E-Comm: Midterm

Disintermediation

the cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries

5. Competitive Advantage

"What special advantages does your firm bring to the marketspace?" -Is your product superior to or cheaper to produce than your competitors'? Important concepts: -Asymmetries -First-mover advantage, complementary resources -Unfair competitive advantage -Leverage -Perfect markets

6. Market Strategy

"How do you plan to promote your products or services to attract your target audience?" -Details how a company intends to enter market and attract customers -Best business concepts will fail if not properly marketed to potential customers

2. Revenue Model

"How will you earn money?" Major types of revenue models: -Advertising revenue model -Subscription revenue model ▪Freemium strategy -Transaction fee revenue model -Sales revenue model -Affiliate revenue model

8. Management Team

"What kind of backgrounds should the company's leaders have?" A strong management team: -Can make the business model work -Can give credibility to outside investors -Has market-specific knowledge -Has experience in implementing business plans

3. Market Opportunity

"What marketspace do you intend to serve and what is its size?" -Marketspace: Area of actual or potential commercial value in which company intends to operate -Realistic market opportunity: Defined by revenue potential in each market niche in which company hopes to compete Market opportunity typically divided into smaller niches

7. Organizational Development

"What types of organizational structures within the firm are necessary to carry out the business plan?" Describes how firm will organize work -Typically, divided into functional departments -As company grows, hiring moves from generalists to specialists

4. Competitive Environment

"Who else occupies your intended marketspace?" -Other companies selling similar products in the same marketspace -Includes both direct and indirect competitors Influenced by: -Number and size of active competitors -Each competitor's market share -Competitors' profitability -Competitors' pricing

Chapter 1 - Key Points We begin the book by addressing an important student concern in Section 1.1: why they should study ecommerce. Ecommerce is the fastest growing retail, service, and entertainment channel . Although ecommerce revenues were relatively flat in 2008-2009 during the recession, growth resumed in 2010, and has continued at double digit rates since then, outpacing traditional retail by a factor of two or three. There are thousands of job opportunities in ecommerce as traditional firms move onto the Web. Ecommerce revolution is still in the beginning phase. You may have missed the very early tumultuous years, but there are many powerful, commercial, and technological forces that will push ecommerce along in the next decades. Much of the first chapter is aimed at getting some basic definitions straight. The e-commerce field is filled with language that some students might find confusing. In Section 1.2, we distinguish between e-commerce and ebusiness to set the focus clearly on commercial transactions over the Internet. We also briefly introduce the Internet, the Web, and the mobile platform as the technological building blocks of e - commerce . Figure 1.3 highlights the growing use of mob ile devices to access the Internet, with over 90% of Americans using a mobile device to do so at least some of the time. The Insight on Technology case , Will Apps Make the Web Irrelevant ? looks at the rise in importance of apps as compared to the Web in the e - commerce landscape . D iscussion questions for this case might include: • What are the advantages and disadvantages of apps, compared with w ebsites, for mobile users ? • What are the benefits of apps for content owners and creators ? • W ill apps event ually make the Web irrelevant? Why or why not ? In Section 1.3, we examine the unique features of e - commerce technology . We use a variation of Table 1.2 throughout the text in various contexts, so it's a good idea to familiarize students with it. It's also important for students to understand the differences between the various types of e - commerce, such as B2C and B2B. A short preview o f this topic is covered in Section 1.4 . Figure 1. 9 graphically illustrates the relative size of different types of e - commerce, to help drive home the point that although B2C, and social - mobile - local e - commerce may be the types students are most familiar wi th, or hear about the most, they are all dwarfed by B2B . An important distinction in Chapter 1 is the contrast between the early years of e - commerce and e - commerce today. We discuss e - commerce in the context of three stages: an early period of invention , a period of consolidation, and then today's e - commerce, which we refer to as a period of "reinvention." Figure 1. 10 places these periods along a timeline, while Table 1.4 describes the key dimensions of each of these periods. The discussion of the early years of e - commerce and its initial promise in Section 1.5 allows you to introduce some key terms such as disintermediation , friction - free commerce , first movers versus fast followers , and network effects . These terms appear again and again in l ater chapters. The Insight on Business case , Y Combinator's Startup Boot Camp , provides a n interesting look at Y Combinator (YC) , a startup incubator. Students might be inspired by some of the companies that have participated in YC's boot camp and are now significant successes, such as Airbnb, Dropbox, Zenefits, Stripe, Machine Zone, Instacart, and Twitch , among others . D iscussion questions for this case might include: • Wh y do you think investors today are still interested in investing in startups ? • What are the benefits of investing in a company that is a graduate of a Y C boot cam p ? • Is an incubator the best solution for startups to find funding? Why or why not ? Section 1.6 lays out the organizing themes that we use to understand e - commerce throughout the book: technology, business , and society. The Insight on Society case , Facebook and the Age of Privacy , in this section touches on each of these themes (the technology of social networks, Facebook's business model), but focuses primarily on so me of the societal themes that recur throughout the book. Do consumers in a public marketplace have a legitimate expectation of privacy? Is there anything consumers can do to protect their pr ivacy? Can the Web be designed to better protect privacy? S ection 1.7 briefly reviews the various ac ademic disciplines concerned with e - commerce, so that students get a sense of the multidisciplinary nature of the topic. Section 1.8 is a new section focused on careers in e - commerce. We conclude each chapter of the book with a section that examines a jo b posting by an Internet/e - commerce company for an entry - level position, giving a brief overview of the company, some details about the position, a list of the qualifications and skills that are typically required, some tips for students about how to prepa re for an interview, as well as some possible interview questions and answers. We've designed this section to help your students understand how the concepts they've learned in the chapter can help them find and get a job , as well as provide a good opportun ity for a class discussion about possible careers . The chapter ending case study, Pinterest:A Picture Is Worth a Thousand Words, in Section 1.9, captures some of the changes in the foundations of ecommerce. Pinterest is at the forefront of a movement toward a more visual social media experience. It illustrates many of the trends that will be impacting e commerce over the next few years, including the growing use of social media to sell goods (social ecommerce), for branding, and to drive traffic to company websites, as well as the growing importance of the mobile platform

