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: It’s 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 2009–2010
 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. Slide 1-4

 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

Copyright © 2010 Pearson Education, Inc. Slide 1-5

 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. Slide 1-6

 E-commerce vs. E-business
 E-business:
 Digital enablement of transactions and processes
within a firm, involving information systems under
firm’s control
 Does not include commercial transactions
involving an exchange of value across
organizational boundaries

Copyright © 2010 Pearson Education, Inc. 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. Slide 1-8

 Unique Features of E-commerce
Technology
1. Ubiquity
2. Global reach
3. Universal standards
4. Information richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology

Copyright © 2010 Pearson Education, Inc. Slide 1-9

 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. Slide 1-11

 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

Copyright © 2010 Pearson Education, Inc. Slide 1-12

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. Slide 1-13

 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 40–50 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”?

Copyright © 2010 Pearson Education, Inc. Slide 1-15

 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
Copyright © 2010 Pearson Education, Inc. Slide 1-16
 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.

Copyright © 2010 Pearson Education, Inc. Slide 1-19

 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
Copyright © 2010 Pearson Education, Inc. Slide 1-20
 E-commerce: A Brief History
 1995–2000: Innovation
 Key concepts developed
 Dot-coms; heavy venture capital investment

 2001–2006: Consolidation
 Emphasis on business-driven approach

 2006–Present: 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 investment—first 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 1998–2000? Was this
investment irrational?
 What was the effect of the big bust of March 2000 on e-
commerce 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?

Copyright © 2010 Pearson Education, Inc. Slide 1-23

 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

Copyright © 2010 Pearson Education, Inc. Slide 1-25

 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

Copyright © 2010 Pearson Education, Inc. Slide 1-27

 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 privacy-
invading? Why?
 Is e-commerce any different than traditional markets
with respect to privacy? Don’t merchants always
want to know their customer?
 How do you protect your privacy on the Web?

Copyright © 2010 Pearson Education, Inc. Slide 1-28

 Academic Disciplines Concerned
with E-commerce
 Technical approach  Behavioral approach
 Computer science  Information systems
 Management science  Economics
 Information systems  Marketing
 Management
 Finance/accounting
 Sociology

Copyright © 2010 Pearson Education, Inc. Slide 1-29