Download - MANAGEMENT INFORMATION SYSTEMS (MIS) E - COMMERCE DIGITAL MARKETS AND DIGITAL GOODS SPRING 2010 LECTURE NOTES 7

MANAGEMENT INFORMATION SYSTEMS (MIS)MANAGEMENT INFORMATION SYSTEMS (MIS)

E - COMMERCEE - COMMERCE

DIGITAL MARKETS AND DIGITAL GOODSDIGITAL MARKETS AND DIGITAL GOODS

SPRING 2010SPRING 2010

LECTURE NOTES 7LECTURE NOTES 7

E - COMMERCE: DIGITAL MARKET AND DIGITAL GOODSE - COMMERCE: DIGITAL MARKET AND DIGITAL GOODS

E-commerce began in 1995 when one of the first Internet E-commerce began in 1995 when one of the first Internet Portals, (Netscape.com) accepted the first advertisements from Portals, (Netscape.com) accepted the first advertisements from major corporations and popularized the idea that the Web could major corporations and popularized the idea that the Web could be used as a new medium for advertising and sales.be used as a new medium for advertising and sales.

No one envisaged at the time that that would turn out to be No one envisaged at the time that that would turn out to be exponentially growth curve for e-commerce retail sales which exponentially growth curve for e-commerce retail sales which tripled and doubled in the early years.tripled and doubled in the early years.

..


Although most purchases still take place through traditional Although most purchases still take place through traditional channels, e-commerce continues to be the fastest growing form of channels, e-commerce continues to be the fastest growing form of retail trade, and continues to transform the way companies do retail trade, and continues to transform the way companies do business. business.

The e-commerce revolution is still just beginning. Individuals and The e-commerce revolution is still just beginning. Individuals and businesses will increasingly use the Internet to conduct commerce as businesses will increasingly use the Internet to conduct commerce as more products and services come online and more households switch more products and services come online and more households switch to broadband telecommunications. to broadband telecommunications.

More industries will be transformed by e-commerce, including travel More industries will be transformed by e-commerce, including travel reservations, music and entertainment, news, software, education, reservations, music and entertainment, news, software, education, and finance.and finance.


WHAT IS E-COMMERCEWHAT IS E-COMMERCE

E-Commerce is about digitally enabled commercial transactions E-Commerce is about digitally enabled commercial transactions that occur over the Internet and the Web between and among that occur over the Internet and the Web between and among organizations and individuals.organizations and individuals.

Commercial transactions involve the exchange of value across Commercial transactions involve the exchange of value across organizational or individual boundaries in return for products organizational or individual boundaries in return for products and services.and services.

In a nut shell, E-Commerce refer to the use of the Internet and In a nut shell, E-Commerce refer to the use of the Internet and the Web to conduct business.the Web to conduct business.


WHY E-COMMERCE IS DIFFERENTWHY E-COMMERCE IS DIFFERENT

The Internet and the e-commerce technologies are much more rich and The Internet and the e-commerce technologies are much more rich and powerful than the previous technology revolutions.powerful than the previous technology revolutions.

Let’s explore the following unique Features of e-commerce TechnologyLet’s explore the following unique Features of e-commerce Technology..

UBIQUITYUBIQUITY Internet / Web technology (e-commerce) is available everywhere; At Internet / Web technology (e-commerce) is available everywhere; At work, at home, at car, and elsewhere via mobile devices, anytime. work, at home, at car, and elsewhere via mobile devices, anytime. This result is called This result is called MarketspaceMarketspace, which means A Market place extended , which means A Market place extended

beyond traditional boundaries and removed from a temporal and beyond traditional boundaries and removed from a temporal and geographic location. geographic location.

From a Customer point of view, Ubiquity reduces transaction costs From a Customer point of view, Ubiquity reduces transaction costs i .e. the cost of participating in a market.i .e. the cost of participating in a market.


WHY e-COMMERCE IS DIFFERENTWHY e-COMMERCE IS DIFFERENT

GOBAL RESEARCHGOBAL RESEARCH

E-commerce permits commercial transactions to cross cultural and E-commerce permits commercial transactions to cross cultural and national boundaries far more convenient and cost effective than is true national boundaries far more convenient and cost effective than is true in traditional commerce.in traditional commerce.

UNIVERSAL STANDARDSUNIVERSAL STANDARDS

The technical standards of Internet and therefore the technical standards The technical standards of Internet and therefore the technical standards for conducting e-commerce are universal standards. for conducting e-commerce are universal standards.

The universal technical standards of Internet and e-commerce greatly The universal technical standards of Internet and e-commerce greatly lower the market entry costs, which is the cost that merchants must pay lower the market entry costs, which is the cost that merchants must pay simply to bring their goods to market. simply to bring their goods to market.

Universal standards also reduce search costs (the effort to find suitable Universal standards also reduce search costs (the effort to find suitable products) for consumers. products) for consumers.


RICHNESSRICHNESS

Information Richness referees to the complexity and content of a message. Information Richness referees to the complexity and content of a message. The web makes it possible to deliver rich messages with text, audio, and The web makes it possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people. video simultaneously to large numbers of people.

INTERACTIVITYINTERACTIVITY

Interactivity allows an online merchant to engage a consumer in ways Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience but on a massive, global scale. similar to a face-to-face experience but on a massive, global scale.

E-commerce technologies are interactive, meaning that they allow for E-commerce technologies are interactive, meaning that they allow for two-way communication between merchant and consumer.two-way communication between merchant and consumer.


INFORMATION DENSITYINFORMATION DENSITY

The Internet and the Web vastly increases Information density (the total The Internet and the Web vastly increases Information density (the total amount of and quality of information available to all market participants.) amount of and quality of information available to all market participants.)

E-commerce technologies reduce information collection, storage, E-commerce technologies reduce information collection, storage, processing, and communication costs while greatly increasing the processing, and communication costs while greatly increasing the currency, accuracy, and timelines of information. currency, accuracy, and timelines of information.

Information Density in e-commerce market makes Information Density in e-commerce market makes Prices and CostsPrices and Costs more more transparent. transparent.

Price TransparencyPrice Transparency refers to the ease of finding out the variety of refers to the ease of finding out the variety of prices in a market. prices in a market. Cost TransparencyCost Transparency refers to the ability of consumers to discover the refers to the ability of consumers to discover the actual cost of merchants pay for products. actual cost of merchants pay for products.


INFORMATION DENSITYINFORMATION DENSITY

Online Merchants can discover much more about customers than in the Online Merchants can discover much more about customers than in the past. past.

Information Density allows merchants to segment market into groups Information Density allows merchants to segment market into groups who who are willing to pay different prices and permits the merchant to engage in are willing to pay different prices and permits the merchant to engage in price discrimination (Selling the same goods, to different targeted price discrimination (Selling the same goods, to different targeted groups , groups , to different targeted groups at different prices.) to different targeted groups at different prices.)

Information Density also helps merchants differentiate their products in Information Density also helps merchants differentiate their products in terms of costs, brand, and quality. terms of costs, brand, and quality.


PERSONALIZATION / CUSTOMIZATIONPERSONALIZATION / CUSTOMIZATION

E-commerce technologies permit ‘E-commerce technologies permit ‘’Personalization’’.’Personalization’’. Merchants can target Merchants can target their marketing messages to specific individuals by adjusting the messages their marketing messages to specific individuals by adjusting the messages to a person’s name, interests, and past purchases. to a person’s name, interests, and past purchases.

E-commerce technologies also permits ‘E-commerce technologies also permits ‘’Customization’Customization’’. (Changing the ’’. (Changing the delivered product or services based on a user’s preferences or prior delivered product or services based on a user’s preferences or prior behaviour. behaviour.

Given the interactive nature of e-commerce technology, much information Given the interactive nature of e-commerce technology, much information about the consumer can gathered in the marketplace at the moment of about the consumer can gathered in the marketplace at the moment of purchase. purchase.

With the increase in Information Density, a great deal of information With the increase in Information Density, a great deal of information about the consumer’s past purchases and behaviour can be stored and about the consumer’s past purchases and behaviour can be stored and used by online merchants. used by online merchants.

KEY CONCEPTS IN E-COMMERCE; DIGITAL MARKETS AND DIGITAL GOODSKEY CONCEPTS IN E-COMMERCE; DIGITAL MARKETS AND DIGITAL GOODS

The Internet has greatly reduced the cost of obtaining and distributing The Internet has greatly reduced the cost of obtaining and distributing information, and created a digital marketplace where millions of people are information, and created a digital marketplace where millions of people are able to exchange massive amounts of information directly, instantly, and free. able to exchange massive amounts of information directly, instantly, and free. As a result, Internet has changed the way companies conduct businessAs a result, Internet has changed the way companies conduct business ..