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Chapter 2

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Chapter 2 - Key Points This chapter attempts to briefly summarize the variety of ways that the Internet, Web, and mobile platform can be used to build new business firms—firms that generate revenue and hopefully a profit. The challenge in this chapter is to focus on some simple, unchanging realities of the business world that have nothing to do with the Internet, and then to understand how the Internet can be used within this framework to develop new businesses. What pundits now say about the Internet is, "The Internet changed everything, except the rules of business."The chapter starts out with the tale of Twitter's business model in the opening case, Tweet Tweet: Will Twitter Ever Find a Business Model That Works? Twitter has amassed some very significant online assets in the form of a large audience and behavioral data on this audience. Twitter is now monetizing these assets by selling online adve rtising space in the form of Promoted Tweets, Promoted Trends, and Promoted Accounts, as well as other methods detailed in the case. However, Twitter is having difficulty developing a business model that will deliver the profits expected by Wall Street. D iscussion questions for this case might include the following: ● What characteristics or benchmarks can be used to assess the business value of a company such as Twitter? ● What are Twitter's most important assets? ● Which of the various methods described for monetizing Twitter's assets do you feel might be most successful? ● Why has Twitter had such a tough time developing a business model that works? Business Models. One of the most abused phrases in the e-commerce lexicon is "business model." Put simply, a business model is a plan for making money. Like all models, a business model has several components that we describe in Section 2.1: value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development, and management team. Students need to have a good understanding of each of these elements. We discuss both business and social issues in the Insight on Society case, Foursquare: Check Your Privacy at the Door , which focuses on Foursquare's location- based services business. Location -based services, which involve the merger of geo- positioning technology (GPS) and the Internet, promise to deliver advertising and useful content to use rs based on their location. However, this same technology results in the ability for a company to track a user's whereabouts. While encouraging users to engage with their friends by posting their locations, these services pose significant privacy issues that users should consider. Raising Capital. This section provides an overview of the primary ways that e -commerce startups raise capital, including seed capital, incubators, angel investors, venture capital investors and crowdfunding, a new method recently enabled by the Jumpstart Our Business Startups (JOBS) Act. The Insight on Business case, Crowdfunding Takes Off, provides a further look at the crowdfunding phenomenon. S ome of the discussion questions to think about: ● What types of projects and companies might be able to use crowdfunding most successfully? ● Are there any negative aspects to crowdfunding? ● What obstacles ar e presented in the use of crowdfunding as a method of funding startups? E-commerce Business Models. With several million commercial websites to consider, there is a vast variety of e -commerce business models. Many firms pursue multiple business models at once. Nevertheless, there clearly are dominant patterns to all this variety on the Web. We describe seven different and typical e- commerce B2C business models in Section 2 .2: E -tailers, Community Providers (including social networks ), Content Providers, Portals, Transaction Brokers, Market Creators, and Service Providers. Students should be able to describe how each of these models typically expects to generate revenue and earn profit. The Insight on Technology case, Connected Cars and the Future of E -commerce, examines how changes in Internet technology, such as the Internet of Things , are driving the emergence of new business models in the online content market . Some que stions that might help you to think: ● What value does the Internet of Things (IoT) have for businesses ? ● What impact does the IoT have on the content industry? ● What impact does the IoT have on vehicles? ● Are there any issues to "connected" cars? B2B Models. B2B e -commerce is several orders of magnitude larger than B2C e- commerce. In Section 2 .3, we describe the major generic types of B2B e -commerce: e -distributors, e - procurement companies, exchanges, industry consortia, and private industrial networks. Each of these models has a distinct revenue model, described further in Table 2.7. How E -commerce Changes Business. In Section 2 -4, we look at how e -commerce can change business in three major areas: ● Industry Structure ● Industry Value Chain ● Firm Value Chain E-commerce can change industry structure by introducing substitute products, increasing the bargaining power of suppliers or of consumers and buyers, and by changing existing barriers to entry. Figure 2.3 provides a graphic illustration of these concepts. The Internet can change industry value chains insofar as suppliers, manufacturers, distributors, retailers, and customers can interact in new and different w ays. You can use Figure 2.4 to review this concept. Firm value chains (see Figure 2.5) can be directly affected by e -commerce through its potential impact on how the business performs various business processes such as warehousing, manufacturing, sales , an d customer support. For instance, Amazon uses the Internet to provide consumers with access to a much larger inventory of books than traditional retailers and to accomplish order entry, provide post -sales support, and offer ordering from its suppliers. Finally, e -commerce and the Internet can change business strategies by allowing the firm to develop new ways of differentiating its products in the marketplace, lowering costs, or changing the scope of its operations. For instance, Dell uses e -commerce as a way of achieving lower costs in the PC business and has created an entirely new way of organizing large -scale production— build to order. Table 2.9 summarizes the basic business strategies . Yo u will likely have heard or seen reference to the terms "disruptive technologies" and "digital disruption." A section on business model disruption examines how e -commerce technology has radically changed entire industries, driving incumbent firms out of business, spawni ng new firms, and in some cases, radically changing the entire industry. In Section 2.5, we offer students information and tips about how the concepts they've learned in this chapter c an help them prepare for an interview for an entry- level position as an assistant manager of e- business.

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Chapter 4

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Chapter 5

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Chapter 6

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Unique Features of E-commerceTechnology

1.Ubiquity 2.Global reach 3.Universal standards 4.Information richness 5.Interactivity 6.Information density 7.Personalization/customization 8.Social technology

Eight Key Elements of a Business Model

1.Value proposition 2.Revenue model 3.Market opportunity 4.Competitive environment 5.Competitive advantage 6.Market strategy 7.Organizational development 8.Management team

E-commerce Merchant Server Software

Provides basic functionality for sales -Online catalog ▪List of products available on website -Shopping cart ▪Allows shoppers to set aside, review, edit selections, and then make purchase -Credit card processing ▪Typically works in conjunction with shopping cart ▪Verifies card and puts through credit to company's account at checkout

Insight on Business: Crowdfunding Takes off

Class Discussion -What types of projects and companies might be able to most successfully use crowdfunding? -Are there any negative aspects to crowdfunding? -What obstacles are presented in the use of crowdfunding as a method to fund startups?

Figure 3.13 Wi-Fi Networks

Figure 3.13, page 141. In a Wi-Fi network, wireless access points connect to the Internet using a land-based broadband connection. Clients, which could be desktops, laptops, tablet computers, or smartphones, connect to the access point using radio signals. Alt Text Long description: An illustration depicts WI FI networks, as follows: A wireless access point is connected to the internet by a broadband connection. The access point provides internet access to devices such as a laptop and desktop computer and a smartphone or tablet computer.

B2C Models: Content Provider

Digital content on the Web: - News, music, video, text, artwork Revenue models: - Use variety of models, including advertising, subscription; sales of digital goods - Key to success is typically owning the content Variations: - Syndication - Aggregators

A value proposition defines how a company's product or service will generate revenue for the firm.

False

The term e-commerce refers to the digital enabling of business processes both inside and outside the firm

False

Table 4.10 E-commerce Website Features That Annoy Customers

Feature •Requiring user to view ad or intro page before going to website content •Pop-up and pop-under ads and windows •Too many clicks to get to the content •Links that don't work •Confusing navigation; no search function •Requirement to register and log in before viewing content or ordering •Slow loading pages •Content that is out of date •Inability to use browser's Back button •No contact information available (web form only) •Unnecessary splash/flash screens, animation, etc. •Music or other audio that plays automatically •Unprofessional design elements •Text not easily legible due to size, color, format •Typographical errors •No or unclear returns policy

Figure 1.10 Periods in the Development of E-commerce

Figure 1.10, page 28. Full description: A graph shows the years 19 95 to 20 18 divided into three periods in the development of e-commerce, Invention, Consolidation, and Reinvention. The x-axis depicts years from 19 95 to 20 18 in increments of 5 years. The y-axis shows dollars in billions, ranging from 0 to 600 in increments of 100. The period from 19 95 to 2000 is labeled Invention, Retail. The period from 2001 to 2007 is labeled Consolidation, Retail and Services. The period from 2007 onward is labeled Reinvention, social, mobile, and local, Retail, Services, and Content. The graph labels 2000 the year of the crash and 2007 the year of the smartphone. A line curve labeled retail begins at zero from 19 95 onward and increases gradually after 19 98. It reaches around 140 billion in 2007 and then rapidly increases from there on to reach 530 billion by the year 20 18. Another line curve labeled services begins from the year 19 98 and increases gradually over the years, reaching around 100 billion in 2006 and ending at 405 billion in 20 18. A third line curve labeled content begins from the year 19 98 and remains near zero until 20 10. It then increases very slowly and reaches close to 80 billion in the year 20 18.

