1. E-Commerce: Digital Markets, Digital Goods
Lecture 6
E-Commerce: Digital Markets, Digital Goods

2. Management Information Systems Intended Learning Outcomes
E-Commerce: Digital Markets, Digital Goods
Intended Learning Outcomes
Understand the unique features of e-commerce, digital markets and digital goods.
Classify the E-commerce business models.
Study the role of mobile commerce in transforming toady’s business.
Apply basic features of building an e-commerce site.

3. Management Information Systems What is E-commerce?
E-Commerce: Digital Markets, Digital Goods
What is E-commerce?
Use of Internet and Web to transact business.
More formally:
Digitally enabled commercial transactions between and among organizations and individuals.
Transactions that occur over the Internet, the Web, and/or via mobile apps.
Commercial transactions, involve the exchange of value (money) across organizational or individual boundaries in return for products and services.
NO exchange of value, NO commerce.

4. Management Information Systems The Growth of E-commerce: B2C & B2B
E-Commerce: Digital Markets, Digital Goods
The Growth of E-commerce: B2C & B2B
B2C growth
B2B growth

5. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
E-commerce Vs. E-business
E-business
Digital enablement of transactions and processes within a firm, involving information systems under firm’s control.
Mainly deals with business processes of a firm.
e.g., office automation, IS-based business process, inventory management.
Does not include commercial transactions involving an exchange of value across organizational boundaries.
No exchange

6. Management Information Systems E-commerce Vs. E-business (cont’d)
E-Commerce: Digital Markets, Digital Goods
E-commerce Vs. E-business (cont’d)
E-commerce primarily involves transactions that cross firm boundaries.
E-business primarily involves the application of digital technologies to business processes within the firm.

7. Management Information Systems Features of E-commerce
E-Commerce: Digital Markets, Digital Goods
Features of E-commerce

8. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
Unique Features of E-commerce Technology
Ubiquity, available everywhere: at work, at home; reduces transaction costs, saves time & energy.
Global reach, reaches across cultural, regional & national boundaries conveniently & cost-effectively.
Universal standards, one set of technology standards,
Information richness, audio, video and text messages are possible.
Interactivity, two-way communication; merchant to consumer, among consumers.
Information density, quality & quantity of information; reduces information cost.
Personalization/customization, personalized advertisements, customized products/service.
Social technology, user generated content, C2C, blogging, SNS.

9. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
Key Concepts in E-commerce: Digital Markets
Internet shrinks information asymmetry
Information asymmetry: when one party has more information important for transaction
e.g. Information asymmetry between auto dealers and customers
Digital markets more flexible and efficient
Reduced search and transaction costs
Lower menu costs (cost of changing prices)
Dynamic pricing
Internet enables disintermediation
Disintermediation:
Removal of organizations or business process layers responsible for intermediary steps in value chain
Enables selling direct to consumer

10. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
The Benefits of Disintermediation to the Consumer
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 consumer.

11. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
Key Concepts in E-commerce: Digital Goods
Goods that can be delivered over network
e.g. Music tracks, video, e-books, software
Cost for producing first unit is nearly total cost of product
Cost for producing additional units very low
Impact of Internet on market for digital goods is revolutionary
Video rental services
Hollywood studios
Record label companies
Newspapers and magazines

12. Management Information Systems Key Ingredients of a Business Model
E-Commerce: Digital Markets, Digital Goods
Key Ingredients of a Business Model

13. Management Information Systems Major Types of Revenue Models
E-Commerce: Digital Markets, Digital Goods
Major Types of Revenue Models
Advertising revenue model (Yahoo):
Offers content, services/products. Receives fee from advertisers.
Subscription revenue model (consumerreport.com, Match.com, eHarmony):
Charges a subscription fees. Provides detailed ratings, reviews, recommendation of customer reports.
Transaction fee revenue model (e Bay, E*Trade):
Receives a transaction fee for each successful transaction.
Sales revenue model (Amazon, Gap.com)
Selling goods, content or services to customers.
Affiliate revenue model (MyPoints, Epinions)
Earns money by connecting companies with potential customers by offerings special deals to its members. Fees for business referrals.

14. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
Classification of E-Commerce Business Models
Business-to-Consumer (B2C) Model
e-tailer, community provider, content provider, portal, transaction broker, market creator, service provider
Business-to-Business (B2B) Model
Net Marketplace: E-distributor, E-procurement, Exchange, Industry Consortium
Private Industrial Network
Consumer-to-Consumer (C2C) Model
Provides a way for consumers to sell to each other, with the help of an online market maker.
Peer-to-Peer (P2P)
Links users, enabling them to share files and common resources without a common server.
M-commerce
E-commerce business models that use wireless technologies.

