questions Projects 335 337 .137 7

Web Siw Resources

usiness Concepts and Social Issues

E COMMERCE MARKETING CONCEPTS

-

340

Learning Objectives

340

Netflix Develops and Defends Its Brand

341

6.1 Consumers Online: The Internet Audience and Consumer 344 Behavior
[he inter - net Audience 341 345 Internet 'traffic: Patterns: The Online Consumer Profile Intensity and Scope of Usage Demographics and Access 3/5 :145 347

Type of Internet Connection: Broadband Impacts Corr Intinity Effects: Social Contagion Lifestyle 340 350

and

Sociological Impacts

Media Choices and Multitasking : The Internet versus Other Media Channels 350 350 35 3 354 355

Consumer Behavior Models Profiles of Online Consuniers The Online Purchasing Decision

A Model of Online Consumer Behavior Shoppers: Browsers and Buyers 358

What Consumers Shop for and Buy Online

3130 3(ie

Intentional Acts: I low Shoppers Find Vendors Online Why More People Don't Shop Online 361

xxviii I

Contents

Trust, Utility, and Opportunism in Online Markets

363

6.2 Basic Marketing Concepts

Feature Sets 363

362
3144 366

Products, Brands, and the Branding Process Segmenting, Targeting, and Positioning Are Brands Rationab' Do Brands Last Forever? 367

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

Web Transaction Togs 373 376 Supplementing the Logs: Cookies and Web Bogs

372

Insight on Society: Marketing with Web Bugs

Databases 38() 381

378

Databases, Data Warehouses, and Data Mining: Developing Profiles

Data Warehouses and Data Mining

Insight on Technology: The Long Tail: Big Hits and Big Misses
Customer Relationship Management (CRM) Systems
-

384

386

6.4 B2C and B2I3 E commerce Marketing and Branding Strategics

Market Entry Strategies 388 390 Establishing the Customer Relationship Advertising Networks Permission Marketing Affiliate Marketing :391 393 393 394

.388

Viral Marketing in the Web 2.0 Milieu 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 401 401

Customer Retention: Strengthening the Customer Relationship Personalization and One-to-One Marketing Customization and Customer Co-Production iransactive Content Customer Service Net Pricing Strategies
f ree and freemium

401 403

404 101 406 408

Versioning Bundling

409 409 411

Dynainic Pricing

Contents

xxix

Channel Strategies: Managing Channel Conflict 6.5 6.6

412

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

413

Review
Rev Concepts Questions Projects

418
418 421 427 422

Web Site Resources

NEE
7.1

E-COMMERCE MARKETING COMMUNICATIONS

424

Learning Objectives

424

Video Ads Cure Banner Blindness: String Master

Marketing Communications
Online Advertising 429

425

429
431

Display Ads: Banners and Pop-Ups Rich Media Video Ads 432 434

Search Engine Advertising: Paid Search Engine Inclusion and Placement Sponsorships 412 442

435

Referrals (Affiliate Relationship Marketing) [-mail Marketing and the Spam Explosion Online Catalogs 447 443

Social Marketing: Rings, Social Networks and Eames log Advertising 442 450

49

Social Network Advertising Came Advertising 450

Behavioral targeting: Getting Personal

451

Insight on Society: Marketing to Children of the Web in the Age of Social 452 Networks
Mixing Offline and Online Marketing Communications 457

7.2 Understanding the Costs and Benefits of Online Marketing 458 Communications
Insight on Business: Are the Very Rich Different from You and Me?
Online Marketing Metrics: Lexicon 492 49. 6 How Well Does Online Advertising Work? The Costs of Online Advertising 498 470

459

Software tor Measuring Online Marketing Results

7.3 The Web Site as a Marketing Communications Tool Domain

Narnes 471 472 Search Engine Optimization

470

Insight on Technology: Its 10 PM. Do You Know Who Is On Your Web 473 Site?

xxx

Co n tent s

Web Site Functionality

470

7.4 Case Study: AdwareSpyware, Ad Bombs, Ambush Marketing, and Customer Hijacking: Invasive Marketing Techniques Grow on the Web 480 7.5 Review Key Concepts Questions Projects 187 488 489
490

485 485

Web Site Resources

ETHICAL, SOCIAL, AND POLITICAL ISSUES IN E-COMMERCE

Learning Objectives

100
497

Discovering Law and Ethics in a Virtual World

8.1

itt

Understanding Ethical, Social, and Political Issues E-commerce 494 405 407

A Model For Organizing the Issues

Basic Ethical Concepts: Responsibility, Accountability, and Liability Analyzing Ethical Dilemmas 409 Candidate Ethical Principles 500 8.2 Privacy and information Rights Information Collected at E-commerce Sites Social Networks and Privacy 504 Profiling and Behavioral Targeting 501 .502