Figure 3.17 How Google Works

Figure 3.17, page 167. Alt Text Long description: A flow chart depicts how Google works, as follows: A, Indexing the web. Step 1, a Googlebot, which is a form of software code, crawls the web, going from link to link. Step 2, crawled pages are analyzed: links semantic analysis and JavaScript or C S S content. Step 3, new data is added to an index of keywords and the pages on which they appear. Step 4, to deal with the scale of the Web, Google has already indexed an estimated 30 trillion pages, Google breaks it up into thousands of index shards, groups of millions of pages. Step 5, the index shards are stored on Google servers, approximately 1 million, located in data centers around the world. Step 6, the indexing process runs continuously, processing billions of web pages a day. Pages with frequently updated content and links from other highly ranked sites are crawled more regularly and deeply and given higher rank themselves. B, Processing a Search Query. Step 1, a user enters a search query on a desktop computer or mobile device. Google will make suggestions as the user types. Step 2, the search request is sent to one of Google's many servers. Step 3, the server uses an algorithm to access the index database, find matching pages, and compute a score, representing how good a match the page is for the query. The algorithm has 200 plus variables, including page rank, the quality and relevance of the content on the page to the query, the context of the search such as the user's location and device being used, and the user's previous search history. Google also applies various penalties and filters to prevent attempts to game the algorithm. Step 4, short text summaries or snippets are generated for each result. Step 5, results are delivered to the user, 10 to a page.

Figure 1.11 The Internet and the Evolution of Corporate Computing

Figure 1.11, page 38. The Internet and Web, and the emergence of a mobile platform held together by the Internet cloud, are the latest in a chain of evolving technologies and related business applications, each of which builds on its predecessors. Full description: A figure illustrates the major stages in the development of corporate computing and the role of the Internet in this evolution. There are two columns. One column contains each category of computer technology and the years in use. The other contains business applications. The information is as follows. Mainframe computers were in use predominantly from 19 50 to 19 75, and were used for transaction automation applications such as payroll, and accounts receivable. Minicomputers were in use predominantly from 19 70 to 19 75, and were used for business function automation applications such as marketing, human resources, and design. Personal computers have been used since 19 80 to the present, and are used for desktop automation business applications such as word processing, spreadsheets, and databases. Local area networks, which includes client and server computing, have been used since 19 80 to the present, and are used for workgroup automation business applications such as document sharing, project management, messaging, and e-mail. Enterprise-wide computing has been in use since 19 90 to the present, and is used for enterprise-wide automation business applications such as resource planning systems, integrated finance manufacturing systems, and human resource planning. Internet and Web, which includes mobile platform and cloud computing, has been in use since 19 95 to the present, and is used for industrial system automation business applications such as supply chain management, customer relationship management, channel management systems, and web and cloud services.

Figure 1.5 The Growth of B2C E-commerce in the United States

Figure 1.5, Page 22. In the early years, B2C e-commerce was doubling or tripling each year. Although B2C e-commerce growth in the United States slowed in 2008-2009 due to the economic recession, it resumed growing at about 13% in 2010 and since then, has continued to grow at double-digit rates. In 2018, revenues from B2C e-commerce are expected to reach almost $1 trillion. SOURCES: Based on data from eMarketer, Inc., 2018c, 2018d; U.S. Census Bureau, 2018a; authors' estimates. Full description: A graph shows growth of B2C e-commerce in the United States during the time period 19 95 to 20 22. The x-axis shows years from 19 95 to 20 22 in increments of 5 years. The y-axis shows revenue in billions of dollars, ranging from 0 to 1 thousand 500 in increments of 250. The graph shows the years and the corresponding revenue as follows. 19 95, 0. 2000, 50 billion dollars. 2005, 170 billion dollars. 20 10, 300 billion dollars. 20 15, 700 billion dollars. 20 20, 1200 billion dollars. 20 22, 1500 billion dollars. All data are approximate.

Figure 1.7 The Growth of B2B E-commerce in the United States

Figure 1.7, Page 24. B2B e-commerce in the United States is about 10 times the size of B2C e-commerce. In 2022, B2B e-commerce is projected to be reach around $7.3 trillion. (Note: Does not include EDI transactions.) SOURCES: Based on data from U.S. Census Bureau, 2018b; authors' estimates. Full description: A graph shows the growth of B 2 B e-commerce in the United States between 2002 and 20 22, including some projected data. The x-axis shows years between 2002 and 20 22. The y-axis shows revenue in trillions of dollars, ranging from 0.0 to 8.0 in increments of 1.0. The graph shows the years and the corresponding revenue as follows: 2002, 1.8 trillion dollars. 2005, 2.6 trillion dollars. 20 10, 4.0 trillion dollars. 20 15, 5.8 trillion dollars. 20 20, 6.5 trillion dollars. 20 22, 7.4 trillion dollars. All data are approximate.

Figure 1.8 The Growth of M-commerce in the United States

Figure 1.8, page 25. In the last five years, m-commerce has increased astronomically, from just $32.8 billion in 2012 to almost $280 billion in 2018, and it is anticipated that it will continue to grow by over 20% a year over the next five years as consumers become more and more accustomed to using mobile devices to purchase products and services. SOURCE: Based on data from eMarketer, Inc., 2018e, 2018f. Full description: A graph shows the growth of m-commerce in the United States, with actual figures depicted for years 20 12 to 20 17, and projected figures for 20 18 to 20 22. The x-axis shows years from 20 12 to 20 22 in increments of 1 year. The y-axis shows revenue in billions of dollars, ranging from 0 to 700 in increments of 100. The graph shows the years and the corresponding revenue as follows: 20 12, 32.8 billion dollars. 20 13, 65 billion dollars. 20 14, 95 billion dollars. 20 15, 120 billion dollars. 20 16, 185 billion dollars. 20 17, 220 billion dollars. 20 18, 290 billion dollars. 20 19, 350 billion dollars. 20 20, 420 billion dollars. 20 21, 510 billion dollars. 20 22, 605 billion dollars. All values are in approximates only.

Figure 3.10 The Hourglass Model of the Internet

Figure 3.10 Page 132. The Internet can be characterized as an hourglass modular structure with a lower layer containing the bit-carrying infrastructure (including cables and switches) and an upper layer containing user applications such as e-mail and the Web. In the narrow waist are transportation protocols such as TCP/IP. Alt Text Long description: A diagram illustrates the hourglass model of the internet, as follows: The hourglass model depicts the internet as being divided into 4 layers, in an hourglass shape, from bottom to top, as follows. Layer 1 at the wide bottom of the hourglass: Network technology substrates including coaxial cable, LANs, wireless, satellite, fiber optic, and D S L. Layer 2, at the narrowest part of the hourglass: Transport services and representation standards including I P v 6, I P v 4, and T C P. Layer 3 at the widening middle of the hourglass: middleware services including storage repositories, security, authentication and identity management, and file systems. Layer 4, at the top and widest part of the hourglass: applications including web browsers, email clients, media players, image servers, and remote login.

Figure 3.11 Internet Network Architecture

Figure 3.11, Page 133. Today's Internet has a multi-tiered open network architecture featuring multiple backbones, regional hubs, campus/corporate area networks, and local client computers. Alt Text Long description: An illustration depicts internet network architecture, as follows: The backbone exchanges information with the regional hubs, I X P's. The I X P's exchange information with regional hosts. Regional hosts are connected to domain local I S P's and domains like N Y U dot edu. The Domain Local I S P's are connected via D S L, FIOS or cable to the home computer at the client I P address. The domain N Y U dot e d u is connected via T1 line to a CAN or offices at the client I P address.