The Internet shrinks The Internet shrinks Information AsymmetryInformation Asymmetry..

Information Asymmetry exists when one party in a transaction has more Information Asymmetry exists when one party in a transaction has more information that is important for the transaction than the other party. information that is important for the transaction than the other party. That information helps determine their relative bargaining power. That information helps determine their relative bargaining power.

In Digital Markets, consumers and suppliers can ‘’see’’ the prices being In Digital Markets, consumers and suppliers can ‘’see’’ the prices being charged for goods, and in that sense digital markets are said to be more charged for goods, and in that sense digital markets are said to be more ‘’Transparent’’ than traditional markets. ‘’Transparent’’ than traditional markets.


For exampleFor example: : Until Automobile (Auto) retailing sites appeared on the Web, Until Automobile (Auto) retailing sites appeared on the Web, there was a pronounced information asymmetry between auto there was a pronounced information asymmetry between auto dealers and customers. dealers and customers.

Only dealers knew the manufacturers’ prices, and it was difficult Only dealers knew the manufacturers’ prices, and it was difficult

for shop around for the best price. for shop around for the best price. Auto dealers’ profit margins depended on this asymmetry of Auto dealers’ profit margins depended on this asymmetry of information. information.

Today’s consumers have access to a legion of Web sites providing Today’s consumers have access to a legion of Web sites providing competitive pricing information, and 75% of U.S Auto buyers use the competitive pricing information, and 75% of U.S Auto buyers use the Internet to shop around the best dealInternet to shop around the best deal. .

Thus, the Web has reduced the information asymmetry surrounding an Thus, the Web has reduced the information asymmetry surrounding an auto purchase. The Internet has also helped businesses seeking to purchase auto purchase. The Internet has also helped businesses seeking to purchase from other businesses reduce information Asymmetries and locate better from other businesses reduce information Asymmetries and locate better prices and terms.prices and terms.


Digital Markets are very flexible and efficient because they operate withDigital Markets are very flexible and efficient because they operate with :- :-

Reduced search and transaction costs , Reduced search and transaction costs , Lower Lower Menu Costs Menu Costs (Merchants’ costs of charging prices), (Merchants’ costs of charging prices), Price discrimination, Price discrimination, Ability to change prices dynamically based on market conditions. Ability to change prices dynamically based on market conditions.

In In Dynamic PricingDynamic Pricing - The price of a product varies depending on the demand - The price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller.characteristics of the customer or the supply situation of the seller.

Digital markets may either reduce or increase switching costs, depending on Digital markets may either reduce or increase switching costs, depending on the nature of the product or services being sold, and they may cause some extra the nature of the product or services being sold, and they may cause some extra delay in gratification.delay in gratification.

Unlike a physical Market, you can not immediately consume a product such as Unlike a physical Market, you can not immediately consume a product such as clothing purchased over the Web.clothing purchased over the Web.


Digital Markets are very flexible and efficient because they operate withDigital Markets are very flexible and efficient because they operate with :- :-

Digital Markets provide many opportunities to sell directly to the Consumer, Digital Markets provide many opportunities to sell directly to the Consumer, bypassing intermediaries , such as distributors or retail outlets. bypassing intermediaries , such as distributors or retail outlets.

Eliminating intermediaries in the distribution channel can significantly lower Eliminating intermediaries in the distribution channel can significantly lower purchase transaction costs. purchase transaction costs.

To pay for all the steps in a traditional distribution channel , a product may To pay for all the steps in a traditional distribution channel , a product may have to be priced as high as 135% of its original cost to manufacturer.have to be priced as high as 135% of its original cost to manufacturer.


Figure below illustrates how much savings result from eliminating each of these layers Figure below illustrates how much savings result from eliminating each of these layers (intermediaries) in the Distribution process.(intermediaries) in the Distribution process.

By selling directly to consumers, or reducing the number of intermediaries, companies By selling directly to consumers, or reducing the number of intermediaries, companies are able to raise profits while charging lower prices. The removal of organizations or are able to raise profits while charging lower prices. The removal of organizations or business process layers responsible for intermediately steps in a value chain is called business process layers responsible for intermediately steps in a value chain is called ‘‘’Disintermediation’’.’Disintermediation’’.

The typical distribution channel has several intermediary layers, each of which adds to The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer.the consumer.


Airlines and Hotels operating their own Reservation sites online, earn more revenue Airlines and Hotels operating their own Reservation sites online, earn more revenue from Ticket selling because they have eliminated Travel Agents as intermediaries.from Ticket selling because they have eliminated Travel Agents as intermediaries.

Table below summaries the differences between Digital Markets and Traditional Table below summaries the differences between Digital Markets and Traditional Markets.Markets.


DIGITAL GOODSDIGITAL GOODS

Digital Gods are goods that can be delivered over a digital network such as music, tracks, Digital Gods are goods that can be delivered over a digital network such as music, tracks, video, software, newspapers, magazines and books. video, software, newspapers, magazines and books.

Digital Goods can be expressed, stored, delivered, and sold as purely digital products.Digital Goods can be expressed, stored, delivered, and sold as purely digital products.

Currently, most of these products are sold as physical goods, for example, CDs DVDs Currently, most of these products are sold as physical goods, for example, CDs DVDs and hard copy bocks. But the Internet offers the possibility of delivering all these and hard copy bocks. But the Internet offers the possibility of delivering all these products on demand as digital products.products on demand as digital products.

In general, the marginal cost of producing another unit of digital good is about zero. In general, the marginal cost of producing another unit of digital good is about zero. (it costs nothing to make another copy of music). Costs of delivering over the Internet (it costs nothing to make another copy of music). Costs of delivering over the Internet are very low; marketing costs remain the same; and pricing can be highly variable. are very low; marketing costs remain the same; and pricing can be highly variable. (e.g. On the Internet , the merchant can change prices as often as desired because of low (e.g. On the Internet , the merchant can change prices as often as desired because of low menu costs.)menu costs.)

The impact of Internet on the market of these kind of digital goods is nothing The impact of Internet on the market of these kind of digital goods is nothing short of revolutionary, and we see the results around us every day.short of revolutionary, and we see the results around us every day.


DIGITAL GOODSDIGITAL GOODS

The impact of Internet on the market of these kind of digital goods is nothing short of The impact of Internet on the market of these kind of digital goods is nothing short of revolutionary, and we see the results around us every day.revolutionary, and we see the results around us every day.

Businesses dependent on the physical products for sales – such as bookstores, book Businesses dependent on the physical products for sales – such as bookstores, book publishers, music labels and film studios – face the possibility of declining sales and even publishers, music labels and film studios – face the possibility of declining sales and even destruction of their businesses. Newspapers and magazines are losing readers to the destruction of their businesses. Newspapers and magazines are losing readers to the Internet, and losing advertisers.Internet, and losing advertisers.

HOW INTERNET CHANGES THE MARKETS FOR DIGITAL GOODS

DIGITAL GOODS TRADITIONAL GOODSMarginal Cost / unit Zero Greater than ZeroCost of Production High VariableCopying Cost Approximately 0 Greater than highDistributed Delivery Cost Low HighInventory Cost Low HighMarketing Cost Variable Variable

Pricing More Variable Fixed, based on unit cost(Bundling, RandomPricing Games)


INTERNET BUSINESS MODELSINTERNET BUSINESS MODELS

The economics of information has caused a revaluation in commerce. As a result many The economics of information has caused a revaluation in commerce. As a result many new business models emerged and many old business models became no longer tenable.new business models emerged and many old business models became no longer tenable.

All new Business Models that have emerged:All new Business Models that have emerged:

• UUse the Internet in one way or the other, se the Internet in one way or the other, • Add extra value to existing products and services Add extra value to existing products and services • Provide the foundation for new products and services.Provide the foundation for new products and services.

Most of these Business Models are called ‘’ Most of these Business Models are called ‘’ Pure-play Business ModelsPure-play Business Models ‘’ because: ‘’ because:

• They are based purely on the Internet.They are based purely on the Internet.• They did not have an existing They did not have an existing ‘’Bricks-and-Mortar Business’’ ‘’Bricks-and-Mortar Business’’ when they when they designed their internet business. designed their internet business.

However some firms like The Wall Street Journal, L.L Bean, Office Depot etc…. However some firms like The Wall Street Journal, L.L Bean, Office Depot etc…. Have developed Web sites as extensions of their traditional Bricks-and-Mortar Have developed Web sites as extensions of their traditional Bricks-and-Mortar businesses. Such businesses represent a hybrid called businesses. Such businesses represent a hybrid called ‘’Click-and-Mortar Business ‘’Click-and-Mortar Business Model ‘’ Model ‘’


1. 1. COMMUNICATION AND COMMUNITY MODELCOMMUNICATION AND COMMUNITY MODEL

Some of the new Business Models take advantage of the internet’s rich Some of the new Business Models take advantage of the internet’s rich communication capabilities such as e-Bay. communication capabilities such as e-Bay.

