1. Copyright © 2011 Pearson Education, Inc.
E-commerce
Kenneth C. Laudon
Carol Guercio Traver
business. technology. society.
seventh edition
E-commerce: business.
technology. society.

2. Copyright © 2011
Pearson Education, Inc.
Chapter 1: The Revolution Is Just
Beginning
Copyright © 2007 Pearson Education, Inc. Slide 1-2
Chapter 1
The Revolution Is Just Beginning

3. Copyright © 2011
Pearson Education, Inc.
Facebook:
The New Face of E-Commerce?
Class Discussion
 Do you use Facebook, and if so, how often? What
has the experience been like?
 Have you purchased anything based on an
advertisement on Facebook or by using a link
provided by a friend?
 Are you concerned about the privacy of the
information you have posted on Facebook?
Slide 1-3

4. Copyright © 2011
Pearson Education, Inc.
E-commerce Trends 2010-2011
 Social networking continues to grow
 Social e-commerce platform emerges
 Online consumer sales return to growth
 Mobile computing begins to rival PC
 Explosive growth in online video viewing
 Continued privacy and security concerns
Slide 1-4

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The First 30 Seconds
 First 16 years of e-commerce
Just the beginning
Rapid growth and change
 Technologies continue to evolve at
exponential rates
Disruptive business change
New opportunities
Slide 1-5

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Pearson Education, Inc.
What is E-commerce?
 Use of Internet and Web to transact
business
 More formally:
Digitally enabled commercial transactions
between and among organizations and
individuals
Slide 1-6

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E-commerce vs. E-business
 E-business:
Digital enablement of transactions and processes
within a firm, involving information systems under
firm’s control
Does not include commercial transactions
involving an exchange of value across
organizational boundaries
Slide 1-7

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Pearson Education, Inc.
Why Study E-commerce?
 E-commerce technology is different, more
powerful than previous technologies
 E-commerce bringing fundamental changes to
commerce
 Traditional commerce:
 Passive consumer
 Sales-force driven
 Fixed prices
 Information asymmetry
Slide 1-8

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Unique Features of E-commerce
Technology
1. Ubiquity
2. Global reach
3. Universal standards
4. Information richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology
Slide 1-9

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Pearson Education, Inc.
Web 2.0
 Technologies that allow users to:
Create and share content, preferences,
bookmarks, and online personas
Participate in virtual lives
Build online communities
E.g. Twitter, YouTube, Facebook, Second Life,
Wikipedia, Digg
Slide 1-10

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Types of E-commerce
 Classified by market relationship
 Business-to-Consumer (B2C)
 Business-to-Business (B2B)
 Consumer-to-Consumer (C2C)
 Classified by technology used
 Peer-to-Peer (P2P)
 Mobile commerce (M-commerce)
Slide 1-11

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The Internet
 Worldwide network of computer networks
built on common standards
 Created in late 1960s
 Services include the Web, e-mail, file
transfers, etc.
 Can measure growth by looking at number of
Internet hosts with domain names
Slide 1-12

13. Copyright © 2011
Pearson Education, Inc.
The Growth of
the Internet,
Measured by
Number of
Internet Hosts
with Domain
Names
Figure 1.3, Page 23
Slide 1-13
SOURCE: Internet Systems Consortium,
Inc. , 2010.

14. Copyright © 2011
Pearson Education, Inc.
The Web
 Most popular Internet service
 Developed in early 1990s
 Provides access to Web pages
HTML documents that may include text,
graphics, animations, music, videos
 Web content has grown exponentially
 Google indexes between 75 – 100 billion
pages
Slide 1-14

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Insight on Technology:
Spider Webs, Bow Ties, Scale-Free
Networks, and the Deep Web
Class Discussion
 What is the “small world” theory of the Web?
 What is the significance of the “bow-tie” form
of the Web?
 Why does Barabasi call the Web a “scale-free
network” with “very connected super nodes”?
Slide 1-15

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Origins & Growth of E-commerce
 Precursors:
 Baxter Healthcare
 Electronic Data Interchange (EDI)
 French Minitel (1980s videotex system)
 None had functionality of Internet
 1995: Beginning of e-commerce
 First sales of banner advertisements
 E-commerce fastest growing form of
commerce in United States
Slide 1-16

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The Growth of B2C E-commerce
Figure 1.4, Page 25
Slide 1-17
SOURCES: Based on data from eMarketer, Inc., 2010; authors’ estimates.

18. Copyright © 2011
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The Growth of B2B E-commerce
Figure 1.5, Page 28
Slide 1-18
SOURCES: Based on data from U.S. Census Bureau, 2010; authors’ estimates.

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Technology and E-commerce in
Perspective
 The Internet and Web: Just two of a long list
of technologies that have greatly changed
commerce
Automobiles
Radio
 E-commerce growth will eventually cap as it
confronts its own fundamental limitations.
Slide 1-19

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Potential Limitations on the
Growth of B2C E-commerce
 Expensive technology
 Sophisticated skill set
 Persistent cultural attraction of physical
markets and traditional shopping experiences
 Persistent global inequality limiting access to
telephones and computers
 Saturation and ceiling effects
Slide 1-20

21. Copyright © 2011
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E-commerce: A Brief History
 1995-2000: Innovation
 Key concepts developed
 Dot-coms; heavy venture capital investment
 2001-2006: Consolidation
 Emphasis on business-driven approach
 2006-Present: Reinvention
 Extension of technologies
 New models based on user-generated content, social
networks, services
Slide 1-21

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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 1-22

23. Copyright © 2011
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Insight on Business
“Noodlenomics” Guides Internet
Investment in 2010
Class Discussion
 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 1-23

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Assessing E-commerce
 Many 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
Slide 1-24

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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.
 Regulatory activity worldwide will grow.
 Cost of energy will have an influence.
Slide 1-25

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Understanding E-commerce:
Organizing Themes
 Technology:
 Development and mastery of digital computing and
communications technology
 Business:
 New technologies present businesses with new ways of
organizing production and transacting business
 Society:
 Intellectual property, individual privacy, public welfare
policy
Slide 1-26

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Pearson Education, Inc.
The Internet
and the
Evolution
of Corporate
Computing
Figure 1.9, Page 44
Slide 1-27

28. Copyright © 2011
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Insight on Society
Who Really Cares About Online Privacy?
Class Discussion
 What techniques of privacy invasion are described in
the case?
 Which of these techniques is the most privacy-
invading? Why?
 Is e-commerce any different than traditional markets
with respect to privacy? Don’t merchants always
want to know their customer?
 How do you protect your privacy on the Web?
Slide 1-28

29. Copyright © 2011 Pearson Education, Inc.
Academic Disciplines Concerned
with E-commerce
 Technical approach
 Computer science
 Management science
 Information systems
 Behavioral approach
 Information systems
 Economics
 Marketing
 Management
 Finance/accounting
 Sociology
Slide 1-29

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