Figure 4.10 Factors in Website Optimization

Figure 4.10, Page 209. Website optimization requires that you consider three factors: page content, page generation, and page delivery. Full description: An image depicts factors in optimizing website performance. There are three factors in website optimization along with the following items pertaining to each factor. First, Page Delivery, which includes Content delivery networks, Edge caching, and Bandwidth. Second, Page Generation, which includes Server response time, Device-based accelerators, Efficient resource allocation, Resource utilization thresholds, and Monitoring site performance. The third factor, Page Content, includes Optimize H T M L, Optimize images, Site architecture, and Efficient page style.

Figure 4.11(a) Two-Tier E-commerce Site Architecture

Figure 4.11(a), Page 212. In a two-tier architecture, a web server responds to requests for web pages and a database server provides backend data storage. Full description: An image illustrates two-tier architecture. The image shows a user, who sends requests for pages to a web server. The web server sends the request to a content management slash database server. The content management slash database server sends the requested pages back to the web server which then sends them back to the user.

Figure 4.11(b) Multi-Tier E-commerce Site Architecture

Figure 4.11(b), Page 212. In a multi-tier architecture, a web server is linked to a middle-tier layer that typically includes a series of application servers that perform specific tasks, as well as to a backend layer of existing corporate systems. Full description: An image illustrates multi-tier architecture. In a multi-tier architecture, there are three layers. The Web Server Layer consists of Web Servers that receive incoming Internet requests. The Middle-tier Layer consists of E-commerce Servers, Application Servers, Database Servers, Ad Servers, and Mail Servers. The Backend Layer consists of Corporate Applications, Finance, Production M R P, Enterprise Systems, and H R Systems. The incoming Internet request are sent by Web Servers to the Middle-tier Layer, from the Middle-tier Layer to the Backend Layer, from the Backend Layer back to the Middle-tier Layer, and from the Middle-tier Layer back to the Web Server Layer.

Figure 4.2 E-commerce Presence Map

Figure 4.2, Page 194. An e-commerce presence requires firms to consider the four different kinds of presence, and the platforms and activities associated with each type of presence. Full description: A diagram maps the activity and platform associated with each type of presence. There are four types of presence and each has a platform and activity. The first type of presence, Website or App, uses a traditional (desktop), mobile, and tablet platform. Activities include search, display, affiliates, and sponsorships. The second type of presence, social media, uses Facebook, Twitter, Pinterest, Instagram, and Blogs as a platform. Activities include conversation, engagement, sharing, and advice. The third type of presence, e-mail, uses internal lists and purchased lists as a platform. Activities include newsletters, updates, and sales. The fourth type of presence, offline media, uses print, T V, and radio as a platform. Activities include education, exposure, and branding.

Figure 4.5 Systems Development Life Cycle

Figure 4.5, Page 198. Full description. A flow diagram shows the systems development life cycle. The loop follows the following route. Systems Analysis and Planning, leading to Systems Design, leading to Building the System, leading to Testing, and finally leading to Implementation Service Delivery. After this step, the process again loops back to the Systems Analysis and Planning stage. Best practices listed below are Continuous availability 99 percent plus, Design for scalability, Build in management for end-to-end delivery, Plan for growth, Design pages for high-speed performance, Understand and optimize workload on system.

Figure 4.6(a) A Logical Design for a Simple Website

Figure 4.6(a), Page 201. This data flow diagram describes the flow of information requests and responses for a simple website. Full description: A simple data flow diagram depicts the logical design for a simple website. The data flow diagram connects various processes in a loop. These processes are: 1. A website customer sends an H T T P request to verify login. 2. The verify login process first retrieves customer information from the customer database and then either accepts or rejects the visitor. 3. If the visitor is accepted, catalog pages are displayed by connecting to a catalog database. 4. The display catalog pages process leads to the next process, which is purchase products. This stage is connected to a customer database, catalog database, and order database. 5. Once the order is placed, the next process is to fulfill the order, leading to the ship products stage. 6. When the order shipped, the ship products process again connects to website customer to confirm the process.

Figure 4.6(b) Physical Design for a Simple Website

Figure 4.6(b), Page 201. A physical design describes the hardware and software needed to realize the logical design. Full description: A simple data flow chart that depicts the physical design for a simple website. The overall description of this simple physical design is: In a multi-tier architecture, a web server is linked to a middle-tier layer that typically includes a series of application servers that perform specific tasks, as well as to a backend layer of existing corporate systems. The image of the simple physical design shows the following: 1. Customer connects from a mobile phone, smartphone, or desktop to Internet through a cable, D S L, T 1, satellite, cellular, or Wi-Fi. 2. Your firm's website connects to the Internet through cable or F I O S. 3. At your firm's end, hardware needed are H P or Dell web servers and 5 terabytes of storage. 4. Software needed are Oracle S Q L database, I B M WebSphere e-commerce suite, ad server, online catalog, mail server, and shopping cart.

Figure 4.7 Choices in Building and Hosting

Figure 4.7, Page 202. You have a number of alternatives to consider when building and hosting an e-commerce site. Full description: A matrix shows the various possible combinations in building and hosting the site. The four possible combinations are as follows. 1. When both the building and hosting are done in-house, the responsibility is completely in-house. 2. When the building is done in-house and the hosting is outsourced, there is mixed responsibility. 3. When the building is outsourced and the hosting is done in-house, there is mixed responsibility. 4. When both the building and hosting are outsourced, the product is completely outsourced.

Figure 5.1 The E-commerce Security Environment

Figure 5.1, Page 260. E-commerce security is multi-layered, and must take into account new technology, policies and procedures, and laws and industry standards. Full description: A bulls-eye diagram depicts the multi-layered nature of the e-commerce security environment. The diagram has Data in center. There are four concentric ovals. From the inner-most oval to the outer-most one, the ovals are labeled as follows, Technology Solutions, Organizational Policies and Procedures, and Laws and Industry Standards.

Figure 5.10 Secure Negotiated Sessions Using S S L/T L S

Figure 5.10, Page 298. Certificates play a key role in using SSL/TLS to establish a secure communications channel. Full description: A process diagram illustrates secure negotiated sessions using S S L and T L S. The following steps are involved in the process. 1. Client browser requests a secure session with a merchant server via the internet. 2. Merchant server grants the secure session. 3. Session I D and methods of encryption are negotiated. 4. Client certificate and merchant certificate are exchanged. Identity of both parties is established. 5. Client generates session key and uses server public key to create digital envelope. 6. Digital envelope is sent to the server, which then decrypts it using a private key. 7. Encrypted transmission using client-generated session key begins.

Figure 5.11 Firewalls and Proxy Servers

Figure 5.11, Page 301. The primary function of a firewall is to deny access by remote client computers to local computers. The primary purpose of a proxy server is to provide controlled access from local computers to remote computers. Full description: A set of flow diagrams illustrates how firewalls and proxy servers provide protection for networks. A linear flow diagram for a firewall shows, from left to right, a laptop, desktop, and a mobile phoneconnected to a firewall with two-way arrows. The firewall connects with a remote client on the Internet through a web server. A remote server is present on the side of the remote client. A linear flow diagram for proxy server shows, from left to right, a laptop, desktop, and a mobile phone connected two-way with an internal network. The internal network is connected two-way with a proxy server. The proxy server connects to a remote client on the Internet through an external network. A remote server is present on the side of the remote client.

