The Internet in Business: Corporations, Businesses, and Entrepreneurs Chapter 9

Objectives Discuss the pervasiveness and inevitability of business on the Internet Explain how money factors, especially advertising, affect the Web Describe the likely success factors for Web entrepreneurs Differentiate between business-to-Consumer and Business-to-Business sites Explain the importance of Internet transmission speed for business sites Differentiate between intranets, extranets and virtual private networks

Contents E-Commerce Promoting a Web Site Web-based Business Internet Speed Streaming Sharing Files Push Technology / Webcasting Intranets VPN Consolidation of the Web

E-Commerce Electronic Commerce Buying and selling over the Internet

E-Commerce Retail Sites Retail becomes etail

E-Commerce Retail Sites Clothes Out-of-print biography Used car Bargain airline tickets Music CDs Videos Baby equipment Jewelry Sporting goods Office supplies Cosmetics Flowers Gifts Groceries What’s for Sale? EVERYTHING!

Etail Advantage to Consumer Any time No need to dress and travel Saves time Provides simple means to comparison-shop Anyplace Contributes to competition

Etail Savings to retail business No physical store building People time

The Commerce Site Lists and views of products and prices Content –Product related –Updated regularly –Written to interest visitors in returning to site to purchase in the future

Commerce vs. Content Sites Commerce adding content Content adding products and sales information Division is no longer clear

E-Commerce Acceptance Opposition to e-Commerce by in-person sales representatives Strategy to merge Etail and Retail –Web site prices may be higher –Commission to sales representative on each Internet transaction regardless of their involvement with its origin –Web site marketing followed by local store purchase

E-Commerce Acceptance Successful web site may alienate others

Promoting a Web Site Users must find their way to the site Advertising needed –Traditional ads on web pages –Portals

Portals Definition – entry point to the rest of the Internet Presents content and links to variety of topics Customize the content –User provides personal data –Portal provides related information and links Can become your home page

Portals Earning Money Flat fee to be listed on portal based upon number of visitors to the site Percentage of sale generated by a visitor who traveled to the affiliate via the portal

Portals Who Are They? Yahoo! MSN Snap! Excite Netscape Go Network America Online Search engines that expanded their content and retail connections

Advertising Pay a fee to the host site Disadvantage of online Ads –Contain graphics and applets that load slowly –Ads load first

Advertising Types of Online Ads Banner ads –Clickable –Users reluctant to click through Live banner Displays sales pitch User does not need to leave current site Work slowly Expensive to develop Context-sensitive –Ad is related to subject matter on web page –Greater click through and conversion

Web-based Business Simple to start-up of new businesses Provides access to people and global markets Minimum investment –Server link –Home page Competition –Not a level playing field –Large advertising budgets of large companies “get the word out”

Web-based Business Make business look large Many products can be offered since no inventory No physical space to reflect size

Payments Finalize order by –Phone –Fax –Call with credit card number Enter credit card number Security –Communication between buyer and retailer is encrypted –Use SSL (Secure Sockets Layer) protocol and generate the message “our secure server”

Taxes American Federal Law Taxes due only on mail-orders within your state Presence of etail is debatable

Taxes Internet Tax Freedom Act – 1998 Provisions –No tax on Internet access charges –No new tax on out-of-state businesses (insures that presence is not redefined) –Creates temporary commission to study Internet taxes –Demand that foreign governments keep Internet free of taxes and tariffs Free of taxes for three years Can impose same tax regulations as phone or mail order Provisions extended through 2005

Success Factors Making a Profit Content –What you have to say and offer –Cannot be static –News about product, scores, contest, searches Uniqueness –Not offered elsewhere –Difficult to obtain Self-help –Search for product –Order product –Check the status of an order –Track a delivery Community –Provide sense of community –Sharing between visitors –Prizes Repeat business needed

B2C Business-to-Consumer Activity between business and individual User makes purchase based upon personal decisions Growing –$38 billion in 1998 –Over $800 billion by 2005 Global trend – more than ½ online sales will be outside US by 2004

B2B Business-to-Business Activity of one business providing another with materials and supplies Advantages to buyers –Reduced costs of procurement –Consider a larger number of suppliers Problems –Security –Antitrust concerns Growing –$92 billion in 1998 –$2 trillion in 2004

Internet Speed Traffic Not planned for current use Victim of its own success Original Internet –Low-speed –Text-based –Limited sites Today’s Internet –Million of users –Downloading high-volume multimedia data –Causes slow transmission speed

Internet Speed Impacts Business Large companies use T1 and T3 lines and have servers capable of thousands of concurrent visitors Smaller business connect via ISP or pay a company with high-speed connections to host their site

Internet Speed Solutions Increase bandwidth –Satellite –ISDN –DSL –Cable modem Increase backbone capacity –Backbone – communication lines across geographical areas –Advances in technology –Investment in new facilities Change Internet access fees

Streaming Hear and see digitized content as it is downloaded –Audio –Video –Animation Uses substantial bandwidth –Quality of content Speed of connection Internet traffic –Performance will improve as bandwidth improves Content is displayed using Plug-ins

Streaming RealPlayer Free download from RealNetworks Broadcast.com –Live radio –Canned television shows

Sharing Files Unicasting Send multiple computers copies of files individually Wastes bandwidth as you are sending the same file over and over

Sharing Files Broadcast –Send one copy of the file to every computer on the network –Wasteful – some users do not need the file –Compromises security Multicasting –Send one copy of the file and it is directed only to the appropriate recipients

Push Technology Webcasting Software that send (pushes) information from the Internet to a user’s PC Makes business active participants in providing information to users

Push Technology How it Works User provides consent by downloading and installing free push software User selects channels to receive User sets update schedule Push software goes to the Internet on schedule and downloads updated information for the channels

Push Technology Good or Bad? Time-saver for user; no browsing required Uses precious bandwidth to send graphics and advertising

Intranets Internal network Private to a certain company Easy and fast to setup Inexpensive

Intranet Setting it Up Same components as needed for Internet Computers for access Server TCP/IP Software including a browser

Intranet Web Pages for Employee Use Personnel data Internal job posting Corporate policy information Available training courses Cafeteria menu Notices from management

Intranet, Internet, Extranet Internet –Public Intranet –Private –Can be linked to Internet Extranet –Provide access to Intranet to selected customer and suppliers –Replacing EDI

VPN Virtual Private Networks Use public Internet as a channel for private data communication Use the Internet to access the company network rather than private lines –Sharing public lines –Lower cost

VPN Benefits Lower operating costs Simplifies communications No 800 lines and long distance charges Reduces in-house management responsibilities Communication needs handled by ISP

VPN Technology Tunneling / encapsulation –Transfer of data between two similar networks over an intermediate network –Point-to-Point Tunneling Protocol (PPTP) – proposed protocol for tunneling –Encloses packet of one protocol (PPTP) inside packet using different protocol (TCP/IP) Encryption –Packets are encrypted before encapsulation –Authentication software used

Consolidation of the Web Consolidation brings efficiency and uniformity –Occurring quickly –Large scale 1999 AOL purchased Netscape Conglomerates “moving in” will control the majority of what we see