• E-Bay is an online auction forum that uses e-mail and other E-Bay is an online auction forum that uses e-mail and other interactive features of the Web. interactive features of the Web.

• e-bay Systems accept bids entered on the internet, evaluates the bids, e-bay Systems accept bids entered on the internet, evaluates the bids, and notifies the highest bidder. and notifies the highest bidder.

• e-Bay collects a small commission on each listing and sales.e-Bay collects a small commission on each listing and sales.

• e-Bay has become so popular that its site serves as a huge trading e-Bay has become so popular that its site serves as a huge trading platform for other companies, hosting hundreds of thousands of platform for other companies, hosting hundreds of thousands of ‘ ‘’’Virtual Storefronts’’.Virtual Storefronts’’.

. .

i-Village.com provides an online Community for woman sharing similar interests, i-Village.com provides an online Community for woman sharing similar interests, such as diet and fitness, pregnancy, parenting, home and garden, and food. such as diet and fitness, pregnancy, parenting, home and garden, and food.

Members participate in online discussions and join ‘’Online communities’’ with Members participate in online discussions and join ‘’Online communities’’ with other like-minded peopleother like-minded people



Business-to-business auctions’’ have also emerged. Business-to-business auctions’’ have also emerged.

Example , GoIndustry features Web-based auction services for Example , GoIndustry features Web-based auction services for Business-to- Business sales of industrial equipment and machinery. Business-to- Business sales of industrial equipment and machinery.

The Internet has created online communities, where people with similar The Internet has created online communities, where people with similar interests exchange ideas from many different locations. interests exchange ideas from many different locations.

Some of the Some of the Virtual Communities Virtual Communities such as i-Village.com are providing such as i-Village.com are providing foundation for new businesses. foundation for new businesses.



A major source of revenue of the Virtual communities involves providing ways A major source of revenue of the Virtual communities involves providing ways for corporate clients to target customers, including the placement of banner for corporate clients to target customers, including the placement of banner ads, and placing pop-up ads on their web sites.ads, and placing pop-up ads on their web sites.

Social networking sites are a type of online communities that has become Social networking sites are a type of online communities that has become extremely popular. extremely popular.

Social networking is the practice of expanding the number of business contacts Social networking is the practice of expanding the number of business contacts or social contacts by making connections through individuals.or social contacts by making connections through individuals.

Social networking sites link people through their mutual business or personal Social networking sites link people through their mutual business or personal connections, enabling them to mine their friends for sales leads, job hunting connections, enabling them to mine their friends for sales leads, job hunting tips, or new friends. (MySpce.com, Facebook.com and Friendster.com appeal to tips, or new friends. (MySpce.com, Facebook.com and Friendster.com appeal to people who are primarily interested in extending their friendship, while people who are primarily interested in extending their friendship, while LinkedIn .com focuses on job networking.)LinkedIn .com focuses on job networking.)



Social networking members surf pages, check out other members, exchange messages, Social networking members surf pages, check out other members, exchange messages, and thus they reveal a great deal of information about themselves while surfing .and thus they reveal a great deal of information about themselves while surfing .

Businesses firms harvest these personal information to create carefully targeted Businesses firms harvest these personal information to create carefully targeted promotions that far surpass the typical text and display ads found on the Web. promotions that far surpass the typical text and display ads found on the Web.

Firms also use the social networking sites to interact with potential customers. Firms also use the social networking sites to interact with potential customers.

These sites are so stick that they have become very powerful marketing tools.These sites are so stick that they have become very powerful marketing tools.

Social Networking is so appealing that it has inspired a new type of e-commerce Social Networking is so appealing that it has inspired a new type of e-commerce experience experience called called ‘’Social Shopping’’‘’Social Shopping’’ ..

Social Shopping sites such as Kaboodle, ThisNext, Wists.com and StyleHive.comSocial Shopping sites such as Kaboodle, ThisNext, Wists.com and StyleHive.com provide online meeting places for people to swap shopping ideas. provide online meeting places for people to swap shopping ideas.

Social Shopping sites provide tools for users to create their own Web pages withSocial Shopping sites provide tools for users to create their own Web pages with information and images about items they like to help other shoppers.information and images about items they like to help other shoppers.


2. 2. DIGITAL GOODS, CONTENT, ENTERTEINMENT, AND SERVICES MODELDIGITAL GOODS, CONTENT, ENTERTEINMENT, AND SERVICES MODEL

The ability to deliver digital goods and digital content over the Web has created new The ability to deliver digital goods and digital content over the Web has created new alternatives to traditional print and broadcast media.alternatives to traditional print and broadcast media.

There are Web sites for digital versions of print publications, such as New York Times, There are Web sites for digital versions of print publications, such as New York Times, or Milliyet .com Newspaper publisher.or Milliyet .com Newspaper publisher.

Some of the most popular Web sites deliver entertainment in digital form.Some of the most popular Web sites deliver entertainment in digital form.

Online games attract huge numbers of players. For example: Blizzard Entertainment’s Online games attract huge numbers of players. For example: Blizzard Entertainment’s online role-playing game World of Warcraft earned 1 Billiononline role-playing game World of Warcraft earned 1 BillionDollars in 2006 alone, from 7 million players worldwide.Dollars in 2006 alone, from 7 million players worldwide.

You can listen to some of your favourite radio channels such as the BBC or Classic Rock You can listen to some of your favourite radio channels such as the BBC or Classic Rock on the web as well as many independent channels. Because the radio signal is relceived on the web as well as many independent channels. Because the radio signal is relceived over the Internet, it is possible to access stations from anywhere in the world.over the Internet, it is possible to access stations from anywhere in the world.

Service like Yahoo!’s LAUNCHcast and RealNetworks’ Rapsody even put together Service like Yahoo!’s LAUNCHcast and RealNetworks’ Rapsody even put together individualized radio channels for listeners.individualized radio channels for listeners.


2. DIGITAL CONTENT, ENTERTEINMENT, AND SERVICES MODEL2. DIGITAL CONTENT, ENTERTEINMENT, AND SERVICES MODEL

Broadband connections now make it possible for Web sites to display full-Broadband connections now make it possible for Web sites to display full-length films and television shows. Apple, Amazon.com Movielink, and length films and television shows. Apple, Amazon.com Movielink, and CinemaNow have downloading services for full-length movies.CinemaNow have downloading services for full-length movies.

Web can also be used to preview and download music. Although some of Web can also be used to preview and download music. Although some of this Internet music is free of charge, Apple’s iTunes and other sites are this Internet music is free of charge, Apple’s iTunes and other sites are generating revenue by charging for each song or album downloaded from generating revenue by charging for each song or album downloaded from their Web sites.their Web sites.

The popularity of Apple’s iTunes music services and Apple’s iPod The popularity of Apple’s iTunes music services and Apple’s iPod portable music player has inspired a new form of digital content delivery portable music player has inspired a new form of digital content delivery called called PodcastingPodcasting..


• Podcast also have internal uses for businesses, who want to distribute Podcast also have internal uses for businesses, who want to distribute information in audio form to their employees.information in audio form to their employees.

• Internet security firm SonicWall uses Podcasts to demonstrate its expertise Internet security firm SonicWall uses Podcasts to demonstrate its expertise to customers and to provide new product information to its Resellers.to customers and to provide new product information to its Resellers.

2. DIGITAL CONTENT, ENTERTEINMENT, AND SERVICES MODEL2. DIGITAL CONTENT, ENTERTEINMENT, AND SERVICES MODEL

Podcasting is a method of publishing audio broadcasts via the Internet, Podcasting is a method of publishing audio broadcasts via the Internet, allowing subscribing users to download audio files onto their PC or portable allowing subscribing users to download audio files onto their PC or portable music players.music players.

Video clips designed to be downloaded and viewed on a portable device are Video clips designed to be downloaded and viewed on a portable device are called Vcasts.called Vcasts.

Podcasting enables independent producers to self-publish their own audio Podcasting enables independent producers to self-publish their own audio content and gives broadcast media a new distribution method.content and gives broadcast media a new distribution method.


3. 3. PORTALS BUSINESS MODELPORTALS BUSINESS MODEL The Web’s information resources are so vast and rich that Portals have The Web’s information resources are so vast and rich that Portals have emerged as an emerged as an Internet Business ModelInternet Business Model. Portals help individuals and . Portals help individuals and organizations locate information more efficiently and also seek to become organizations locate information more efficiently and also seek to become destination sites by aggregating content on their sites. destination sites by aggregating content on their sites.

