IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/ Chapter 5 Enabling Commerce Using the Internet “…[W]e can hardly keep up with the Fortune 500 companies who are contacting us.” Sibley Verbeck, CEO and founder of the Electric Sheep Company “…[W]e can hardly keep up with the Fortune 500 companies who are contacting us.” Sibley Verbeck, CEO and founder of the Electric Sheep Company

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 How Did the Internet Get Started? 4-2 Internet—derived from internetworking 1960s—U.S. Defense Advanced Research Project (DARPA)  ARPANET—WAN that linked universities and research centers 1986—U.S. National Science Foundation  NSFNET—became major component of the Internet Other networks ultimately connected  BITNET, CSNET, NSINET, ESNET, NORDUNET

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Packet-Switching Technology 4-3 Problem: Concurrent data transmission  One wire and several users Solution: Turn taking Messages divided into packets and sent Packets travel independently Reassembled by receiver Header contains address of source and destination

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 EC Business Strategies 5-4 Differentiated, based on levels of physical/virtual presence  Brick & mortar (Traditional Stores)  Physical locations only  Cons: Limited geographical reach  Click Only (virtual companies)  Business conducted in cyberspace—no physical location  Cons: Customers uncomfortable with online transactions No face-to-face interaction with customers  Clicks-and-mortar  Bricks-and-clicks business strategy  Hybrid strategy  Cons: Added complexity combining two different environments

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Most Common Types of E-Commerce 5-5 EC just a portion of E-Business Business-to-consumer (B2C) - target.com Business-to-business (B2B) - Grainger.com Business-to-employee (B2E) - Southeast portal Consumer-to-consumer (C2C) - eBay Government-to-citizen (G2C) – income tax filing  Government-to-business (G2B) – procurement Government-to-government (G2G) -  G8 Summit G8 Summit

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Data Exchange 5-6 Internet  Intranet  Requires login & password  Extranet – Access to a portion of an intranet. Electronic Data Interchange (EDI) Used prior to the introduction of the Internet for B2B Digital or electronic transmission of business documents between organizations  Value-added networks (VAN)  Dedicated circuit between companies

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Consumer E-Tailing 5-7 Benefits:  Product - Unlimited number & variety  Available 24/7/365 anytime, anywhere globally  Easier comparison shopping  Price - High inventory turnover = lower costs  No expenditures for physical retail space Disadvantages  Product delivery-Delay between purchase & delivery  Exception: Digital delivery  Product experience  Lack of sensory information (Smell, taste, feel)  Lack of the social element Addressed by: Blogs, Twitter, Facebook, other Web 2.0

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Attracting and Retaining Online Customers 5-8 Basic rule of commerce  Offer valuable products/services at fair prices Additional e-commerce rules 1. The Web site should offer something unique. 2. The Web site must be aesthetically pleasing. 3. The Web site must be easy to use and fast. 4. The Web site must motivate people to visit, stay, & return. 5. You must advertise your presence on the Web. 6. You should learn from your Web site.

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Search Engine Marketing 5-9 Search engine optimization  Position within search results based on complex formula Optimization based on: Web site updates Use of key terms Unethical “tricks” Paid inclusion (Fee paid to search engine to appear in results)  Cannot influence order, thus companies may use:  Search engine advertising Sponsored search Pay to ensure a spot on top of search results page Pay-per-click

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Auctions & 3 rd Party Payment Services 5-10 Forward auction - Highest bid wins  Sellers post goods or services for sale Reverse auction – Lowest seller bid wins  Buyers post a request for quote (RFQ) used in B2B  Seller proposes a bid Third Party Payment Services  Online transactions without sharing private information with actual seller  Examples:  PayPal (owned by eBay) – Send & receive $ with account Can send & receive money if you have an account  Google Checkout – Linked with Google sear  E-Gold - Service backed by real gold

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Conducting Safe Transactions Online Use a secure browser with the latest encryption capabilities 2. Check the site’s privacy policy 3. Read and understand refund and shipping policies 4. Keep personal information private 5. Give payment information only to those you know and trust 6. Keep records of online transaction 7. Review your monthly credit card and bank statements

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Legislative & Tax Issues 5-12 The USA PATRIOT Act introduced after 9/11/01  Increased power given to U.S. government agencies to protect  Increased ability for government surveillance The Internet Tax Freedom Act—1998  Created as an incentive for EC businesses  No sales taxes paid in states where the company has no presence Problem: Loss of tax incomes & Unfair advantage for e-tailers Solutions:  Use tax – consumer pays state’s sales tax or taxed on income tax returns  Streamlined Sales Tax Project – Tax code simplified  COPA – Child Online Protection Act  Age verification

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 10/6/2015 Moving toward Internet v L-Commerce – “Always on” connectivity  Real-time transfer of data over 3G and 4G cellular networks  Based on location - (GPS functionality & Bluetooth)  Pull-based—consumers seeking information  Push-based—companies sending (unrequested) information to the consumer IPv6 Net Neutrality  Data sent over the Internet is handled in a neutral manner  All traffic treated the same way  ISPs and telephone companies argue for prioritization  Traditional Internet traffic suffers ( ) due to high bandwidth applications Example: YouTube.com not paying fair share, should be deprioritized