Figure 5.12 Developing an E-commerce Security Plan

Figure 5.12, Page 303. There are five steps involved in building an e-commerce security plan. Full description: A circular diagram lists the steps involved in developing an e-commerce security plan. The steps are listed as follows. 1. Perform a risk assessment. 2. Develop a security policy. 3. Develop an implementation plan. 4. Create a security organization. 5. Perform a security audit.

Figure 5.14 How an Online Credit Card Transaction Works

Figure 5.14, Page 313. Full description: A process diagram depicts how an online credit card transaction works. The process is as follows. 1. Consumer makes purchase. 2. S S L or T L S provides secure connection through Internet to merchant server. 3. Merchant software from the merchant server contacts clearinghouse through a secure line. 4. Clearinghouse verifies account and balance with consumer's card issuing bank. 5. The issuing bank credits merchant account in the merchant bank. 6. All the above connections between the various players are two-way. 7. The issuing bank issues a monthly statement with debit for purchase to the consumer.

Figure 5.16 How Blockchain Works

Figure 5.16, Page 318. A blockchain system is a distributed database that records transactions in a P2P network of computers. Full description: A process diagram shows six steps illustrating how blockchain works. 1. An order is submitted by a user or customer. 2. To verify the user, the transaction is broadcast to a P2P network of computers. 3. The transaction is validated by others in the network. 4. The block is added to the chain of transactions for this user. 5. Production, Warehouse, Logistics add additional blocks. 6. The order is fulfilled.

Figure 5.2 A Typical E-commerceTransaction

Figure 5.2, Page 264. In a typical e-commerce transaction, the customer uses a credit card and the existing credit payment system. Full description: A flow diagram depicts a typical e-commerce transaction. The steps involved in the transaction are as follows. An Online consumer contacts an Online store through an Internet service provider. The online store uses a Merchant website and Merchant web server which connects with a Database server which connects with a Warehouse. The Customer credit card bank transacts with the Merchant bank through the Merchant website and Merchant Web servers. All of the above transactions and connections are two-way. Last, the Warehouse uses a Shipping service to ship the product to the Online consumer.

Figure 5.3 Vulnerable Points in an E-commerce Transaction

Figure 5.3, Page 265. There are three major vulnerable points in e-commerce transactions: Internet communications, servers, and clients. Full description: A flow diagram depicts the vulnerable points in an e-commerce transaction. The steps involved in the transaction are as follows. An Online consumer contacts an Online store through an Internet service provider. The online store uses a Merchant website and Merchant web server which connects with a Database server which connects with a Warehouse. The Customer credit card bank transacts with the Merchant bank through the Merchant website and Merchant Web servers. All of the above transactions and connections are two-way. Last, the Warehouse uses a Shipping service to ship the product to the Online consumer. Vulnerable points in the process include web beacons in the Online consumer's system, Wi-Fi listening wiretaps in the connection between the consumer and Internet service provider, Customer list hacks in the online store's system, S Q L injection attacks on the database server, D O S attacks, card theft, or hacking at the customer credit card bank's end, and security breaches at the point where the Customer credit card bank, Merchant bank, and the Merchant web servers and Merchant website connect, and when the order is shipped to the Online consumer.

Figure 5.5 Tools Available to Achieve E-commerce Security

Figure 5.5, Page 288. There are a number of tools available to achieve e-commerce security. Full description: A diagram depicts the different tools available to achieve e-commerce security. The diagram shows Security Management in the center and the following points surrounding it. Firewalls, Encryption, Network Security Protocols, Virtual Private Networks, Authentication Procedures, Proxy Servers, Anti-Virus Software, Automated Software Updates, Intrusion Detection and Prevention.

Figure 5.6 Public Key Cryptography: A Simple Case

Figure 5.6, Page 291. In the simplest use of public key cryptography, the sender encrypts a message using the recipient's public key, and then sends it over the Internet. The only person who can decrypt this message is the recipient, using his or her private key. However, this simple case does not ensure integrity or an authentic message. Full description: An image illustrates a simple use of public key cryptography and the important steps in using public and private keys. The steps are as follows. First, the sender creates an original digital message, to buy X Y Z at the rate of 100 dollars. Second, the sender obtains the recipient's public key and applies it to the message. Third, this message gets encrypted in cipher text, depicted as 1 0 1 0 1 1 0 1 1 1 0 0 0 1. Fourth, the message is sent over the Internet. And fifth, the message is received by the recipient, who uses his or her private key to decrypt the message..

Figure 5.7 Public Key Cryptography with Digital Signatures

Figure 5.7, Page 292. A more realistic use of public key cryptography uses hash functions and digital signatures to both ensure the confidentiality of the message and authenticate the sender. The only person who could have sent the above message is the owner or the sender using his/her private key. This authenticates the message. The hash function ensures the message was not altered in transit. As before, the only person who can decipher the message is the recipient, using his/her private key. Full description: An image illustrates the steps of public key cryptography with digital signatures. The steps are as follows. First, the sender creates an original digital message, to buy X Y Z at the rate of 52 dollars. Second, the sender applies a hash function, which produces a hash digest. Third, the sender encrypts the message and has digest using the recipient's public key. Fourth, the sender encrypts the result, using the sender's private key, or digital signature. Fifth, the message, now in the form of double-encrypted signed cipher text is sent via the Internet. Sixth, the message then reaches the receiver, who uses the sender's public key to get authenticated cipher text. Seventh, the receiver then uses his or her private key to decrypt the hash function and original message.

Figure 5.8 Public Key Cryptography: Creating a Digital Envelope

Figure 5.8, Page 294. A digital envelope can be created to transmit a symmetric key that will permit the recipient to decrypt the message and be assured the message was not intercepted in transit. Full description: A flow diagram depicts the steps involved in creating a digital envelope in case of public key cryptography. The flow diagram depicts the following steps. 1. The sender creates the original message, Diplomatic Report. 2. It is encrypted using a symmetric session key. 3. The symmetric session key is encrypted using the recipient's public key. 4. These form a digital envelope, which is sent over the Internet as a message encrypted in cipher text. 5. The message is then decrypted using the recipient's private key and the symmetric session key. And 6. The message, Diplomatic Report, reaches the receiver.

Figure 5.9 Digital Certificates and Certification Authorities

Figure 5.9, Page 295. The PKI includes certification authorities that issue, verify, and guarantee digital certificates that are used in e-commerce to assure the identity of transaction partners. Full description: A process diagram illustrates digital certificates and certification authorities. The following steps are shown in the diagram. 1. An Institution or Individual subject requests a certificate over the Internet from a Certification Authority or C A. 2. The C A provides a certificate to the institution or individual subject. 3. The institution or individual then shares the certificate with a Transaction partner, such as an online merchant or customer. The certificate has the following data. Digital certificate serial number. Version. Issuer name. Issuance slash expiration date. Subject name. Subject public key. C A signature. Other information.