50.5 The Internet and Government invasions of I'ti vat E-commerce Surveillance 500 Legal Protections 510 Intbrmed Consent .512 513 51(i The FTC's Fair Information Practices Principles 'The European Directive on Data Protection Private Industry Selt-Regulation Privacy Advocacy Groups Technological Solutions 518 3111
519 524

510

Insight on Business: Chief Privacy Officers Insight on Technology: The Privacy Tug of War

8.3 Intellectual Property Rights

527 Types of intellectual Property Protection

528 Copyright: The Problem of Perfect Copies and Encryption Look and Feel 520 Fair Use Doctrine 530 .531 533 The Digital Millennium Copyright Act of 1098 Patents: Business Methods and Processes

528

Contents

G-o n n

Patents 537

534 537

Patent Reform

Tradernarks: Online Infringement and Dilution "Fradenorks and the Internet Cybersquatting Cyberpiracy Meta tag-gi ng Kevrvording Linking Framing
8.4 Governance
Who

538

530 510 541 542

.543 543 544

545

Challenge: Balancing the Protection of Property with Other Values Governs F.-commerce and the Internet? Can the Internet Be Controlled? Public Government and Law Taxation 548 550
551

546

546

548

Net Neutrality

8.5 Public Safety and Welfare

551 Protecting Children Cigarettes, Gambling, and Drugs: Is the Web Really Borderless?
Insight on Society: The Internet Drug Bazaar 554
8.6 Case Study: The Google Book Settlement: Is it Fair? 8.7 Review 562

553
558

Rey Concepts Questions Projects 3115 560

562

Web Site Resources

567

fi

erce

in Action

Learning Objectives

570
577
575

Blue Nile Sparkles For Your Cleopatra

9.1 The Online Retail Sector The Retail Industry

570 5711 380

578 Online Retailing Lwommerce Retail: The Vision The Online Retail Sector Today

xxxii

Contents

Multi-channel Integration

582

9.2 Analyzing the Viability of Online Firms

Strategic Analysis Financial Analysis 583 584
-

583

9.3 E commerce in
-

Action: E tailing
586

Business Models

586

Virtual Merchants

E-commerce in Action: Amazon.com

Catalog Merchants Manufacturer-Direct 597 598

587
595

Multi-channel Merchants: Brick-and-Clicks

Common Themes in Online Retailing

599

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

9.4 The Service Sector: Offline and Online
What Are Services":' 604 604 (504 605

601

603

Categorizing Service Industries

Knowledge and Information Intensity Personalization and Customization

9.5 Online Financial Services

Financial Services Industry Trends

605
605 608

Online Financial Consumer Behavior Online Banking and Brokerage 609

Multi-channel vs. Pure Online Financial Services Firms Financial Portals and Account Aggregators Online Mortgage and Lending Services Online Insurance Services Online Real Estate Services 61:1 613 612 611

610

9.6

Online Travel Services

618
618

Why Are Online Travel Services So Popular'?

Insight on Society: Turf WarsAntitrust and the Online Real Estate Market
The Online "Fravel Market 622

619

Insight on Business: Zipcars

623
626 627

Online Travel Industry Dynamics

Opportunities for Disintermecliation and Re-intermediation

9. 7

Online Career Services

628
629

Its Just Information: The Ideal Web Business:' 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 9.9 Review
Key Concepts

634

638
638

Contents

xxxiii

(Zwstions
Projects

645

10)1
647

\Vet) Site Resources

Learning Objectives

0411

Information Wants to Bc Expensive 10.1

Online Content
653

649
6.53

Content Audience and Market: Where Are the Eyeballs and the Money?
Media I itilization 653

Internet and Traditional Media: Cannibalization Versus Complementaritv Media Revenues 655 656

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 660 660 661

Media Industry Structure

Media Convergence: Technology, Content, and Industry Structure Thchnological Convergence Content Convergence Industry Convergence 661 663 664 666 667 1161

Online Content Revenue Models and Business Processes Making a Profit with Online Content: From Free to Fee Key Challenges Facing Content Producers and Owners lichnology Cost 068 669 667

Distribution Channels and Cannibalization

Digital Rights Management (DRA)

669

10.2 The Online Publishing Industry

Online Newspapers 671)

6'70

Insight on Business.- ORM: Who Owns Your Files? Audience Size and Growth
Newspaper Business Models
COnv(gence