15. Management Information Systems B2C Model: E-tailer
E-Commerce: Digital Markets, Digital Goods
B2C Model: E-tailer
Online version of traditional retailer (i.e., online retail store)
Customer can shop at any hour of the day or night without leaving their home or office.
Similar to ‘bricks-and-mortar’ store, except customers only have to connect to the Internet or use their smartphones to place an order.
Types
Virtual merchants, e.g., Amazon, Blue Nile, Drugstore (No physical store)
Bricks-and-clicks, e.g., JCPenney, Walmart, Barnes & Noble
Catalog merchants, e.g., LLBean.com
Manufacturer-direct online sales, e.g., Dell.com
Revenue
Sales of goods

16. Management Information Systems B2C Model: Community Provider
E-Commerce: Digital Markets, Digital Goods
B2C Model: Community Provider
Sites that create a digital online environment where people with similar interests can transact (buy & sell), communicate, and receive interest-related information, and even play out fantasies by adopting online personalities called avatars.
Revenue:
Hybrid revenue model,
Advertising, subscription, affiliate referral fees.
Example:
iVillage
Babycenter.com (
Rightstart.com (

17. Management Information Systems B2C Model: Content Provider
E-Commerce: Digital Markets, Digital Goods
B2C Model: Content Provider
Information and entertainment companies that provide digital content over the Web.
Digital content: digital video, music, photos, text, & artwork.
Revenue
Subscription fee, pay for download, or advertisements.
Example
WSJ.com (Wall Street Journal online newspaper)
CNN.com
CBSSports.com
ESPN.com

18. Management Information Systems B2C Model: Portal
E-Commerce: Digital Markets, Digital Goods
B2C Model: Portal
Offers powerful search tools plus an integrated package of content and social network services.
Do NOT sell anything directly.
Services
News, , chat, music, video streaming, etc.
e.g., Google, Yahoo, MSN, Facebook
Revenue
Advertising, subscription fees, affiliate referral fees
May be general or specialized (Vortal)
Horizontal portal: Yahoo, MSN target all users of the Internet.
Vertical portal (Vortal): Sailnet.com target specialized customers

19. Management Information Systems B2C Model: Transaction Broker
E-Commerce: Digital Markets, Digital Goods
B2C Model: Transaction Broker
Companies that process transactions for consumers normally handled in person, by phone or by mail are transaction brokers.
Primary value proposition—saving time and money
Typical revenue model—transaction fee
Industries using this model include:
Financial services
Travel services
Job placement services
Example
E*Trade
Expedia
Tripadvisor (

20. Management Information Systems B2C Model: Market Creator
E-Commerce: Digital Markets, Digital Goods
B2C Model: Market Creator
Uses Internet technology to create markets that bring buyers and sellers together.
Examples:
Amazon.com
eBay.com
Revenue model:
Transaction fees

21. Management Information Systems B2C Model: Service Provider
E-Commerce: Digital Markets, Digital Goods
B2C Model: Service Provider
Companies that make money by selling users a service, rather than a product.
Value proposition
Valuable, convenient, time-saving, low-cost alternatives to traditional service providers
Revenue
Sales of services, subscription fees or one-time payment
Example
VisaNow.com
RocketLawyer

22. Management Information Systems B2B Model: Net Marketplaces (e-hubs)
E-Commerce: Digital Markets, Digital Goods
B2B Model: Net Marketplaces (e-hubs)
Internet-based marketplace for buyers and sellers
Industry-owned or independent intermediary
May establish prices through online negotiations, auctions, requests for quotations or use fixed prices
Generate revenue from transactions and other services
May focus on direct goods or indirect goods
May serve vertical or horizontal markets
Example: Exostar
Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers.

23. Management Information Systems B2BModel: E-distributor
E-Commerce: Digital Markets, Digital Goods
B2BModel: E-distributor
Supplies products and services directly to individual businesses.
Owned by one company seeking to serve many customers.
The more products and services a company makes available on its site, the more attractive that site is to potential customers.
Revenue
Sales of goods
Example
Grainger.com (distributor of maintenance, repair & operations)
Partstore.com