Figure 6.1 A General Model of Consumer Behavior

Figure 6.1, Page 350. Consumer behavior models try to predict the decisions that consumers make in the marketplace. SOURCE: Adapted from Kotler and Armstrong, Principles of Marketing, 13e, 2009, reprinted by permission of Pearson Education, Inc. Full description: An image depicts a general model of consumer behavior. Text illustrations from left to right depict a general model of consumer behavior that influences a consumer's marketplace decisions. The image shows that independent demographic variables lead to intervening variables, which in turn lead to dependent variables. Independent demographic variables, also known as background factors, include Cultural, Social, and Psychological factors. Intervening variables, such as market stimuli, social networks, and communities, include Brand, Marketing Communications Stimuli, and Firm Capabilities. Dependent variables consist of In-store Behavior and Buyer Decisions

Figure 6.10 An Online Consumer Purchasing Model

Figure 6.10, Page 407. The conversion of visitors into customers, and then loyal customers, is a complex and long-term process that may take several months. Full description: The figure shows an online consumer purchasing model. Starting from the left is the following. Awareness-need recognition, which involves Market Communications. Examples of market communications include Search engine, Display ads, E-mail, Affiliates, Social networks, Blogs, Mobile ads, and Apps. The example assumes 100,000 Impressions, 10,000 Search clicks, and 1,500 Likes. Next is Search, which involves Website hits. This generates 1,000 Unique visitors, or 1 percent of the impressions. Next is Evaluation of Alternatives, which involves Page views, Stickiness, and Site design. Next is Purchase, which involves Acquisition and Conversion. This generates 50 Purchases, or 5 percent rate. Lastly is Post-purchase behavior or loyalty, which generates 12 loyal customers, or 25 percent retention.

Figure 6.11 Web Analytics and the Online Purchasing Process

Figure 6.11, Page 412. Marketing analytics help e-commerce firms to better understand consumer behavior at each stage of the online purchasing process. Full description: An image depicts marketing analytics and the online purchasing process model. The figure, from left to right, shows the following process. Awareness In-bound involves Unique visitors. Engagement involves Page views, Duration, and Content views. Interaction involves Posts, Likes, Pins and tweets, and Comments. Purchase involves Enter cart page, Register, Purchase, Abandon. Post-purchase service loyalty involves Repeat customers, Social site buzz, and Service requests.

Figure 6.2 The Consumer Decision Process and Supporting Communications

Figure 6.2, Page 351. Full description: A figure depicts the consumer decision process and supporting communications. The consumer decision process and the types of offline and online marketing communications that support this process are shown as follows. The first step in the consumer decision process is awareness—need recognition. Online marketing communications that support awareness—need recognition include targeted display ads, targeted e-mail ads, and social media. Offline marketing communications that support awareness—need recognition include mass media, T V, radio, print media, and social networks. The second step in the consumer decision process is search. Online marketing communications that support search include search engines, online catalogs, site visits, targeted e-mail, and social networks. Offline marketing communications that support search include catalogs, print ads, mass media, salespeople, product raters, store visits and social networks. The third step in the consumer decision process is evaluation of alternatives. Online marketing communications that support evaluation of alternatives include search engines, online catalogs, site visits, product reviews, user evaluation, and social networks. Offline marketing communications that support evaluation of alternatives includes reference groups, opinion leaders, mass media, product raters, store visits, and social networks. The fourth step in the consumer decision process is purchase. Online marketing communications that support purchases include online promotions, discounts, targeted e-mail, and flash sales. Offline marketing communications that support purchases include promotions, direct mail, mass media, and print media. The fifth step in the consumer decision process is post-purchase behavior—loyalty. Online marketing communications that supports post-purchase behavior—loyalty include communities of consumption, newsletters, customer e-mail, online updates, and social networks. Offline marketing communications that supports post-purchase behavior—loyalty include warranties, service calls, parts and repair, consumer groups, and social networks.

Figure 6.3 A Model of Online Consumer Behavior

Figure 6.3, Page 352. In this general model of online consumer behavior, the decision to purchase is shaped by background demographic factors, several intervening factors, and, finally, influenced greatly by clickstream behavior very near to the precise moment of purchase. Full description: A figure depicts a model of online consumer behavior. The user characteristics that influence online consumer behavior are as follows. Culture, Social Norms, Psychological Factors, and Background Demographic Factors. The intervening factors that influence online consumer behavior are as follows. Brand, Marketing Communications Stimuli, Firm Capabilities, Website and Mobile Platform Features, Consumer Skills, Product Characteristics, Purchasing Attitudes, Perceived Behavioral Control, and Social Networks. The decision to purchase is influenced greatly by clickstream Behavior very near to the purchase.

Figure 6.6 How an Advertising Network Works

Figure 6.6, Page 369. Millions of publishers have audiences to sell, and pages to fill with ads. Thousands of advertisers are looking for audiences. Ad networks are intermediaries that connect publishers with marketers. Full description: A model illustrates how an advertising network works. 1. Consumer requests web page from ad network member merchant site. 2. Merchant site's merchant server connects to the ad network ad server. The ad network's ad server connects with its user profile database. 3. Ad server reads cookie and checks database for the consumer's user profile. 4. Ad server selects and serves user an appropriate display ad based on the consumer's user profile. 5. The ad network follows consumer from site to site through use of tracking files.

Figure 6.9 A Customer Relationship Management System

Figure 6.9, Page 403. This is an example of a CRM system. The system captures customer information from all customer touchpoints as well as other data sources, merges the data, and aggregates it into a single customer data repository or data warehouse where it can be used to provide better service, as well as to construct customer profiles for marketing purposes. Online analytical processing (OLAP) allows managers to dynamically analyze customer activities to spot trends or problems involving customers. Other analytical software programs analyze aggregate customer behavior to identify profitable and unprofitable customers as well as customer activities. Full description: An image depicts a customer relationship management system. In the lower part of the image, customer touch points are shown as follows. Telephone, Sales force, Website, In-store, Social networks, and Mail. These customer touch points direct toward the following functions: 1. Transaction processing and operational data collection. 2. Data aggregation, data cleaning, customer database, and data warehouse. 3. Business intelligence, data mining, analysis and reporting, and modeling. 4. Marketing campaign management, advertising campaign management, and behavioral targeting.

Table 4.11 The Eight Most Important Factors in Successful E-commerce Site Design

Functionality Pages that work, load quickly, and point the customer toward your product offerings Informational Links that customers can easily find to discover more about you and your products Ease of use Simple foolproof navigation Redundant navigation Alternative navigation to the same content Ease of purchase One or two clicks to purchase Multi-browser functionality Site works with the most popular browsers Simple graphics Avoids distracting, obnoxious graphics and sounds that the user cannot control Legible text Avoids backgrounds that distort text or make it illegible

Table 4.13 Unique Features That Must be Taken into Account When Designing a Mobile Presence

Hardware Mobile hardware is smaller, and there are more resource constraints in data storage and processing power. Connectivity The mobile platform is constrained by slower connection speeds than desktop websites. Displays Mobile displays are much smaller and require simplification. Some screens are not good in sunlight. Interface Touch-screen technology introduces new interaction routines different from the traditional mouse and keyboard. The mobile platform is not a good data entry tool but can be a good navigational tool.

Which of the following is an example of a company using the content provider model?