As an e-commerce Business Model, a Portal is a ‘As an e-commerce Business Model, a Portal is a ‘’Supersite’’’Supersite’’ that provides a that provides a comprehensive entry point for a huge array of resources and services on the comprehensive entry point for a huge array of resources and services on the Internet. Internet.

e.g. Yahoo! provides, capabilities for locating information on the Internet e.g. Yahoo! provides, capabilities for locating information on the Internet along with news, sports, weather, telephone directors, maps, games, along with news, sports, weather, telephone directors, maps, games, shopping, email, chat, discussion boards, and links to other sites. shopping, email, chat, discussion boards, and links to other sites.

Yahoo! And other Portals and Web content sites often combine content Yahoo! And other Portals and Web content sites often combine content

and applications from many different sources and service providers.and applications from many different sources and service providers.


3. 3. PORTALS BUSINESS MODELPORTALS BUSINESS MODEL Specialized Portals help users with specific interests. Specialized Portals help users with specific interests.

e.g. StarMedia is a Portal customized for Latin American Internet e.g. StarMedia is a Portal customized for Latin American Internet users, and the Portal Sina.com is customized for Chinese users. users, and the Portal Sina.com is customized for Chinese users.

4. 4. OTHER BUSINESS MODELSOTHER BUSINESS MODELS

Other Internet Business Models use Syndicate as well , providing additional value. Other Internet Business Models use Syndicate as well , providing additional value.

For example, E-Trade, the discount Web trading site, purchase most of its content For example, E-Trade, the discount Web trading site, purchase most of its content from outside sources such as Reuters (news) and BigCharts.com .from outside sources such as Reuters (news) and BigCharts.com .

Online Online SyndicatorsSyndicators,, who aggregate content or applications from multiple sources, who aggregate content or applications from multiple sources, package them for distribution, and resell them to third-party Web sites. Online package them for distribution, and resell them to third-party Web sites. Online Syndicators have emerged as another variant of the Online Content Provider Syndicators have emerged as another variant of the Online Content Provider Business Model. Business Model.

The Web makes it much easier for companies to aggregate, repackage, and distributeThe Web makes it much easier for companies to aggregate, repackage, and distribute information and information-based services. information and information-based services.

Application Service Providers provide online services to subscribing Businesses. Application Service Providers provide online services to subscribing Businesses. Other Service Providers offer services to Individual consumers, such as Remote Other Service Providers offer services to Individual consumers, such as Remote Storage of data at Xdrive.com or online Photo storage and digital photo printouts at Storage of data at Xdrive.com or online Photo storage and digital photo printouts at Ofoto.com. Service Providers generate revenue through subscription fees or from Ofoto.com. Service Providers generate revenue through subscription fees or from advertising. advertising.

ELECTRONIC COMMERCE (E-commerce)ELECTRONIC COMMERCE (E-commerce)

Although most commercial transaction still takes place through traditional retail Although most commercial transaction still takes place through traditional retail channels, rising numbers of consumers and businesses are using the Internet for channels, rising numbers of consumers and businesses are using the Internet for electronic commerce.electronic commerce.

TYPES OF ELECTRONIC COMMERCETYPES OF ELECTRONIC COMMERCE

There are many ways of classifying Electronic Commerce transactions. There are many ways of classifying Electronic Commerce transactions.

One way is by looking at the nature of the participants in the e-commerce One way is by looking at the nature of the participants in the e-commerce transactions. transactions.

The three major e-commerce categories are :The three major e-commerce categories are :• Business-to-Consumer (B2C)Business-to-Consumer (B2C)• Business-to-Business (B2B)Business-to-Business (B2B)• Consumer-to-Consumer (C2C)Consumer-to-Consumer (C2C)

Another way of classifying is in terms of the participantsAnother way of classifying is in terms of the participants’’ physical connection to physical connection to

the Web. the Web.• e-commerce e-commerce over Wired networksover Wired networks• e-commerce-commerce over Wireless network (Mobile Commerce e over Wireless network (Mobile Commerce ((M-commerce))M-commerce))


Business-to-Consumer Electronic Commerce (B2C)Business-to-Consumer Electronic Commerce (B2C)

B2C involves retailing products and services to individual shoppers.B2C involves retailing products and services to individual shoppers.

e.g. Amazon.com, which sells books to consumers is an example of B2C e-commerce.e.g. Amazon.com, which sells books to consumers is an example of B2C e-commerce.

Business-to-Business Electronic Commerce (B2B)Business-to-Business Electronic Commerce (B2B)

B2B involves sales of goods and services among businesses.B2B involves sales of goods and services among businesses.

e.g. ChemConnect’s Web site for buying and selling natural gas liquids, refined and e.g. ChemConnect’s Web site for buying and selling natural gas liquids, refined and intermediate fuels, chemicals, and plastic is an example of B2B e-commerce. intermediate fuels, chemicals, and plastic is an example of B2B e-commerce.

Consumer-to-Consumer Electronic Commerce (C2C)Consumer-to-Consumer Electronic Commerce (C2C)

C2C involvesC2C involves Consumers selling directly to consumers.Consumers selling directly to consumers.

e.g. e-Bay enables people to sell their goods to other consumers by auctioning the e.g. e-Bay enables people to sell their goods to other consumers by auctioning the merchandise off to the highest bidder. merchandise off to the highest bidder.


Wired Network Electronic CommerceWired Network Electronic Commerce

Until recently, almost all e-commerce transactions took place over Wired networks.Until recently, almost all e-commerce transactions took place over Wired networks.

Wireless Network Electronic Commerce (M-commerce)Wireless Network Electronic Commerce (M-commerce)

The use of handheld wireless devices for purchasing goods and services from any The use of handheld wireless devices for purchasing goods and services from any locations has been termed as Mobile Commerce or m-commerce.locations has been termed as Mobile Commerce or m-commerce.

Both B2B and B2C e-commerce transactions can take place using m-commerce technology.Both B2B and B2C e-commerce transactions can take place using m-commerce technology.

ACHIEVING CUSTOMER INTIMACYACHIEVING CUSTOMER INTIMACY - - (E-commerce)(E-commerce)

IINTERACTIVE MARKETING, PERSONALIZATION, AND SELF SERVICENTERACTIVE MARKETING, PERSONALIZATION, AND SELF SERVICE

The unique dimensions of e-commerce technologies offer many new possibilities for The unique dimensions of e-commerce technologies offer many new possibilities for Marketing and Selling. Marketing and Selling.

The Internet provides companies with additional channels of communication and The Internet provides companies with additional channels of communication and interaction for closer yet more cost-effective relationships with customers in Sales, interaction for closer yet more cost-effective relationships with customers in Sales, Marketing, and Customer Support. Marketing, and Customer Support.

INTEACTIVE MARKETING AND PERSONALIZATION

The Internet and e-commerce have helped some merchants achieve the holy grail of The Internet and e-commerce have helped some merchants achieve the holy grail of Marketing. Marketing. (Making products(Making products and services and services toto millions of consumers that are personal , millions of consumers that are personal , and impossible and impossible o achıeve o achıeve in Traditional Marketing).in Traditional Marketing).

example: Lands’End) and VistaPrint (Business cards, note cards, and example: Lands’End) and VistaPrint (Business cards, note cards, and labels labels busıness sıte busıness sıte ), feature online tools that allow consumers to purchase ), feature online tools that allow consumers to purchase products tailored to their individual specifications.products tailored to their individual specifications.

AACHIEVING CUSTOMER INTIMACYCHIEVING CUSTOMER INTIMACY WITH WITH (E-commerce)(E-commerce)

IINTERACTIVE MARKETING AND PERSONALIZATION, NTERACTIVE MARKETING AND PERSONALIZATION,

Web sites have become a rich source of detailed information about CustomerWeb sites have become a rich source of detailed information about Customer

behaviors, preferences, needs, and buying patterns that companies can use behaviors, preferences, needs, and buying patterns that companies can use

to tailor promotions, products, services and pricing.to tailor promotions, products, services and pricing.

Some Customer information may be obtained by asking visitors to ‘’register’’ online Some Customer information may be obtained by asking visitors to ‘’register’’ online and provide information about themselves. and provide information about themselves.

Many companies also collect Customer information using Software tools that track the Many companies also collect Customer information using Software tools that track the activities of Web site visitors.activities of Web site visitors.

Clickstream Tracking ToolsClickstream Tracking Tools collect data on Customer activities at Web sites and store collect data on Customer activities at Web sites and store them in a log.them in a log.