24. Management Information Systems B2BModel: E-procurement
E-Commerce: Digital Markets, Digital Goods
B2BModel: E-procurement
Single firm creating digital markets where sellers and buyers transact for indirect inputs.
Revenue
Fees for market-making services, supply change management
Application service providers
A company that sells access to Internet-based software applications to other companies.
Finding new customers for software, increasing market size and achieving scale economics.
Scale economics Efficiencies that arise from increasing the size of a business.
Example
Ariba (
Create software where large firms organize their procurement process
Creates custom-integrated online catalogs (suppliers list their offerings) for purchasing firms.
PerfectCommerce

25. Management Information Systems B2BModel: Exchange
E-Commerce: Digital Markets, Digital Goods
B2BModel: Exchange
Electronic digital marketplace where suppliers and commercial purchasers can conduct transactions.
Usually owned by independent firms whose business is making a market.
Usually serve a single vertical industry.
Revenue
Commission fees and transaction fees.
Example
FoodTrader.com

26. Management Information Systems B2BModel: Industry Consortia
E-Commerce: Digital Markets, Digital Goods
B2BModel: Industry Consortia
Industry-owned vertical marketplaces that serve specific industries, such as the automobile, aerospace, chemical, floral, or logging industries.
Horizontal marketplaces, in contrast, sell specific products and services to a wide range of industries, such as marketing-related, financial and computing services.
Example
Exostar, online trading exchange for the aerospace & defense industry.

27. Management Information Systems B2BModel: Private Industrial Networks
E-Commerce: Digital Markets, Digital Goods
B2BModel: Private Industrial Networks
Digital networks designed to coordinate the flow of communications among firms engaged in business together.
The network is owned by a single large purchasing firm.
Participation is by invitation only to trusted long-term suppliers of direct inputs.
e.g, Walmart
A private industrial network, also known as a private exchange, links a firm to its suppliers, distributors, and other key business partners for efficient supply chain management and other collaborative commerce activities.
1. Large firm using extranet to link to its suppliers and other key business partners

28. Management Information Systems B2B E-commerce: New Efficiencies
E-Commerce: Digital Markets, Digital Goods
B2B E-commerce: New Efficiencies
EDI (Electronic Data Interchange)
Automated exchange of standard business documents (e.g. invoices)
Each major industry has EDI standards
Internet used increasingly for EDI instead of private networks
Internet broadens circle of trading partners
e.g. For procurement, firms can use Internet to locate most low-cost suppliers
Companies use EDI to automate transactions for B2B e-commerce and continuous inventory replenishment. Suppliers can automatically send data about shipments to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and payment data to suppliers.

29. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
E-commerce Marketing: Web Site Visitor Tracking
E-commerce Web sites have tools to track a shopper’s every step through an online store.
Close examination of customer behavior at a Web site selling women’s clothing shows what the store might learn at each step and what actions it could take to increase sales.

30. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
E-commerce Marketing: Web Site Personalization
Firms can create unique personalized Web pages that display content or ads for products or services of special interest to individual users, improving the customer experience and creating additional value.

31. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
E-commerce Marketing: Achieving Customer Intimacy
Corporate blogs
Used as new channel for reaching customers, maintaining existing customers
Provide personal and conversational way for businesses to present information to the public and prospective customers about new products and services
Customer self service
Web sites and used to answer customer questions or to provide customers with product information, reducing need for human customer- support experts
e.g., A Web-based Postal Service can calculate postage, print shipping labels, schedule package pickups, and track shipments. Web sites for customer self- service are convenient for customers and help firms lower their customer service and support costs.

32. Management Information Systems M-Commerce Services and Applications
E-Commerce: Digital Markets, Digital Goods
M-Commerce Services and Applications
Popular for services that are time-critical, that appeal to people on the move, or that accomplish task more efficiently than other methods
Especially popular in Europe, Japan, South Korea, and countries where fees for conventional Internet usage are very expensive
Location-based services
Wikitude.com a browser with GPS and Compass, helps users to identify locations and addresses.
Baking and Financial Services
Wireless alerts about changes in account information
Wireless advertising & retailing
Wireless service providers including advertising for local restaurants, movie theaters on cell phones and Wi-Fi devices
Games and entertainment
downloading ringtones, movie clips

33. Management Information Systems Electronic Payment Systems: Types
E-Commerce: Digital Markets, Digital Goods
Electronic Payment Systems: Types
Online credit card transactions, most popular, often default choice of payment for e-commerce.
Digital Wallets, use NFC technology. User may pay by simply tapping his phone to a compatible POS terminal with a secret PIN. e.g., Google Checkout.
Digital Cash, “currency” represented in an electronic form. e.g., Octopus Card in Hong Kong, Ez-link Card in Singapore.
Electronic Cheques
Online Stored Value System, e.g., PayPal.
Digital Accumulating Balance Payment Systems, similar to “digital Wallets”, ideal for micro-transaction payments, allows user to make multiple purchases, which will be totaled up & billed for at the end of a time period.
Mobile Commerce, “Wallet phone” No need card authentication or customer signature. e.g., Osaifu Keitai in Japan.
NFC= Near Field Communication, a wireless technology.

