E-commerce: Digital Markets, Digital Goods Chapter 10 E-commerce: Digital Markets, Digital Goods

Features of E-commerce

Related terms Marketspace (boundaries extended) Transaction costs (costs to participate) Market Entry Costs (cost to bring goods) Search costs (costs to find products) Richness (quality message) Information Density (amount and quality of info) Price transparency (find out prices in a market) Cost transparency (discover costs merchants pay) Price discrimination (different prices/different audiences) Personalization (targeted marketing) Customization (user’s preferences determine)

Digital markets and digital goods Information asymmetry reduced by Internet Flexible and efficient Lower menu costs Greater price discrimination Ability to use dynamic pricing Can either reduce or increase switching costs Many opportunities to sell directly to customer and bypass intermediaries (like distributors or retail outlets) Removing organization or business process layers responsible for intermediary steps in a value chain - Disintermediation Digital Goods Delivered over a digital network

Types of E-commerce Business-to-consumer (B2C) Business-to-business (B2B) Consumer-to-consumer (C2C) M-Commerce B2B or B2C used in this model

Internet business models

E-commerce revenue models Advertising Revenue Model (ads) Most widely used model Sales Revenue Model (selling to customers) Micropayment systems (process monetary transactions) Subscription Revenue Model (fee for subscription) Free/Freemium Revenue Model (initial free; then pay for more) Transaction Fee Revenue Model (every transaction=fee) Affiliate Revenue Model (send to websites; fee for purchases)

Networking and marketing Social networking link people together who are interested in the same areas Social shopping (viral marketing) “Wisdom of Crowds” (more better than few) Crowdsourcing (use customers for solving business problems) Many ways to market and advertise online Long tail marketing (find patterns/demand low) Behavioral targeting (estimated 10 times more likely to produce a customer response than a randomly chosen ad) Metrics – use to measure the effectiveness of different behaviors (abandoned shopping cart, page visits, tracked visitor, clickstream data metrics, stickiness, unique visitor, page exposures, site exposures, etc)

e-business Marketing formats

B2B E-commerce Growth rate 7%; by 2014 ($5.1 trillion) Refers to the commercial transactions that occur among business firms 80% of online B2B e-commerce is still based on proprietary systems for Electronic Data Interchange (EDI) Private industrial networks (or private exchange) – Extranet; link suppliers and other business partners Share product design and development, marketing, production scheduling, inventory mgmt, and unstructured communication; Bring together small number of strategic business partner firms that collaborate to develop highly efficient supply chains Net marketplace (e-hubs) – single digital marketplace based on Internet technology for many different buyers and sellers; establish prices online auctions, negotiations, or quote requests, or can used fixed prices Sell direct goods or indirect goods Exchanges – independently owned third-party Net marketplaces that connect thousands of suppliers and buyers for spot purchasing

Mobile Commerce MISC Main areas of growth Location-based services Software application sales Entertainment downloads Mobile display advertising E-book sales Banking and financial services Wireless advertising and retailing Games and Entertainment

E-Commerce websites We will discuss more for SDLC project Business objectives, system functionality, information requirements? In-house or outsourced? Build? Host? Budgets?