Clickstream Tracking Tools record the site that users visited prior to coming to a Clickstream Tracking Tools record the site that users visited prior to coming to a particular Web site and where these users go when they leave that site. They also record particular Web site and where these users go when they leave that site. They also record the specific pages visited on the particular site, the times spent on each page of the site, the specific pages visited on the particular site, the times spent on each page of the site, the types of pages visited, and what the visitors purchased .the types of pages visited, and what the visitors purchased .

AACHIEVING CUSTOMER INTIMACYCHIEVING CUSTOMER INTIMACY WITH WITH (E-commerce)(E-commerce) IINTERACTIVE MARKETING AND PERSONALIZATION,NTERACTIVE MARKETING AND PERSONALIZATION,

E-commerce Web sites have tools to track a shopper’s every step through an online E-commerce Web sites have tools to track a shopper’s every step through an online store. Close examination of Customer behaviour at a Web site selling woman’s clothing store. Close examination of Customer behaviour at a Web site selling woman’s clothing shows what the store might learn at each step and what actions it could take to increase shows what the store might learn at each step and what actions it could take to increase sales.sales.

Firms analyze this information about customer interests and behaviour to develop Firms analyze this information about customer interests and behaviour to develop precise profiles of existing and potential customers.precise profiles of existing and potential customers.

Figure below shows Web Site Visitor Tracking.Figure below shows Web Site Visitor Tracking.

ELECTRONIC COMMERCE (E-commerce)ELECTRONIC COMMERCE (E-commerce) INTERACTIVE MARKETING AND PERSONALIZATIONINTERACTIVE MARKETING AND PERSONALIZATION

Firms analyze the captured information about customer interests and behaviour to Firms analyze the captured information about customer interests and behaviour to develop precise profiles of existing and potential customers.develop precise profiles of existing and potential customers.

Also these information enables firms to create unique personalized Web pages that Also these information enables firms to create unique personalized Web pages that display content or Ads for products or services of special interest to each user, thus, display content or Ads for products or services of special interest to each user, thus, improving the customer’s experience and creating additional value .improving the customer’s experience and creating additional value .

Figure below shows Web Site PersonalizationFigure below shows Web Site Personalization

ELECTRONIC COMMERCE (E-commerce)ELECTRONIC COMMERCE (E-commerce) INTERACTIVE MARKETING AND PERSONALIZATIONINTERACTIVE MARKETING AND PERSONALIZATION

By using Personalization technology to modify the Web pages presented to each customer, achieve By using Personalization technology to modify the Web pages presented to each customer, achieve the benefits of using individual salespeople at dramatically lower costs.the benefits of using individual salespeople at dramatically lower costs.

One technique for Web Personalization is ‘One technique for Web Personalization is ‘’Collaborative Filtering’Collaborative Filtering”, which compares ”, which compares information gathered about a specific user’s behaviour at a Web site information gathered about a specific user’s behaviour at a Web site wıth wıth other customers with other customers with similar interests to predict what the user would like to see next.similar interests to predict what the user would like to see next. The Software then makes The Software then makes recommendations to users based on their assumed interests.recommendations to users based on their assumed interests.

example: Amazon.com use Collaborative Filtering Software to prepare personalized book example: Amazon.com use Collaborative Filtering Software to prepare personalized book recommendations: ‘’Customers who bought this book also bought ……” . These recommendations: ‘’Customers who bought this book also bought ……” . These recommendations are made just at the point of purchase, an ideal time to prompt a recommendations are made just at the point of purchase, an ideal time to prompt a consumer into purchasing a related product.consumer into purchasing a related product.

ELECTRONIC COMMERCE (E-commerce)ELECTRONIC COMMERCE (E-commerce) INTEACTIVE MARKETING AND PERSONALIZATIONINTEACTIVE MARKETING AND PERSONALIZATION

BBLOGSLOGS

Blogs have emerged as another promising Web-based tool for Marketing.Blogs have emerged as another promising Web-based tool for Marketing.

A Blog, the popular term for a A Blog, the popular term for a Weblog,Weblog, is a is a PPersonal Web page ersonal Web page that typically that typically contains a series of chronological entries (newest to oldest) by its author, and contains a series of chronological entries (newest to oldest) by its author, and links to related Web pages.links to related Web pages.

The Blog may include a The Blog may include a Blogroll Blogroll (a collection of links to other Blogs) and (a collection of links to other Blogs) and Trackbacks Trackbacks (a list of entries in other Blogs that refer to a post on the first Blog).(a list of entries in other Blogs that refer to a post on the first Blog).

Most Blogs allow readers to post comments on the Blog entries as well.Most Blogs allow readers to post comments on the Blog entries as well.

The act of creating Blog is often referred to as ‘’Blogging’’.The act of creating Blog is often referred to as ‘’Blogging’’.

Blogs Blogs could be could be hosted by a third party site such as Blogger.com (owned by hosted by a third party site such as Blogger.com (owned by Google)Google)

ELECTRONIC COMMERCE (E-commerce)ELECTRONIC COMMERCE (E-commerce) BBLOGSLOGS Continued) Continued)

Blog Pages are usually variations on templates provided by the Blogging Blog Pages are usually variations on templates provided by the Blogging Service or Software and hence require no knowledge of HTML Service or Software and hence require no knowledge of HTML

Therefore, people without HTML skills of any kind can post their own Web Therefore, people without HTML skills of any kind can post their own Web pages, and share content with friends and relatives. pages, and share content with friends and relatives.

The totality of Blog-related Web sites is often referred to as the The totality of Blog-related Web sites is often referred to as the Blogosphere.Blogosphere.

The content of Blogs range from individual musing to corporate The content of Blogs range from individual musing to corporate communications.communications.

• Companies that maintain Companies that maintain PPublic Blogs use them as a new channel for ublic Blogs use them as a new channel for reaching reaching customers. customers.

ELECTRONIC COMMERCE (E-commerce)ELECTRONIC COMMERCE (E-commerce) BBLOGSLOGS (Continued) (Continued)

Corporate Blogs provide a personal and conversational way for businesses to Corporate Blogs provide a personal and conversational way for businesses to present information to the public and prospective customers about new present information to the public and prospective customers about new products and services.. Readers are often invited to post comments.products and services.. Readers are often invited to post comments.

Markets are starting to analyze Blogs as well as Chat Groups and Markets are starting to analyze Blogs as well as Chat Groups and Me Message ssage BBoards to see what is being said online about new products, old brands, and oards to see what is being said online about new products, old brands, and ad campaigns.ad campaigns.

• Blog-watching Services Blog-watching Services that monitor popular blogthat monitor popular blogss, claim that , claim that ‘’ ‘’Blog-Blog- watching watching ccan be cheaper and faster for analyzing consumer interests an be cheaper and faster for analyzing consumer interests and sentiment than traditional focus groups and surveys. and sentiment than traditional focus groups and surveys.


CUSTOMER SELF SERVICECUSTOMER SELF SERVICE

Many companies use their Web sites and e-mail to answer customer questions or to Many companies use their Web sites and e-mail to answer customer questions or to provide customers with product information, reducing the need for human Customer-provide customers with product information, reducing the need for human Customer-support experts.support experts.

For example: American Northwest, THY and many other Airlines have created Web For example: American Northwest, THY and many other Airlines have created Web sites where customers can review flight times, seating chars, Airport sites where customers can review flight times, seating chars, Airport logistics; check frequent-flayer miles; and purchase tickets online. logistics; check frequent-flayer miles; and purchase tickets online.

New Software products are even integrating the Web with customer call centres, where New Software products are even integrating the Web with customer call centres, where customer service problems have been traditionally handled over the telephone.customer service problems have been traditionally handled over the telephone.

A Call Centre is an organizational department responsible for handling customer service A Call Centre is an organizational department responsible for handling customer service issues by telephone and other channels. issues by telephone and other channels.

Example: A visitor to the Lands’ End Web site can request a phone call from customer Example: A visitor to the Lands’ End Web site can request a phone call from customer service by entering his/her telephone number. service by entering his/her telephone number.

A Call Centre System directs a customer Service representative to place a voice A Call Centre System directs a customer Service representative to place a voice telephone call to the user’s phone.telephone call to the user’s phone.


B2B ELRCTRONIC COMMERCE: New Efficiencies and RelationshipsB2B ELRCTRONIC COMMERCE: New Efficiencies and Relationships

About 80% of B2B e-commerce is still based on proprietary Systems for About 80% of B2B e-commerce is still based on proprietary Systems for Electronic Data Interchange (EDI), which enables the computer-to-computer Electronic Data Interchange (EDI), which enables the computer-to-computer exchange between two organizations of standard transactions such as Invoices, exchange between two organizations of standard transactions such as Invoices, Bill of lading, Shipment schedules, or Purchase ordersBill of lading, Shipment schedules, or Purchase orders ..