34. Management Information Systems
E-Commerce: Digital Markets, Digital Goods
Building a Web Presence: A systematic Approach
Most important management challenges:
Developing a clear understanding of business objectives
Identification of target audience
Characteristics of market space
Strategic analysis
Revenue model
Types and sources of contents
Conduct a SWOT analysis
Knowing how to choose the right technology to achieve those objectives
NFC= Near Field Communication, a wireless technology.

35. Management Information Systems Web Site Systems Development Life Cycle
E-Commerce: Digital Markets, Digital Goods
Web Site Systems Development Life Cycle
NFC= Near Field Communication, a wireless technology.

36. Management Information Systems Build/Host Your Own Vs. Outsourcing
E-Commerce: Digital Markets, Digital Goods
Build/Host Your Own Vs. Outsourcing
Outsourcing:
hiring vendors to provide services involved in building site
Build: Own Vs. Outsourcing:
Build your own requires team with diverse skill set; choice of software tools; both risks and possible benefits
Use pre-built template, e.g., Yahoo Merchant Solutions, Amazon Stores, eBay
WordPress: a blogging tool with a sophisticated content management system (CMS).
CMS: A database software program specifically designed to manage structured and unstructured data and objects in a Web site environment.
Risks: Shopping carts, credit card authentication, inventory and order processing.
Host: Own Vs. Outsourcing
Hosting: hosting company responsible for ensuring site is accessible 24/7, for monthly fee, e.g., Amazon EC2, Bluehost, GSI Commerce, Verizon/Terremark, etc.
Co-location: firm purchases or leases Web server (with control over its operation), but server is located at vendor’s facility.

37. Management Information Systems Choices in Building and Hosting
E-Commerce: Digital Markets, Digital Goods
Choices in Building and Hosting

38. Management Information Systems Building Own E-Commerce Site: Tools
E-Commerce: Digital Markets, Digital Goods
Building Own E-Commerce Site: Tools
Build from scratch
HTML
Dreamweaver
Expression
CGI Scripts
SQL Database
Use Packaged site-building tools
Commerce Server 10 (commerce-Sever.net)
IBM WebSphere
Use prebuilt templates
Google Sites
Yahoo Merchant Solutions/Yahoo Small Business
Amazon Webstore
WordPress

39. Management Information Systems Web Server Software
E-Commerce: Digital Markets, Digital Goods
Web Server Software
Why is needed?
Answer requests from customers for HTML and XML pages.
Software:
Apache
Leading Web server software (52% of market)
Works only with UNIX, Linux Oss
Unix, is the original programming language of the Internet & Web
Linux, is a derivative of Unix designed for the personal computer.
Apache is free & can be downloaded from many sites
Microsoft’s Internet Information Server (IIS)
Second major Web server software (20% of market)
Windows-based, compatible with a wide selection of Microsoft utility and support programs.

40. Tools for Interactivity and Active Content
Management Information Systems
E-Commerce: Digital Markets, Digital Goods
Tools for Interactivity and Active Content
CGI (Common Gateway Interface), a set of standards for communication between a browser and a program running on a server that allows for interaction between the user and the server.
ASP (Active Server Pages), a software development tool that enables programmers using Microsoft’s IIS package to build dynamic pages.
Java, JSP, and JavaScript:
Java: create interactivity & active content on the client computer
JSP: dynamically generate Web pages in response to user requests
JavaScript: control the objects on an HTML page & handle interactions with the browser
ActiveX and VBScript: invented by Microsoft, ActiveX competes with Java, VBScript competes with JavaScript.
Coldfusion, an integrated server-wide environment for developing interactive Web applications.
Web 2.0 design elements: Widgets, Mashups.
Widget a small, prebuilt chunk of code that executes automatically in your HTML Web page; capable of performing a wide variety of tasks.
Mashups data pulling functionality. Pull data from one program and include in another program. e.g., Google Map mashups.

41. Management Information Systems References
E-Commerce: Digital Markets, Digital Goods
References
Laudon, K.C. & Traver, C.G E-commerce: Business, Technology, Society, (10th ed.): Pearson, India.
Laudon, K.C. & Laudon, J.P Management Information Systems: Managing the Digital Firm (12th ed.): Pearson, India.