Netflix

Key Points: Chapter 4

Imagining Your E-commerce Presence. Section 4.1 of the chapter (pages 190 to 196) walks the student through the process of creating an e-commerce presence, by developing an idea, understanding how the idea can potentially make money, defining the target audience and the marketplace, and determining what the content looks like. An important part of this effort involves performing a SWOT analysis, developing a presence map, and creating a timeline. A Method for Building E-commerce Sites. In the early years of e-commerce, websites were often built one page at a time, with little advance planning. Many disasters resulted. Section 4.2 of the text borrows the systems analysis and design framework from large-scale systems and applies it to building an e-commerce website (which in reality is a large-scale system). See Table 4.2. This is also a good time to introduce the issue of outsourcing options and tool options. Figure 4.4 covers most of the outsourcing options, and Figure 4.5 illustrates the range of tool options. The Insight on Business case, Weebly Makes Creating Websites Easy, highlights Weebly, a company that was itself once a small start-up, and whose business model focuses on enabling small businesses to create websites easily and inexpensively. Some discussion questions for this case might include the following: ● What value does Weebly offer to small businesses? ● Are there any drawbacks to using Weebly to create an e-commerce presence? ● How are service providers like Weebly changing the nature of e-commerce? Figure 4.10 provides a summary of factors to consider when optimizing the performance of a website. A number of emerging alternative web development methodologies are also introduced, including prototyping, agile development, Scrum, DevOps, component-based development, and web services. Choosing the Right Software. Students are curious about the software needed to operate a website. They often confuse web server hardware with web server software, confusion made possible by the widespread use of the generic "web server" phrase. Section 4.3 addresses these concepts. Three figures and tables capture the essence of the section. Figure 4.11 is a good place to start with a description of both a simple and a complex architecture for a website. Table 4.4 then provides a list of basic functionalities provided by web server software, whereas Table 4.5 provides a list of the many different types of application servers. Table 4.6 lists some open source software options for students who are interested in "doing it themselves" and "building their own." Choosing the Right Hardware. We cover the hardware aspects of developing a website in Section 4.4. Students often want to know what hardware is required to run a website and how much is needed. Websites can be very simple. The Variety of Site Development Tools. In addition to server software and hardware, site developers use a wide variety of tools to build and manage an e-commerce site, which we review in Section 4.5. Design elements such as widgets and mashups enhance user interest and involvement. CGI, ASP/ASP.NET, Java, JSP, JavaScript, ActiveX, VBScript, ColdFusion, PHP, Ruby on Rails, and Django are all tools used to handle interactive elements on web pages. Information Policy Set. Many site developers do not understand that a commercial website needs to have a set of information policies established by management that govern how information gathered at the site will be used. The Insight on Society case, Designing for Accessibility, asks students to think about how a site can be designed to serve the needs of disabled users, including the visually challenged and hearing impaired. Questions for class discussion might include the following: ● Why might some merchants be reluctant to make their websites accessible to disabled users? ● How can websites be made more accessible? ● Should all websites be required by law to provide "equivalent alternatives" for visual and sound content? ● What additional accessibility problems do mobile devices pose? Developing a Mobile Website and Building Mobile Applications. Section 4.6 introduces students to some issues surrounding developing a mobile website and building mobile applications. If possible, spend some time talking about the differences between mobile websites that are optimized for the mobile platform versus regular websites that are not, and what impact that might have on the m-commerce opportunities for the site. Although students are undoubtedly very familiar with different apps, they may not understand the distinction between a mobile web app, a native app, and a hybrid app. Table 4.12 applies the systems analysis and design framework first introduced in Section 4.1 and Table 4.1 to developing a mobile presence, and Table 4.13 highlights some unique features that students should be aware of that need to be taken into consideration when designing for the mobile platform. The section on mobile presence design considerations also covers several important trends in this area, including mobile first design philosophy, responsive Web design (RWD) and adaptive Web design (AWD). A section on cross-platform mobile app development tools highlights some of the various tools now available that make creating cross-platform mobile apps relatively easy and inexpensive. The Insight on Technology case, Carnival Cruise Ships Go Mobile, discusses the development of the Carnival Hub App, a mobile app now in use on a variety of Carnival cruise ships, as well as its new Ocean Medallion system. Questions for class discussion might include the following: ● What influenced Carnival in deciding to create a mobile app? ● Are there any disadvantages in making a mobile app such a central part of the Carnival Cruise experience? ● How will the Ocean Medallion system add value to the cruising experience? Section 4.7 offers students information and tips about how the concepts they've learned in this chapter can help them prepare for an interview for an entry-level position as a UX (user interface) designer. The chapter-ending case study in Section 4.8 provides a rich discussion of both the business and technology considerations that shaped the decisions by Dick's Sporting Goods to take over its own e-commerce operations after having outsourced them to eBay for a number of years.

Table 5.3 Customer and Merchant Perspectives on the Different Dimensions of E-commerceSecurity

Integrity Has information I transmitted or received been altered? Has data on the site been altered without authorization? Is data being received from customers valid? Nonrepudiation Can a party to an action with me later deny taking the action? Can a customer deny ordering products? Authenticity Who am I dealing with? How can I be assured that the person or entity is who they claim to be? What is the real identity of the customer? Confidentiality Can someone other than the intended recipient read my messages? Are messages or confidential data accessible to anyone other than those authorized to view them? Privacy Can I control the use of information about myself transmitted to an e-commerce merchant? What use, if any, can be made of personal data collected as part of an e-commerce transaction? Is the personal information of customers being used in an unauthorized manner? Availability Can I get access to the site? Is the site operational?

Categorizing E-commerce Business Models

No one correct way to categorize Text categorizes according to: -E-commerce sector (e.g., B2B) -E-commerce technology (e.g., m-commerce) Similar models appear in different sectors Companies may use multiple business models (e.g., eBay) E-commerce enablers

