Chapter 4 E-Commerce, Digital Markets, Digital Goods …€¦ · · 2012-10-18E-Commerce, Digital...

Lecture 7TIM 50 Autumn 2012

Chapter 4E-Commerce, Digital Markets, Digital Goods

Announcement

1. HW#2 due Next Tuesday, OCT 232. Database assignment 1 due Next

Thursday, OCT 25 (submit the Access file by eCommons. The file ends in .accdb extention)

3. Business Paper Proposal due Next Thursday, OCT 25(submit by eCommons)

2. Computer Lab Hour(if you know Microsoft Access, You may not attend)Date Time : Oct 18 : 08:00 -09:30 PMLocation: Baskin Engineering Building Room 109Instructor: TAs.

* Due to space limit: you should arrange Date and time(All class are same)

e - Commerce

e – Business SystemsGoods, Services IT Systems

e –Business Models e-Revenue Models

e – Business Entrants

e-Business ChallengesNew Directions

e- Business, Digital Markets

DBMS, OLAP, and Data Mining

DBMS OLAP Data Mining

Task Extraction of detailed and summary data

Summaries, trends and forecasts

Knowledge discovery of hidden patterns and insights

Type of result Information Analysis Insight and Prediction

1. Ubiquity

2. Global reach

3. Universal standards

4. Interactivity

5. Richness Interactivity

6. Information density

7. Personalization/Customization:

8. Social technology

Eight unique features of e-commerce technology

Key concepts in e‐commerceDigital markets reduce: Info Asym., Price.Digital markets enable: no‐Mediator, Dyn. Price.

E‐commerce business models

Portal, E‐tailer, Content Provider, Transaction Broker,Market Creator, Service Provider, Community Provider

Digital goodsGoods that can be delivered over a digital networkCost of producing first unit almost entire cost of product: marginal cost of 2nd unit is about zero

Types of e‐commerce

•Business‐to‐Consumer (B2C)

•Business‐to‐Business (B2B)

•Consumer‐to‐Consumer (C2C)

•Mobile commerce (m‐commerce)

P: People B2P, P2P..G: Government, B2G, G2B….

Based on your reading in this chapter, how would you characterize Twitter’s business model?

If Twitter is to have a revenue model, which of the revenue models described in this chapter would work?

What is the most important asset that Twitter has and how could it monetize this asset?

What impact will a high customer churn rate have on Twitter’s potential advertising revenue?

TWITTER SEARCHES FOR A BUSINESS MODEL

E‐commerce revenue models

1. Advertising 2. Sales 3. Subscription4. Free/ Fremium5. Transaction Fee 6. Affiliate7….

Necessity , Intelligence(Wisdom), Customer Needs Change the matters

Most popular Web 2.0 service: social networkingSocial networking sites sell banner ads, user preference information, and music, videos and e‐books

Social shopping sitesSwap shopping ideas with friends (Kaboodle, ThisNext)

Wisdom of crowds/crowdsourcing (Selective**)Large numbers of people can make better decisions about topics and products than a single person

Prediction markets: Peer‐to‐peer betting markets on specific outcomes (elections, sales figures, designs for new products)

• Interactive marketing and personalization

• Web sites are bountiful source of details about customer behavior, preferences, buying patterns used to tailor promotions, products, services, and pricing

• Clickstream tracking tools: Collect data on customer activities at Web sites

- Used to create personalized Web pages

• Collaborative filtering: Compares customer data to other customers to make product recommendations

Filtering: to select or pick needed information

What concepts in the chapter are illustrated in this case?Describe the weaknesses of Facebook’s privacy policies and features. What management, organization, and technology factors have contributed to those weaknesses?List and describe some of the options that Facebook managers have in balancing privacy and profitability. How can Facebook better safeguard user privacy? What would be the impact on its profitability and business model?Do you anticipate that Facebook will be successful in developing a business model that monetizes their site traffic?Why or why not?

FACEBOOK: MANAGING YOUR PRIVACY FOR THEIR PROFIT

E‐commerce marketingInternet provides marketers with new ways of identifying and communicating with customers

Long tail marketing: Ability to reach a large audience inexpensively

Behavioral targeting: Tracking online behavior of individuals on thousands of Web sites

Advertising formats include search engine marketing, display ads, rich media, and e‐mail

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.