Transactions are automatically transmitted from one Information Systems to Transactions are automatically transmitted from one Information Systems to another system through a network, eliminating the printing and handling of another system through a network, eliminating the printing and handling of paper at one end and the inputting of data at the other. paper at one end and the inputting of data at the other.

Every major industry has EDI standards that define the structure and information Every major industry has EDI standards that define the structure and information fields of electronic documents for the particular industry. fields of electronic documents for the particular industry.

EDI originally automated the exchange of documents such as Purchase Orders, EDI originally automated the exchange of documents such as Purchase Orders, Invoices, and Shipping notices. Also firms engaged in Just-In-Time Inventory Invoices, and Shipping notices. Also firms engaged in Just-In-Time Inventory Replenishment and continuous Production use EDI as a System for continuous Replenishment and continuous Production use EDI as a System for continuous Replenishment. Replenishment.


Suppliers have online access to selected parts of the Purchasing firm’s Suppliers have online access to selected parts of the Purchasing firm’s production and Delivery Schedules and automatically ship materials and production and Delivery Schedules and automatically ship materials and goods to meet pre-specified targets without intervention by firm Purchasing goods to meet pre-specified targets without intervention by firm Purchasing Agents.Agents.

Figure below shows Electronic Data Interchange (EDI)Figure below shows Electronic Data Interchange (EDI)

Companies use EDI to automate transactions for B2B e-commerce and Companies use EDI to automate transactions for B2B e-commerce and continuous Inventory Replenishment. Suppliers can automatically send continuous Inventory Replenishment. Suppliers can automatically send data about shipment to purchasing firms. The purchasing firms can use data about shipment to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and payment data EDI to provide production and inventory requirements and payment data to suppliers.to suppliers.


Many organizations still use Many organizations still use Private NetworksPrivate Networks for EDI, for EDI, companies are increasingly turning to the internet for this companies are increasingly turning to the internet for this purpose because it provides much more flexible and low cost purpose because it provides much more flexible and low cost platform for linking to other firms. platform for linking to other firms.

Businesses can use the Internet to locate the most low-cost Businesses can use the Internet to locate the most low-cost SupplSuppliers, search online catalogs of Supplier products, negotiate with iers, search online catalogs of Supplier products, negotiate with Suppliers, place orders, make payments, and arrange transportation. Suppliers, place orders, make payments, and arrange transportation.

Using the Internet, businesses are able to extend digital technology to a Using the Internet, businesses are able to extend digital technology to a wider range of activities and broaden their circle of trading partners.wider range of activities and broaden their circle of trading partners.

The Internet and Web technology enable businesses to create new The Internet and Web technology enable businesses to create new electronic storefronts for selling to other businesses with electronic storefronts for selling to other businesses with multimedia multimedia graphic displays and interactive features similar to those for graphic displays and interactive features similar to those for B2C commerce.B2C commerce.


Businesses can use Internet technology to create Businesses can use Internet technology to create Extranets Extranets or or Electronic Electronic Marketplaces Marketplaces for linking to other businesses for purchase and sale for linking to other businesses for purchase and sale transactions. transactions.

Private Industry NetworksPrivate Industry Networks (Private exchange) typically consist of a large (Private exchange) typically consist of a large

firm using an Extranet to link with its Suppliers and other key Business firm using an Extranet to link with its Suppliers and other key Business partners. partners.

The Private Network is owned by a buyer, and it permits the firm and The Private Network is owned by a buyer, and it permits the firm and designated suppliers, distributors, and other business partners to designated suppliers, distributors, and other business partners to share :share :

• Product design and development , Product design and development , • Production scheduling ,Production scheduling ,• MarketingMarketing• Inventory management , Inventory management , • Unstructured communication, including graphics and e-mail. Unstructured communication, including graphics and e-mail.


Figure –A Private Industrial NetworkFigure –A Private Industrial Network

e.g. VWGroupSupply.com links the Volkswagen Group and its Suppliers. It handles 90% of all e.g. VWGroupSupply.com links the Volkswagen Group and its Suppliers. It handles 90% of all global purchasing for Volkswagen, including all automotive and parts components. global purchasing for Volkswagen, including all automotive and parts components.


Net Marketplace Net Marketplace also also calledcalled e-hub e-hub,, provides a single Digital provides a single Digital Marketplace based on Internet technology for many different buyers and Marketplace based on Internet technology for many different buyers and sellers.sellers.

Net Marketplaces are online marketplaces where multiple Buyers can Net Marketplaces are online marketplaces where multiple Buyers can purchase from multiple Sellers.purchase from multiple Sellers.

Net Marketplaces are owned or operate by intermediaries (i,e. Independent Net Marketplaces are owned or operate by intermediaries (i,e. Independent firms) between Buyers and Sellers.firms) between Buyers and Sellers.

Net Marketplace generates revenue from purchase and sale transactions Net Marketplace generates revenue from purchase and sale transactions and other services provided to clients.and other services provided to clients.

Participants in Net Marketplaces can establish prices through online Participants in Net Marketplaces can establish prices through online negotiations, auctions, or request for quotations, or they can use fixed negotiations, auctions, or request for quotations, or they can use fixed prices.prices.


There are many different types of Net Marketplaces and many different ways There are many different types of Net Marketplaces and many different ways of classification:of classification:

a) a) Net Marketplace by Selling TypesNet Marketplace by Selling Types

- Direct goods selling Net Markets- Direct goods selling Net Markets - Indirect goods selling Net Markets- Indirect goods selling Net Markets

• Direct goods are those goods used in a production process, such as Direct goods are those goods used in a production process, such as sheet steel for auto body production. sheet steel for auto body production.

• Indirect goods are all other goods not directly involved in the Indirect goods are all other goods not directly involved in the production process such as products for maintenance and repair. production process such as products for maintenance and repair.


b) b) Net Marketspace by Purchasing SupportNet Marketspace by Purchasing Support

- Contractual purchasing support Net Marketplace- Contractual purchasing support Net Marketplace - Spot purchasing support Net Marketplace - Spot purchasing support Net Marketplace

• Contractual purchasing support is based on long term relationships Contractual purchasing support is based on long term relationships with designated Suppliers with designated Suppliers

• Spot Purchasing Support is short term support where goods are Spot Purchasing Support is short term support where goods are purchased based on immediate needs, often from many different purchased based on immediate needs, often from many different Suppliers. Suppliers.


c) c) Net Marketplaces by Market TypesNet Marketplaces by Market Types

- Vertical markets serving Net Marketplaces - Vertical markets serving Net Marketplaces - Horizontal markets serving Net Marketplaces- Horizontal markets serving Net Marketplaces

• Net Markets that serve those Vertical Markets for specific industries, such Net Markets that serve those Vertical Markets for specific industries, such as automobiles, telecommunications etc.. as automobiles, telecommunications etc..

• Net Markets that serve Horizontal Markets in various industries, such as Net Markets that serve Horizontal Markets in various industries, such as Office Equipment or Transportation. Office Equipment or Transportation.

Example 1: Example 1: ExostarExostar is an Industry owned Net Marketplace (Sponsored by is an Industry owned Net Marketplace (Sponsored by

Aerospaced and Defense industries), focusing on long-term Aerospaced and Defense industries), focusing on long-term Contracts purchasing relationships and on providing common Contracts purchasing relationships and on providing common

networks and computing platforms for reducing supply networks and computing platforms for reducing supply chain inefficiencies. chain inefficiencies.


Example Example 22 ‘‘ExchangesExchanges’’ are independently owned third-party Net are independently owned third-party Net Marketplace that connects thousands of Suppliers and Buyers Marketplace that connects thousands of Suppliers and Buyers for Spot Purchasing. for Spot Purchasing.

• Nowadays, suppliers are reluctant to participate in Nowadays, suppliers are reluctant to participate in ‘‘ExchangesExchanges’’ since since they encourage competitive bidding that drove prices down and do not they encourage competitive bidding that drove prices down and do not offer any long term relationships with buyers. offer any long term relationships with buyers.

MOBILE COMMERCE (M-COMMERCE)MOBILE COMMERCE (M-COMMERCE)

Wireless Mobile devices are starting to be used for purchasing Wireless Mobile devices are starting to be used for purchasing goods and services as well as transmitting messages.goods and services as well as transmitting messages.

M-COMMERCE APPLICATIONS AND SERVICESM-COMMERCE APPLICATIONS AND SERVICES

M-commerce Applications have taken off for services that are time-critical, M-commerce Applications have taken off for services that are time-critical, that appeal to people on the move, or that accomplish a task more efficiently that appeal to people on the move, or that accomplish a task more efficiently than other methods.than other methods.