671

675 1176

678 080

(:hallenges: Disruptive Technologies Books: The Evolution or C-books k-books 6II2 684 680

Book .Audience Size and Growth

Content: Advantages and Disadvantages of C-hooks II-book Industry Revenue Models 646

680

xxxiv

Contents

Convergence

(18/1

Insight on Society: The Future of Books

10.3 The Online Entertainment Industry

691
693
(103

Online Entertainment Audience Size and Growth Online Traditional Entertainment rift')

User-Generated Content: Where Does It Fit3 Content 6117

(105

Online Entertainment industry Revenue Models Convergence (100

600

Insight on Technology: Hollywood Meets the Internet: Round 2

10.4 This Ad Plays 10.5 Review
Key Concepts Questions Projects 714 713 715

702

Case Study: Google and YonTnbe Together: Pass the Popcorn While
704 709
709

Weh Site Resources

11

SOCIAL NETWORKS, AUCTIONS, AND PORTALS

Learning Objectives 716

716

Social Network Fever Spreads to the Professions 11.1

717
719

Social Networks and Online Communities

What Is an Online Social Network:' 720

Dithinince Between Social Networks and Portals The Growth of Social Networks and Online Communities 'Brining Social Networks Into Businesses 723

721 721

iPopes of Social Networks and Their Business Models Social Network Features and Technologies The Future of Social Networks 723 725

723

11.2 Online Auctions

726

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

Defining and Measuring the Growth of Auctions and Dynamic Pricing Why Are Auctions So Popular .: Benefits and Costs of Auctions Benefits of Auctions 731 731

727
7'0

Risks and Costs ofAuctions (Or Consumers and Businesses Market-Maker Benefits: Ancthms as an L-commerce Business Model Types and Examples of Auctions interne( Auction Basics Types of Auctions 730 741 734 734 7:34

When to Ilse Auctions (and ror What) in Business

Contents

xxxv

743 Seller and Consumer Behavior at Auctions Seller Prolits: Arrival Rate, Auction Length, and Number of Units Auction Prices: Are They the Lowest? Consumer Trust in Auctions 745 745
746

743

713

When Auction Markets Fail: Fraud and Abuse in Auctions

11.3 E-commerce Portals 748

Insight on Society: Swoopo: Online Auction or Game of Chance? Me tooirth and Evolution of Portals

750 750
751 758

Types of Portals: General Purpose and Vertical Market

Insight on Business: The Transformation of AOL

Portal Business Models

761

756

11.4 Case Study: eBay Fine-Tunes Its Strategy 11.5 Review

Key Concepts Questions Projects 766 767

761

Web Site Resources

767

12

B2B E-COMMERCE: SUPPLY CHAIN MANAGEMENT AND COLLABORATIVE COMMERCE

768

Learning Objectives

768
769 772

Volkswagen Builds Its 828 Net Marketplace

12.1 B2B E-commerce and Supply Chain Management

Defining (Ind Measuring the Growth of 02B Commerce 773 The Evolution of B2B Commerce The (irowth of B20 E-cornmerce 2009-2013
Industry

77 3

775

Forecasts

775 776 777 779 780

Potential Benefits of 11211 F-commerce Types of ProCurement 778

The Procurement Process and the Supply Chain The Role of Existing Legacy Computer Systems Supply Chain Simplification 781 781 781

Trends in Supply Chain Management and Collaborative Commerce Electronic Data Interchange (EDI) Supply Chain Management Systems Collaborative Commerce 785

Insight on Technology: RF1D Autoidentification: Making Your Supply Chain Visible 786 1n166 Types of Internet-based 132B Commerce 12.2 Net Marketplaces 789

780 700

The Variety and Characteristics of Net Marketplaces

xxxvi

Contents

Types of Net Marketplaces [-distributors E-procurement Exchanges 794 796 792 70:1

700

Industry Consortia

The Long-Term Diminnics of Nut Marketplaces

799

12.3 Private Industrial Networks

What Are Private Industrial Networks?

800
801
802 004

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

Characteristics of Private Industrial Networks

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

Private Industrial Networks and Collaborative Commerce Implementation Barriers 008 808 810 000

805

Industry-Wide Private Industrial Networks

The Long-Term Dynamics of Private Industrial Networks

12.4 Case Study: Elemica: Cooperation, Collaboration, and Community 811 12.5 Review 816 Key Concepts 816
Questions Projects 820 821 822

Web Situ Resources

References

R 1
-

Index Credits

1-1 C-1