elc 200 day 21 introduction to e-commerce 1 copyright, tony gauvin, umfk, 2011

ELC 200ELC 200Day 21Day 21

Introduction to E-Commerce

1Copyright, Tony Gauvin, UMFK, 2011

Agenda Questions? Assignment 7 Corrected

3 A’s, 5 B’s, 2 C’s, 2 D’s, 1 F (late) and 1 non-submit

Assignment 8 posted Due April 29 ELC 200 assignment 8.pdf

Optional Assignment 9 posted Due May @ 9:30 AM

Finish Discussion on Online Retailing and Services Begin Discussion on Online Content and Media

4 week countdown

April 22 Chap 10

April 25 Chap 11

April 29 Chap 11 Assignment 8 Due

May 2 Chap 12

May 6 Chap 12

May 9 Quiz 3 Optional assignment 9 Due

May 16 @ 8 AM Framework Papers and

Presentations Due

Copyright © 2012 Pearson Education, Inc. Slide 8-3

Chapter 9

Online Retail and Services

Learning Objectives Describe the major trends in the online travel services

industry today. Identify current trends in the online career services industry.

Online Travel Services One of the most successful B2C e-commerce

segments Online travel bookings declined slightly due to

recession but expected to grow to $107.5 billion in 2011

For consumers: More convenience than traditional travel agents

For suppliers: A singular, focused customer pool that can be efficiently reached through onsite advertising


Online Travel Services (cont.)

Travel an ideal service/product for Internet Information-intensive product Electronic product—travel arrangements can be

accomplished for the most part online Does not require inventory Does not require physical offices with multiple

employees Suppliers are always looking for customers to fill excess

capacity Does not require an expensive multi-channel presence


Insight on Business: Class Discussion

Zipcar Shifts into High Gear What is the Zipcar business model? How does it make

money? How does Zipcar use the Internet? Does Zipcar compete with traditional car rental firms? Will Zipcar work only in urban markets? Can it expand

to the suburbs? http://www.zipcar.com/colby?zipfleet_id=112324150


http://www.zipcar.com/colby?zipfleet_id=112324150

Online Travel Services Revenues

Figure 9.5, Page 618

Copyright © 2012 Pearson Education, Inc.

SOURCE: Based on data from eMarketer, 2011c.

Slide 9-9

The Online Travel Market Four major sectors:

Airline tickets Hotel reservations Car rentals Cruises/tours

57% purchase airline tickets from airline’s Web site, 22% from travel booking Web site (e.g., Expedia)

Corporate online-booking solutions (COBS) Integrated travel services


Online Travel Industry Dynamics Intense competition among online providers Price competition difficult Industry consolidation Industry impacted by meta-search engines

Commoditize online travel

Mobile applications are also transforming industry

Social media content, reviews have an increasing influence on travel purchases


Insight on Society: Class Discussion

Phony Reviews Should there be repercussions to individuals

and/or businesses for posting false reviews of products or services?

Can phony reviews be recognized and moderated?

Do you rely more on some types of reviews or comments on Web sites and blogs over others?


Online Career Services Top sites generate over $1 billion annually Two main players: CareerBuilder, Monster Traditional recruitment:

Classified, print ads, career expos, on-campus recruitment, staffing firms, internal referral programs

Online recruiting More efficient, cost-effective, reduces total time-to-hire Enables job hunters to more easily distribute resumes while

conducting job searches Ideally suited for Web due to information-intense nature of

process


It’s Just Information: The Ideal Web Business?

Recruitment ideally suited for the Web Information-intense processInitial match-up doesn’t require much personalization

Saves time and money for both job hunters and employers

One of most important functions: Ability to establish market prices and terms (online

national marketplace)


Online Recruitment Industry Trends Consolidation Diversification: Niche employment sites Localization:

Local vs. national, Craigslist

Job search engines/aggregators: “Scraping” listings

Social networking: LinkedIn; Facebook apps

Mobile apps


Chapter 10

Online Content and Media

Learning Objectives Identify the major trends in the consumption of media

and online content. Discuss the concept of media convergence and the

challenges it faces. Describe the five basic content revenue models. Discuss the key challenges facing content producers

and owners. Explain the key factors affecting the online publishing

industry. Explain the key factors affecting the online

entertainment industry.

Class Discussion

Information Wants to Be Expensive

Why did the Wall Street Journal succeed with a subscription model?

Would you pay to read a daily newspaper online? Why or why not? Would you pay for access to online archives of newspapers and/or magazines?

Do you think newspapers can make the transition from “print on paper” to “news on-screen”?

What do you think about the New York Times’ new subscription-based model?


Trends in Online Content, 2011–2012 Increased media consumption Smartphones and tables create “fourth screen”

The video screens again are:1. the movie screen, also known as the silver screen.