1. Content and Location-Based Services1. Content and Location-Based Services2. 2. Banking and Financial ServicesBanking and Financial Services3. 3. Wireless AdvertisingWireless Advertising4. 4. Games and EntertainmentGames and Entertainment

MOBILE COMMERCE (M-COMMERCEMOBILE COMMERCE (M-COMMERCE))

1.1. Content and Location-Based ServicesContent and Location-Based Services

Searching for Services, such as Local Business, Local movie shows, Local restaurants, Hotels, Train schedules, Airline flights, weather forecasts by accessing Wireless Web services.

e.g. Go2 Mobile Directory users NTT DoCoMo Wireless Services in JapanNTT DoCoMo Wireless Services in Japan

2. 2. Banking and Financial ServicesBanking and Financial Services

WWireless alerts about changes in Account information such as balance on ireless alerts about changes in Account information such as balance on Mobile phones that support text messaging or Web access operated by Mobile phones that support text messaging or Web access operated by many Banks. many Banks.

Use of Mobile telephones to check account balance, transfer funds between Use of Mobile telephones to check account balance, transfer funds between bank accounts, and paying bill services provided by many Banks. bank accounts, and paying bill services provided by many Banks.

MOBILE COMMERCE (M-COMMERCEMOBILE COMMERCE (M-COMMERCE))

3. 3. Wireless AdvertisingWireless Advertising

Some major Wireless Services Providers are starting to include Some major Wireless Services Providers are starting to include

advertising on their sites. advertising on their sites.

e.g. When consumers use Goe.g. When consumers use Go2 Mobile Directory2 Mobile Directory to search for local to search for local restaurants or movie theatres, Yahoo-sponsored advertisers appear restaurants or movie theatres, Yahoo-sponsored advertisers appear in the list of search restaurants.in the list of search restaurants.


4. 4. Games and Entertainment Games and Entertainment

Cell phones are quickly turning into portable entertainment platforms. Cell phones are quickly turning into portable entertainment platforms.

Mobile phone services offer downloadable Digital games and ringtones. Mobile phone services offer downloadable Digital games and ringtones.

Users with broadband services can down load on demand movie clips, Users with broadband services can down load on demand movie clips, news clips and weather reports. news clips and weather reports.

Film companies are starting to produce short films explicitly designed toFilm companies are starting to produce short films explicitly designed to play on mobile phones.play on mobile phones.

e.g. MobiTV features live TV programs. e.g. MobiTV features live TV programs.


ACCESSING INFORMATION FROM THE WIRELESS WEBACCESSING INFORMATION FROM THE WIRELESS WEB

Although Cell phones, PDAs and other handheld mobile devices are able to Although Cell phones, PDAs and other handheld mobile devices are able to access Web at anytime from anyplace, the amount of information that they access Web at anytime from anyplace, the amount of information that they can actually handle is very limited.can actually handle is very limited.

Until 3G Broadband services comes into widespread use, the hand held Until 3G Broadband services comes into widespread use, the hand held mobile devices will not be able to transmit or receive large amount of mobile devices will not be able to transmit or receive large amount of data; data; since the amount of information displayed on the screen is limited. since the amount of information displayed on the screen is limited.

Some Web sites have been specially designed for m-commerce. They feature Some Web sites have been specially designed for m-commerce. They feature Web pages with very few graphics and just enough information (that users Web pages with very few graphics and just enough information (that users are most likely to need) to fit on a small mobile handheld screen.are most likely to need) to fit on a small mobile handheld screen.

e.g. Special Wireless Portals (Mobile Portals) such as e.g. Special Wireless Portals (Mobile Portals) such as MSN Mobile MSN Mobile PortalPortal, , provides access to news, sports, local traffic reports, restaurant listings. provides access to news, sports, local traffic reports, restaurant listings. Yellow pages, and Stock market reports, as well as managing e-mail Yellow pages, and Stock market reports, as well as managing e-mail messages and instant messaging. messages and instant messaging.

MOBILE COMMERCE (M-COMMERCE) CHALLENGESMOBILE COMMERCE (M-COMMERCE) CHALLENGES

The number of Wi-Fi hotspots for Wireless Internet access has been The number of Wi-Fi hotspots for Wireless Internet access has been mushrooming in many countries because the technology combines high speed mushrooming in many countries because the technology combines high speed Internet access with a measure of flexibility and mobility.Internet access with a measure of flexibility and mobility.

However, rollout of mobile m-commerce services, has proved to be more However, rollout of mobile m-commerce services, has proved to be more problematic since:problematic since: a) Keyboards and screens on cell phones are still tiny and awkward to use;a) Keyboards and screens on cell phones are still tiny and awkward to use;

b) The data transfer rate on second generation 2G cellular network are b) The data transfer rate on second generation 2G cellular network are very slow compared to dial-up high speed Internet connections for PCs. very slow compared to dial-up high speed Internet connections for PCs. Each second of waiting for download costs money to customers; Each second of waiting for download costs money to customers;

c) Most Internet-enabled phones have limited memory and power supplies.c) Most Internet-enabled phones have limited memory and power supplies.

M-commerce will benefit from 3G networks and other cellular broadband M-commerce will benefit from 3G networks and other cellular broadband services and from standardize services and from standardize Mobile Payment Systems.Mobile Payment Systems.

ELECTRONIC COMMERCE PAYMENT SYSTEMSELECTRONIC COMMERCE PAYMENT SYSTEMS

Special electronic Payment Systems have been developed Special electronic Payment Systems have been developed to pay for goods electronically on the Internet.to pay for goods electronically on the Internet.

Electronic Payment Systems includes: Electronic Payment Systems includes:

1.1. Digital Credit Card Payments;Digital Credit Card Payments;2.2. Digital WalletsDigital Wallets3.3. Accumulated Balance Digital Payment SystemsAccumulated Balance Digital Payment Systems4.4. Stored Value payment SystemStored Value payment System5.5. Digital CashDigital Cash6.6. Peer-to-Peer Payment Systems,Peer-to-Peer Payment Systems,7.7. Digital CheckingDigital Checking8.8. Electronic Billing Presentment and Payment Electronic Billing Presentment and Payment

SystemsSystems


1. 1. DIGITAL CREDIT CARD PAYMENT SYSTEMDIGITAL CREDIT CARD PAYMENT SYSTEM

Digital Credit Card Payment System extend the functionality of Digital Credit Card Payment System extend the functionality of ordinary Credit Cards so they can be used for online shopping payments. ordinary Credit Cards so they can be used for online shopping payments.

Digital Credit Card Payment Systems make Credit Cards safer and Digital Credit Card Payment Systems make Credit Cards safer and more convenient for online merchants and consumers by providing more convenient for online merchants and consumers by providing mechanisms for authenticating the Purchaser's Credit Card to make mechanisms for authenticating the Purchaser's Credit Card to make sure it is valid and arranging for the Bank that issued the Credit sure it is valid and arranging for the Bank that issued the Credit card to deposit money, for the amount of the purchase, in the Seller’s card to deposit money, for the amount of the purchase, in the Seller’s Bank account. Bank account.


22. . DIGITAL WALLETSDIGITAL WALLETS

A Digital Wallet securely stores Credit Card and the owner identification A Digital Wallet securely stores Credit Card and the owner identification information such as Shopper’s name, Credit Card number, Shipping information such as Shopper’s name, Credit Card number, Shipping information i.e. Delivery address, Date and specific instruction etc… information i.e. Delivery address, Date and specific instruction etc… automatically when invoked to complete the purchase automatically when invoked to complete the purchase Digital Wallets make paying for purchases over the Web more efficient Digital Wallets make paying for purchases over the Web more efficient by eliminating the need for Shoppers to enter their address and Credit by eliminating the need for Shoppers to enter their address and Credit Card details repeatedly each time they buy something. Card details repeatedly each time they buy something.

e.g. Q*Wallet and Google Toolbar Autofill are examples of Digital e.g. Q*Wallet and Google Toolbar Autofill are examples of Digital Wallet.Wallet.


3. 3. ACCUMULATED BALANCE DIGITAL PAYMENT SYSTEMSACCUMULATED BALANCE DIGITAL PAYMENT SYSTEMS

Enable users to make Enable users to make MicropaymentsMicropayments, , whenwhen purchases on the purchases on the Web. Web. It accumulates a Debit balance on users Credit card or Telephone It accumulates a Debit balance on users Credit card or Telephone bills that must be paid periodically bills that must be paid periodically. .