WEB SITE VISITOR TRACKING

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.

WEB SITE PERSONALIZATION

• Blogs• Personal web pages that contain series of

chronological entries by author and links to related Web pages

• Has increasing influence in politics, news• Corporate blogs: New channels for reaching

customers, introducing new products and services• Blog analysis by marketers

• Customer self-service• Web sites and e-mail to answer customer questions or

to provide customers with product information• Reduces need for human customer-support expert

HOW AN ADVERTISING NETWORK SUCH AS DOUBLECLICK WORKS

Advertising networks have become controversial among privacy advocates because of their ability to track individual consumers across the Internet.

Business‐to‐business e‐commerceElectronic data interchange (EDI)

Computer‐to‐computer exchange of standard transactions such as invoices, purchase orders

Major industries have EDI standards that define structure and information fields of electronic documents for that industry

More companies increasingly moving away from private networks to Internet for linking to other firms

E.g. Procurement: Businesses can now use Internet to locate most low‐cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, etc.

EDI Uses private communications networks (VANs) to transmit standardized transaction data between business partners and suppliers

Automating transactions using EDI Drastically reduced the amount of paperwork and the need for human intervention

Internet Provided the ideal platform for conducting EDI transactions

VAN: Value added network, special secured private extranet

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.

ELECTRONIC DATA INTERCHANGE (EDI)

Private industrial networks (private exchanges)Large firm using extranet to link to its suppliers, distributors and other key business partners Owned by buyer Permits sharing of:

Product design and developmentMarketingProduction scheduling and inventory managementUnstructured communication (graphics and e‐mail)

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.

A PRIVATE INDUSTRIAL NETWORK

Net marketplaces (e‐hubs)Single market for many buyers and sellers

Industry‐owned or owned by independent intermediary

Generate revenue from transaction fees, other services

Use prices established through negotiation, auction, RFQs, or fixed prices

May focus on direct or indirect goods

May be vertical or horizontal marketplaces

Exostar: BAE System, Boeing, Lockheed Martin, Raytheon, Rolls-Royce-Defense marketplace for 16,000 Companies

Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers.

A NET MARKETPLACE

ExchangesIndependently owned third‐party Net marketplacesConnect thousands of suppliers and buyers for spot purchasingTypically provide vertical markets for direct goods for single industry (food, electronics)Proliferated during early years of e‐commerce; many have failed

Competitive bidding drove prices down and did not offer long‐term relationships with buyers or services to make lowering prices worthwhile

Vertical, Horizontal Markets: steps of producingDirect Goods, indirect Goods ; source to the producing

M‐commerceAlthough m‐commerce represents small fraction of total e‐commerce transactions, revenue has been steadily growing

Location‐based servicesBanking and financial servicesWireless advertising and retailingGames and entertainment

Methods for delivering m-commerce services

Directly from cell phone service providersVia mobile Internet or Web applications

Location-based m-commerce applicationsUsing Short Message Service (SMS) text messaging or Multimedia Messaging Service (MMS)Using short-range wireless technology, such as infrared

Proximity payment system

Technologies and standardsWireless Application Protocol (WAP)

a communication standard used by developers to create m-commerce applications

Wireless Markup Language (WML)

Infrared or Bluetooth wireless networking technology

Near Field Communications (NFC)

Open Mobile Alliance (OMA)

Hundreds of mobile operators, device and network suppliers and companies have joined together to create standards and interoperability between mobile devices

Mobile e-commerce is the fastest growing type of B2C e-commerce although it represents only a small part of all e-commerce in 2010.