2. television (TV)

3. personal computer (PC)

Growth of social and local content User-generated content growing, inverting traditional

production/business models Apple, Google, Amazon, Facebook vie for ownership of

online content ecosystem


http://en.wikipedia.org/wiki/Movie_screen

http://en.wikipedia.org/wiki/Silver_screen

http://en.wikipedia.org/wiki/Television

http://en.wikipedia.org/wiki/Personal_computer

Trends in Online Content (cont.)

Internet advertising revenues expanding rapidly

Increased consumer acceptance of paying for premium content

Content owners adapt mixture of advertising, subscription, a la carte payment for business model

Convergence


Content Audience and Market

Average American adult spends 4,400 hrs/yr consuming various media

2011 media revenues: $580 billion Over 75% of the hours spent consuming

TV, radio, Internet 2.5 hrs/day on Internet Internet usage doesn’t reduce TV viewing


Media Consumption



SOURCE: Based on data from U.S. Census Bureau, 2010, authors’ estimates

Slide 10-24

Internet and Traditional Media Cannibalization vs. complementarity Time spent on Internet reduces time available for other

media Books, newspapers, magazines, phone, radio

Conversely, Internet users consume more media of all types than non-Internet users

Internet users also often “multitask” with media consumption

Multimedia—reduces cannibalization impact for some visual, aural media


Media Revenues by Channel


SOURCE: Based on data from U.S. Census Bureau, 2011; authors’ estimates.


Slide 10-27

Relative Size of the Content Market, Based on Per-Person Spending

Figure 10.3 Page 653


SOURCE: Based on data from U.S. Census Bureau, 2011; authors’ estimates.

Slide 10-28

Digital Content Delivery Models Three commercial content business models

Paid Free with advertiser support Freemium

Free content can drive users to paid content Users increasingly paying for high-quality,

unique content Music, games, newspapers, movies Online paid content audience growing rapidly


Free or Fee? Early years: Internet audience expected free

content but willing to accept advertising Early content was low quality

With advent of high-quality content, fee models successful iTunes 29 million buy from legal music sites Newspapers charging for premium content YouTube cooperating with Hollywood production studios


Media Industry Structure

Three separate segments, each dominated by few key players PublishingNewspapersEntertainment

Larger media ecosystemIncludes millions of individuals, entrepreneurs

(blogs, YouTube, independent music bands)


Media Convergence Technological convergence:

Hybrid devices combining functionality of existing media platforms, e.g., smartphones

Content convergence: Three aspects: Design, production, distribution New tools for digital editing and processing

Industry convergence: Merger of media enterprises into firms that create and

cross-market content on different platforms


Convergence and the Transformation of Content: Books



Online Content Revenue Models and Business Processes

Marketing Free content drives offline revenues

Advertising Fee content paid for by advertising

Pay-per-view/pay-for-download Charge for premium content

Subscription Monthly charges for services

Mixed



http://www.wsjprintsubscription.com/

http://www.wsjprintsubscription.com/

Making a Profit with Online Content 25% users will pay for some content Four factors required to charge for

online content1. Focused market2. Specialized content3. Sole source monopoly4. High perceived net value

Portion of perceived customer value that can be attributed to fact that content is available on the Internet


Revenue and Content Characteristics



Key Challenges Facing Content Producers and Owners

Technology Bandwidth issues for HD video, CD-quality music

Cost Internet distribution more costly than anticipated, for

migrating, repackaging, and redesigning content

Distribution channels and cannibalization Digital rights management (DRM)

Use of technology to circumvent DRM Interests of content creators vs. technology companies

that profit from illegal downloadsCopyright © 2012 Pearson Education, Inc. Slide 10-39

Insight on Business: Class Discussion

Who Owns Your Files? Why does digital content need any more protection than

analog content stored on records and tapes? What is DRM software? Have you ever encountered digital

content that is protected with DRM? Why did Apple abandon its DRM software? Is DRM working for

Amazon’s Kindle? Does it matter to the consumer whether content purchased is

“owned” or “licensed”? How does DRM potentially interfere with “fair use” of

copyrighted material?


Online Newspapers Most troubled segment of publishing

industry 60% have reduced staff Failure to protect content from free distribution

However: Online readership growing at 16% Mobiles, tablets provide new avenues More users willing to pay for premium content Aggregators are recognizing need for high-quality

content to distribute and use for advertisements


Monthly Unique Visitors at Online Newspapers



SOURCES: Based on data from comScore, 2011a; Compete.com, 2011.

