1. Copyright © 2007 Pearson Education, Inc. Slide 1-1 MIS 415/575: Background History of E-Commerce

2. Overview 1. Beginning of the Internet 2. Beginning of E-Commerce 3. Anticipation and Growth 4. Entrepreneurship 5. Consolidation 6. Re-invention Slide 1-2

3. 1. The Internet Worldwide network of computer networks built on common standards (TCP/IP) Created in late 1960s with funds from the US- government, later managed by the NSFNSF Early services included file transfer, telnet, usenet, and email Use originally restricted to research-related purposes Slide 1-3

4. Number of Internet Hosts with Domain Names Slide 1-4 Source: Internet Systems ConsortiumInternet Systems Consortium

5. 2. Beginning of E-commerce Commercialization of the Internet began in earnest in 1996 with the relaxation of NSFnet’s Acceptable Use policy This enabled the use of the Internet for purely commercial purposes Other supporting factors:  Generally falling tech prices and availability of affordable personal computers  Web and browser technology for each access to information online  Low interest rates Slide 1-5

6. The Web Most popular Internet service (‘killer app’) Developed in the early 1990s Provides easy access to online content  HTML documents that may include text, graphics, animations, music, video  Later became a platform for various, more sophisticated applications, dynamic content Slide 1-6

7. Number of Websites Worldwide Slide 1-7 Source: NetcraftNetcraft Web content has grown exponentially (see: Worldwidewebsize.com)Worldwidewebsize.com 2 billion Web pages in 2000 At least 30–60 billion pages today

8. 3. Anticipation and Growth of E- Commerce Slide 1-8 Source: PWC Moneytree ReportPWC Moneytree Report Venture Capital investmentsVenture Capital investments in the U.S.* *The curve is even more prominent for “IT services” only Tech-related growth helped drive unemployment rate to 40 year low of 3.6% (Oct 2000)

9. The Growth of B2C E-commerce Figure 1.4, Page 25 Slide 1-9 SOURCES: eMarketer, Inc., 2009a; U.S. Census Bureau, 2009b; authors’ estimates.

10. The Growth of B2B E-commerce Figure 1.5, Page 28 Slide 1-10 SOURCES: U.S. Census Bureau, 2009a; authors’ estimates.

11. Key points in Web history (1991 – 2001) 1993: CERN decides to make Web technology and codes free for all to use 1995: Amazon.com is launched 1995: (Microsoft) Internet Explorer introduced 1998: Google launched 2000: Dow Jones and NASDAQ markets reach their peak 2001: Wikipedia is launched 2001: eToys and Webvan bankruptcies spark the end of the Web bubble Slide 1-11

12. 4. Entrepreneurship Anticipation: Extraordinary opportunity to earn far above normal returns on investment:  Perceived need to obtain first mover advantage and get big fast!!! “if we build it they will come” Wide availability of VC capital Example: Govworks.com – as documented in the movie Startup.com (see questions)Startup.comquestions Slide 1-12

13. 5. Consolidation Around 2000, investors became anxious for profits from Web companies High profile bankruptcies of eToys and Webvan caused investors to sell, causing stock market to plummet ending many Web companies Other key failures included:  Pets.com  Kozmo.com (order absolutely anything for free delivery)  Flooz.com (new, online currency) Slide 1-13

14. 6. Re-Invention E-Commerce volume continued to grow w/o much interruption (see charts) Changes in technology helped usher in next generation sites  Faster connection speeds  More powerful computers  Broader color range for monitors Development of business models that were more realistic than early approaches Slide 1-14

15. Also: Better understanding of Web and better communication between designers and programmers led to improved site designs that were more attractive and easier to use Increasing inclusion of user-generated content, social networking, services “The impact of technology is generally overestimated in three years and underestimated in 10 years” Attributed to Bill Gates Slide 1-15

16. History of the Web after 2002 Web transformed into social platform and entertainment outlet (as well as commercial outlet)  YouTube viewership rose while network TV viewership declined 2002: Release of Flash Player 6 (the first version to support video files, setting the stage for the later explosion of online video) 2003: Launch of MySpace social network Slide 1-16

17. History of the Web after 2002 (cont’d) 2004: Amazon.com proves Web-based companies can generate positive income with first annual profit 2004: Launch of Facebook social network 2005: Launch of YouTube video sharing site 2005: More new users (17M) go online in 2005 than in all of the 1990’s Slide 1-17

18. In Summary: Early Visions of E-commerce Computer scientists:  Inexpensive, universal communications and computing environment accessible by all Economists:  Nearly perfect competitive market and friction-free commerce  Lowered search costs, disintermediation, price transparency, elimination of unfair competitive advantage Entrepreneurs:  Extraordinary opportunity to earn far above normal returns on investment—first mover advantage Slide 1-18

19. Assessing E-commerce Technology overall successful, but… … many other early visions not fulfilled  Friction-free commerce Consumers less price sensitive Considerable price dispersion  Perfect competition Information asymmetries persist  Disintermediation  First mover advantage Fast-followers often overtake first movers Sound business models are and remain key; creativity needs to be combined with understanding of technology and business!! Slide 1-19

20. The Internet and the Evolution of Corporate Computing Figure 1.9, Page 44 Slide 1-20

21. Laudon/Traver: Insight on Business The Internet Investment Rollercoaster Discussion Questions The Internet Investment Rollercoaster What explains the rapid growth in private investment in e-commerce firms in the period 1998–2000? Was this investment irrational? What was the effect of the big bust of March 2000 on e- commerce investment? What is the value to investors of a company such as YouTube which has yet to show profitability? Why do you think investors today would be interested in investing in or purchasing e-commerce companies? Would you invest in an e-commerce company today? Slide 1-21

22. Some Predictions for the Future Technology will propagate through all commercial activity Prices will rise to cover the real cost of doing business E-commerce margins and profits will rise to levels more typical of all retailers Cast of players will change  Traditional Fortune 500 companies will play dominant role  New startup ventures will emerge with new products, services Number of successful pure online stores will remain smaller than integrated offline/online stores Growth of regulatory activity worldwide Influence of cost of energy Slide 1-22