CONSOLIDATED MOBILE COMMERCE REVENUES

• Digital payments systems for m-commerce• Three types of mobile payment systems in use in

Japan

• Stored value system charged by credit cards or bank accounts

• Mobile debit cards

• Mobile credit cards

• In the U.S., the cell phone has not yet evolved into a mobile payment system

• Limitations in mobile’s access of Web information

• Data limitations

• Small display screens

• Wireless portals (mobile portals)

• Feature content and services optimized for mobile devices to steer users to information they are most likely to need

Business decisions drive the technology ‐ not the reverse Business objectives

Capabilities the site should haveSystem functionality

E.g. execute a transaction paymentTechnological capability to achieve this objective

E.g. a shopping cart or other payment systemInformation requirements

E.g. secure credit card clearing, multiple payment options

Building an e-Commerce Web Site

Assembling a team with the skills required to make decisions about:

TechnologySite designSocial and information policiesHardware, software, and telecommunications infrastructure

Customer’s demands should drive the site’s technology and design

Implementing e-commerce Requires large investment and expertise

E-Commerce host A company that takes on some or all of the responsibility of setting up and maintaining an e-commerce system for a business or organization

Check Off List for the e-Business Establishment

Alternatives in building the Web site Completely in‐houseMixed responsibilityCompletely outsourced

Co‐locationWeb site budgets

Several thousand to millions / year50% of a budget is system maintenance and content creation

You have a number of alternatives to consider when building and hosting an e-commerce site.

CHOICES IN BUILDING AND HOSTING WEB SITES

COMPONENTS OF A WEB SITE BUDGET

• Types of electronic payment systems

• Digital wallet

• Stores credit card and owner identification information and enters the shopper’s name, credit card number, and shipping information automatically when invoked to complete a purchase

• Accumulated balance digital payment systems

• Used for micropayments ($10 or less)

• Accumulating debit balance that is paid periodically on credit card or telephone bills

proximity payment systemallows customers to transfer funds wirelessly between their mobile device and a point-of-sale terminalElectronic cash (e-cash or digital cash) Provides a private and secure method of transferring funds from a bank account or credit card to online vendors or individuals

PayPal: Best-known e-cash provider

E-cash benefitsPrivacy - hides account information from vendorsConvenient if seller cannot process a credit card SmartcardsCredit cards with embedded microchips that can store and process data and can be used as electronic wallets

• Stored value payment systems• Enable online payments based on value stored in on

line digital account• May be merchant platforms or peer-to-peer (PayPal)

• Digital checking• Extend functionality of existing checking accounts to

be used for online payments• Electronic billing presentment and payment systems

• Paying monthly bills through electronic fund transfers or credit cards

There are significant privacy and security concerns

Public networkNo buyer or seller identity verificationHacker attacks

Major consideration?No Physical Substances, networked, S/W

Digital certificate

A type of electronic business card

Attached to Internet transaction data

Verifies the sender of the data

Provided by certification authorities

Encryption

Uses high-level mathematical functions and computer algorithms to transform data so that it is unintelligible to all but the intended recipient

Securing data in transit

Secure Sockets Layer (SSL)Digital certificates combined allows for encrypted communications to occur between Web browser and Web server

Transport Layer Security (TLS)A URL associated with this begins with httpsAllow for encrypted communication to occur between browsers and serversSecures usernames, passwords, credit card information

Great pains are taken to ensure that transaction processing systems remain in working order

Business resumption planning (BRP)Takes into account every possible disaster and provides courses of action to minimize negative effectsThe goal is to protect data and keep key systems operating until order is resumed

Summary of Class

Types of e‐commerce

•Business‐to‐Consumer (B2C)

•Business‐to‐Business (B2B)

•Consumer‐to‐Consumer (C2C)

•Mobile commerce (m‐commerce)

P, G ??

E‐commerce revenue models

1. Advertising 2. Sales 3. Subscription4. Free/ Fremium5. Transaction Fee 6. Affiliate

Most popular Web 2.0 service: social networkingSocial shopping sitesWisdom of crowds/crowdsourcing (Selective**)Prediction markets:

• Interactive marketing and personalization

E‐commerce marketing

Long tail marketing

Behavioral targeting

Advertising formats

Business‐to‐business e‐commerceElectronic data interchange (EDI)

Net marketplaces (e‐hubs)Single market for many buyers and sellers

Industry‐owned or owned by independent intermediary

Generate revenue from transaction fees, other services

Use prices established through negotiation, auction, RFQs, or fixed prices

May focus on direct or indirect goods

May be vertical or horizontal marketplaces