Slide 10-42

Newspaper Business Models Initially fee-based, then free, and now

beginning a return to fee-based Newspaper headlines are primary content on

Google News, Yahoo News New York Times now charging for premium

access Newspaper efforts to ally with Internet titans New reader devices with reader apps


Convergence in Newspaper Industry Technology:

Slow move to Internet; beginning to incorporate video, RSS, user feedback

Content: Four content changes

Premium archived content Fine-grained searching Videos reporting RSS feeds

Timeliness allows competition with TV/radio

Industry structure: Has not seen much convergence due to limited returns


Challenges: Disruptive Technologies Newspapers: a classic case of disruptive

technology? Industry still in flux

Newspapers have significant assets: Content Readership Local advertising Audience (wealthier, older, better educated)

Online audience will continue to grow in numbers and sophistication


E-books Some predicted that Internet would mean

dwindling of books Today, book publishing generates $24 billion Publishing industry concerns:

How much to charge for e-booksWhat content enhancements encourage purchasing of

e-booksBest business relationship with distributors


E-books Evolution

Project Gutenberg (1970s)Voyager’s books on CD (1990s)Adobe’s PDF format

Types of commercial e-booksWeb-accessed e-bookWeb-downloadable e-bookDedicated e-book reader

Kindle, Sony, NookGeneral purpose readerPrint-on-demand books


Book Audience Size and Growth Americans read about 10 books per year per

person Americans spend $95/year on trade books,

more than video games, in-theater movies Book readership is flat, anchored in the 40+

population Professional, educational publishing growing

2 times as fast as economy


Growth of E-book Revenues 2009–2015


SOURCES: Based on data from Assoc. of American Publishers, 2011; eMarketer, 2011b; authors’ estimates.


Slide 10-49

E-book Industry Revenue Models Wholesale model

As with traditional publishing, retailer pays wholesale price and marks price up

With lowered prices of e-books, profits to publisher are also lower

Agency model Publishers set retail price and designate an agent who

receives 30% commission Leads to higher, fixed prices for e-books Google, Amazon, Apple benefit primarily by selling

e-book readers


Convergence in Publishing Industry Technological convergence slowed by:

DRM concerns Competing standards (Kindle, Nook, iPad)

Content convergence User experiences is still turning pages of text and graphics

Industry structure Print publishing industry in flux

Non-physical books Authors bypassing traditional publishing and distribution


Insight on Society: Class Discussion

The Future of Books What technologies are changing the concept of

what a book is? Do you consider Wikipedia a “book,” and if so,

what type of book? What qualities makes Unigo a threat to

traditionally published college references? Are some types of traditional books more

threatened by Internet technologies than others?


Online Entertainment Industry Major players:

Television, radio, Hollywood films, music, video games

Internet is transforming industry, along with: Smartphones, tablets as video, music platform Online streaming, Netflix Social network platforms Viable business models in music subscription services Widespread growth of broadband Business models that eliminate need for DRM


The Five Major Players in the Entertainment Industry



SOURCE: Based on data from U.S. Census Bureau, 2011; NPD Group, 2011, authors’ estimates.

Slide 10-54

Online Entertainment Audience Size Online “traditional” entertainment

Online video has largest audiences, followed by music, games

User-generated content: Substitutes for and complements traditional

commercial entertainment Two dimensions:

User focus User control

Sites that offer high levels of both will grow


Projected Growth in Traditional Online Entertainment (in Millions)

Figure 10.11, Page 688SOURCES: Based on data from industry sources; authors’ estimates.


User Role in Entertainment



Content Internet has greatly changed packaging,

distribution, marketing, sales of traditional entertainment

Greatest impact: Music From CD of 12–15 songs to single-song downloads

Groups can bypass traditional marketing and sales

Revenue Models: Marketing, advertising, pay-per-view, subscription, value-

added, mixed


Convergence inEntertainment Industry

Technology convergence:Smartphones, tablets become music listening

devices, video players, game stationsGame stations connect to Internet, stream moviesMovies and television

Move toward Internet distribution iTunes Store Netflix Hulu


Convergence inEntertainment Industry (cont.)

Content convergenceSignificant progress toward digital tools

for content creation and production

Digital cameras, workstations

Music recording and production highly digitized; some distribution direct to Internet, bypassing CD production stage


Convergence inEntertainment Industry (cont.)

Industry structureFractured: Many players and forces shape

industryReorganization of value chain needed for

aggressive move to WebPossible alternative models

Content owner direct model Internet aggregator model Internet innovator model


Entertainment Industry Value Chains



Insight on Technology

Hollywood Meets the Internet: Round 3Class Discussion

What strategies has Hollywood pursued to combat movie piracy?

Are there legitimate ways that videos can be distributed on the Web?

How can the differentiation of DVD products help in combating piracy?

Do you think Hollywood is doing a better job of protecting its content than the music industry?


elc 200 day 21 introduction to e-commerce 1 copyright, tony gauvin, umfk, 2011

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