Micropayment Systems have been developed for purchase Micropayment Systems have been developed for purchase amounts of less than $10, such as downloads of individual articles amounts of less than $10, such as downloads of individual articles for music clips, which would be too small for Credit Card payments for music clips, which would be too small for Credit Card payments

e.g. QPass enables Wireless customers to charge ringtones, games and e.g. QPass enables Wireless customers to charge ringtones, games and other digital products and services to their monthly Phone bills. other digital products and services to their monthly Phone bills.


4. 4. STORED VALUE PAYMENT SYSTEMSSTORED VALUE PAYMENT SYSTEMS

Enables customers to make instant online payments to merchants and Enables customers to make instant online payments to merchants and other individuals, based on pre-stored Value in a Digital Account. other individuals, based on pre-stored Value in a Digital Account. (e.g. eCount)(e.g. eCount)

Online Value Systems rely on the value stored in a Consumer’s Bank, Online Value Systems rely on the value stored in a Consumer’s Bank, Checking , or Credit Card account, and some of these Systems require Checking , or Credit Card account, and some of these Systems require the use of Digital Wallet. the use of Digital Wallet.

Smart Cards are a type of Stored Value System used for Micropayments.Smart Cards are a type of Stored Value System used for Micropayments.

Smart Card can serve as an ‘Smart Card can serve as an ‘’Electronic Purse’’ ’Electronic Purse’’ in place of cash. in place of cash. e.g. The Mondex Smart Card contains electronic cash and can be used e.g. The Mondex Smart Card contains electronic cash and can be used to transfer funds to Merchants in physical storefronts and to to transfer funds to Merchants in physical storefronts and to Merchants on the Internet. Merchants on the Internet. Mondex Smart Card requires a special card reader whenever the card Mondex Smart Card requires a special card reader whenever the card needs to transfer cash to either an online or offline Merchant. needs to transfer cash to either an online or offline Merchant.


5. 5. DIGITAL CASH (EDIGITAL CASH (E--Cash)Cash)

Digital Cash is currently represented in electronic form that Digital Cash is currently represented in electronic form that moves outside the normal network of money. moves outside the normal network of money.

Digital Cash users are supplied with Client Software to exchange Digital Cash users are supplied with Client Software to exchange

money with another e-cash user over the Internet or with a money with another e-cash user over the Internet or with a retailer retailer accepting e-cash. accepting e-cash.

Digital Cash can be useful for people who do not have Credit Digital Cash can be useful for people who do not have Credit Cards and wish to make Web purchases as well as facilitating Cards and wish to make Web purchases as well as facilitating micropayments. micropayments.

e.g. ClearBIT e.g. ClearBIT is an Example of a Digital Cash service. is an Example of a Digital Cash service.


6. 6. PEER-TO-PEER PAYMENT SYSTEMSPEER-TO-PEER PAYMENT SYSTEMS

Web-based Peer-to-Peer Payment Systems serve people who Web-based Peer-to-Peer Payment Systems serve people who want to send money to vendors or individuals, who are not set up want to send money to vendors or individuals, who are not set up

to accept Credit Card Payments. to accept Credit Card Payments.

The party sending money uses his Credit Card to create an The party sending money uses his Credit Card to create an account with designated payment at a Web site dedicated to account with designated payment at a Web site dedicated to Peer-to-Per Payments.Peer-to-Per Payments.

The Recipient ‘The Recipient ‘’Picks up’Picks up’’ the payment by visiting Web site and ’’ the payment by visiting Web site and supplying information about where to send the payment supplying information about where to send the payment (i.e. A Bank account or a physical address) (i.e. A Bank account or a physical address)

e.g. e.g. PayPalPayPal

ELECTRONIC COMMERCE PAYMENT SYSTEMSELECTRONIC COMMERCE PAYMENT SYSTEMS 7. 7. DIGITAL CHECKING PAYMENT SYSTEMSDIGITAL CHECKING PAYMENT SYSTEMS

Extend the functionality of existing Checking Accounts so they Extend the functionality of existing Checking Accounts so they can be used for online shopping payments . can be used for online shopping payments .

Digital Checks are less expensive than Credit Cards and much Digital Checks are less expensive than Credit Cards and much faster than traditional Checking. faster than traditional Checking.

Digital Checks are encrypted with a Digital Signature that can be Digital Checks are encrypted with a Digital Signature that can be verified and used for payments in e-commerce. verified and used for payments in e-commerce.

Digital Checks (Digital Checks (Electronic ChecksElectronic Checks) are useful in B2B . ) are useful in B2B .

Example is Example is eCheckeCheck..


8. 8. ELECTRONIC BILLING PRESENTMENT AND PAYMENT SYSTEMSELECTRONIC BILLING PRESENTMENT AND PAYMENT SYSTEMS

Enable the users to view their bills electronically and pay them Enable the users to view their bills electronically and pay them through Electronic Fund Transfers (EFT) from Bank Account or with through Electronic Fund Transfers (EFT) from Bank Account or with Credit Card Accounts. Credit Card Accounts.

These services support payments for online and physical store These services support payments for online and physical store purchases of goods services after purchase has taken place such purchases of goods services after purchase has taken place such as paying routine monthly bills. as paying routine monthly bills.

The System notifies the Purchasers about their Bills that are due, The System notifies the Purchasers about their Bills that are due, Present the bills, and Process the Payments. Present the bills, and Process the Payments.

Some of these services such as Some of these services such as CheckFreeCheckFree consolidate Subscribers consolidate Subscribers bills from various sources so that they can all be paid at one time. bills from various sources so that they can all be paid at one time.

DIGITAL PAYMENT SYSTEMS FOR M-COMMERCEDIGITAL PAYMENT SYSTEMS FOR M-COMMERCE With a Wi-Fi connection, all types of Electronic Payment Systems can be With a Wi-Fi connection, all types of Electronic Payment Systems can be used, The fact that connection is with wireless should have no impact . used, The fact that connection is with wireless should have no impact .

Many M-commerce transactions, however, are small, frequent purchases Many M-commerce transactions, however, are small, frequent purchases for items such as soft drinks, newspapers or mobile games that require for items such as soft drinks, newspapers or mobile games that require special Micropayment Systems. special Micropayment Systems.

Micropayment Systems are working well in Europe and Asia, where Micropayment Systems are working well in Europe and Asia, where Mobile Operators and Internet Service Providers handle small payments Mobile Operators and Internet Service Providers handle small payments by adding them up and presenting them on a single bill, such as on the by adding them up and presenting them on a single bill, such as on the mobile telephone bill.mobile telephone bill.

e.g. eBay’s PayPall , Mobile Text2Buy Service allows consumers to send e.g. eBay’s PayPall , Mobile Text2Buy Service allows consumers to send payments to PayPall Mobile Accounts, purchase items from selected payments to PayPall Mobile Accounts, purchase items from selected retailers, or denote money to some charities by entering a short text retailers, or denote money to some charities by entering a short text code into a cell phone. code into a cell phone.

..

DIGITAL PAYMENT SYSTEMS FOR M-COMMERCEDIGITAL PAYMENT SYSTEMS FOR M-COMMERCE

• NTTDoCoMo in Japan offers a cell phone with a Stored Value NTTDoCoMo in Japan offers a cell phone with a Stored Value Payment System for purchases in designated Stores, Payment System for purchases in designated Stores, Restaurants and vending machines. Restaurants and vending machines.

NTTDoCoMo also offers another cell phone with an embedded NTTDoCoMo also offers another cell phone with an embedded Credit Card payment system. Credit Card payment system.

Virgin Mobile Phone in England offers a purchase service of Virgin Mobile Phone in England offers a purchase service of Virgin Cola by dialling a number posted on the Virgin vending Virgin Cola by dialling a number posted on the Virgin vending machine. machine.

The cost of the drink is charged on the mobile phone bill.The cost of the drink is charged on the mobile phone bill.

DIGITAL PAYMENT SYSTEMS FOR M-COMMERCEDIGITAL PAYMENT SYSTEMS FOR M-COMMERCE

Motorola, MasterCard, and Visa are developing Mobile Wallet Motorola, MasterCard, and Visa are developing Mobile Wallet Services (Digital Wallet Payment Systems) . Services (Digital Wallet Payment Systems) .

Micropayment Service Providers run their own unique Micropayment Service Providers run their own unique Payment systems. Payment systems.

A common secure platform for Wireless M-commerce A common secure platform for Wireless M-commerce Payments would help M-commerce to spread rapidly. Payments would help M-commerce to spread rapidly.

Download - MANAGEMENT INFORMATION SYSTEMS (MIS) E - COMMERCE DIGITAL MARKETS AND DIGITAL GOODS SPRING 2010 LECTURE NOTES 7

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