Key Points: Chapter 6

Online Consumer Behavior. Section 6.1 provides basic information about the Internet audience and traffic patterns (online consumer profile) as well as online consumer behavior and purchasing decisions. Most students are unaware of the basic behavioral realities with respect to online consumers. A basic ingredient of the old dictum, "know thy customer"—who is online, what they do when there, what they buy and look at—is a very important prerequisite for successful marketing campaigns. Figures 6.1 and 6.3 provide summary models of the complex process of consumer purchasing. Some key points to make in this section are: Online shopping includes both purchasers and browsers. Online shopping strongly influences offline purchases. Online shopping is largely intentional. Digital Commerce Marketing Platform Strategies and Tools: Section 6.2 reviews various strategies and tools in digital commerce marketing. E-commerce has now been around long Key Points enough that there are tools that can be considered "traditional," such as search engine marketing, display ad marketing (banner ads, rich media ads, video ads, sponsorships, native advertising and content marketing, as well as the use of advertising networks that employ programmatic advertising, ad exchanges, and real-time bidding), e-mail and permission marketing, affiliate marketing, and lead generation marketing. Newer forms of digital commerce marketing, including social marketing, mobile marketing, and local marketing, are reviewed very briefly, and covered in much more depth in Chapter 7. Spend some time on Table 6.2, which illustrates the five main elements of a comprehensive digital marketing program, including website, traditional online marketing, social marketing, mobile marketing, and offline marketing. Intoday's environment, multi-channel marketing is becoming increasingly important. The Insight on Business case, Are the Very Rich Different from You and Me?, examines how luxury goods providers are using online marketing in conjunction with their offline marketing efforts. Class discussion questions for this case might include the following: What distinguishes luxury marketing from ordinary retail marketing? What challenges do luxury retailers have translating their brands and the look and feel of luxury shops into websites? How has social media affected luxury marketing? Visit the Net-a-Porter website. What do you find there? The chapter then examines some further online marketing strategies such as customer retention strategies like personalization, one-to-one marketing, and interest-based advertising (behavioral targeting), customization and customer co-production, and customer service, pricing strategies, and "Long Tail" marketing. The Insight on Technology case, The Long Tail: Big Hits and Big Misses, contains a description of collaborative filtering coupled with the use of recommender systems. This provides a good introduction to data mining. Questions for class discussion might include the following: What are "recommender systems"? Give an example you have used. What is the "Long Tail" and how do recommender systems support sales of items in the Long Tail? How can human editors, including consumers, make recommender systems more helpful? Internet Marketing Technologies. The Internet and the Web provide marketers with a set of exciting marketing technologies. Section 6.3 covers web transaction logs, tracking files databases, data warehouses, data mining, big data, and marketing automation and customer relationship management systems. You will want to spend some time on each of these technologies, noting that many of them come with a social cost, namely, the loss of privacy. A good place to end the discussion is the Insight on Society case, Every Move You Take, Every Click You Make, We'll Be Tracking You, which describes the privacy implications of tracking files. You could ask students what kinds of controls might allow marketers to use web tracking, but also protect individual privacy. Other class discussion questions might include the following: Are beacons innocuous? Or are they an invasion of personal privacy? Do you think your web browsing should be known to marketers? What are the Privacy Foundation guidelines for web beacons? Should online shopping be allowed to be a private activity? The Costs and Benefits of Online Marketing Communications. Section 6.4 introduces the vocabulary of online marketing. A good way to begin is to review Table 6.6, which describes the different metrics used in online advertising. Most research has demonstrated that display ads are effective for producing both brand recognition and immediate sales, and that this effect is positive even when consumers do not click. The online consumer purchasing model in Figure 6.10 gives the students a quantitative idea of the connection between exposure to a banner ad and a subsequent sale. Some may find it surprising that 100,000 untargeted impressions may only lead to a tiny level of purchases (50). This can be improved dramatically by targeting the advertisement or using e-mail or pay for inclusion communications. Indeed, e-mail response rates are considerably higher than direct mail, banner ads, or even traditional media ads. In general, online advertising is more cost-effective than traditional advertising via offline media such as television, radio, and newspapers. The section concludes with a quick look at marketing analytics software packages, which can be used to measure online marketing results. Figure 6.11 provides a conceptual overview of how the various types of data that can be collected and analyzed using such software relates to each of the stages in the online purchasing process. In Section 6.5, we offer students information and tips about how the concepts they've learned in this chapter can help them prepare for an interview for an entry-level position as a digital marketing assistant. The chapter-ending case study, Programmatic Advertising: Real-Time Marketing, in Section 6.6, examines the increasing ability of advertising networks and exchanges to deliver behaviorally tracked display ads directly to users in real time, as well as some of the issues raised by this practice.

Table 4.4 Basic Functionality Provided by Web Servers

Processing of H T T P requests - Receive and respond to client requests for H T M L pages Security services (Secure Sockets Layer)/ Transport Layer Security - Verify username and password; process certificates and private/public key information required for credit card processing and other secure information File Transfer Protocol - Permits transfer of very large files from server to server Search engine Indexing of site content; keyword search capability Data capture Log file of all visits, time, duration, and referral source E-mail Ability to send, receive, and store e-mail messages Site management tools Calculate and display key site statistics, such as unique visitors, page requests, and origin of requests; check links on pages

Key Points: Chapter 3

Section 3.1 covers the evolution of the Internet and the key technology underlying the Internet, including the development of the mobile platform and cloud computing, and various Internet protocols and utility programs. Evolution of the Internet. The Internet has evolved over three stages: Innovation (1961 to 1974), Institutionalization (1975 to 1995), and Commercialization (1995 to the present). Internet Foundation Technologies. The Internet relies on three foundation technologies: packet switching, TCP/IP, and client/server technology. Compare the power growth curves of the basic computer chip with that of trains, automobiles, and television. For instance, trains moved from 15 miles an hour in 1865 to over 100 miles per hour by 1965. Although this is impressive, it is nothing compared to computer chips. The cost performance of computers has improved by ten to the seventh power in the last forty years. A computer purchased in the year 2000 runs 10 million times faster than a computer purchased in the 1960s. A desktop computer purchased in 2016 comes with a terabyte drive and is approximately 3 million times faster than a year 2000 computer. There is every reason to believe this performance curve will be maintained in the short-term future. The business possibilities here are mindboggling and we can't count on so- called Internet experts and gurus to predict how these technologies will be used in business even three years from now. The very nature of the client computer itself is changing by becoming much smaller and more mobile. Smartphones and tablet computers are leading the charge here, and in the next five years we should expect to see these devices continue to shrink by an order of magnitude while increasing in power. Key Points Another important development to discuss with students is the growing importance of "cloud computing," which refers to a model of computing in which firms and individuals obtain computing power and software applications over the Internet, rather than purchasing the hardware and software, and installing it on their own computers. Cloud computing is the fastest growing form of computing right now, and radically reduces the cost of building and operating websites because the necessary hardware infrastructure and software can be licensed as a service from Internet providers at a fraction of the cost of purchasing these services as products. Also note the differences between public, private, and hybrid clouds, since students need to understand to what these terms refer. Internet Protocols and Utility Programs. The Internet relies on a variety of communications protocols such as HTTP, SMTP, and POP mail protocols, FTP, and utility programs (software applications) such as Ping and Tracert. Internet Infrastructure and Access. Section 3.2 reviews the Internet's current architecture. Figure 3.10, the Hourglass Model of the Internet, is very useful for illustrating how Internet hardware and software relate to one another. See Figure 3.11 to analyze how a message moves, from the client on the left of the figure to the client on the right. The remainder of this section examines some of the primary features of the Internet's infrastructure: the backbone and Tier 1 Internet Service Providers (Tier 1 ISPs), Internet Exchange Points (IXPs), Tier 3 Internet Service Providers (Tier 3 ISPs), which provide the last mile of service to the home or office, campus/corporate area networks, and the mobile platform, including various types of cellular services and Wi-Fi. The section also looks at some innovative new Internet access technologies being developed such as using drones, high-altitude balloons and unused analog television signals (white spaces) and concludes with a review of the Internet of Things. The Insight on Business case, The Apple Watch: Bringing the Internet of Things to Your Wrist examines the expansion of the mobile digital platform to wearable technologies like the Apple Watch and the new possibilities for e-commerce made possible by these devices. Possible class discussion questions for this case include the following: ● Are you or anyone you know using the Apple Watch? If not, why not? If so, what apps do you use the most? ● What are the potential benefits of wearable technology? Are there any disadvantages? ● What effects will features like the Apple Pay button and the Taptic Engine have? ● Are there any privacy issues raised by wearable technology? Before leaving this section, take time to discuss the material on who governs the Internet and the Insight on Society case, Government Regulation and Surveillance of the Internet. Students might be surprised at the extent to which governments surveil the Internet. Class discussion questions might include the following: ● How is it possible for any government to "control" or censor the Web? ● Does the Chinese government, or the U.S. government have the right to censor content on the Web? ● How should U.S. companies deal with governments that want to censor content? ● What would happen to e-commerce if the existing Web split into a different Web for each country? How the Web Works. Section 3.3 covers the Web. Key concepts for understanding the Web are hypertext, URLs, HTML (including CSS and HTML5), XML, web servers, and web clients (see pages 154 to 162). You may refer to HTML code behind a popular web page such as Amazon. The Internet and the Web: Features and Services. Without the Web and the Internet, e-commerce would be a fraction of its current size. The Web has enabled e-commerce to explode rapidly because of its ability to store and display product information (enabling order entry), receive payments, allow consumers to search for products, and support a wide range of commercial communication. Section 3.4 begins with an overview of the various communication tools that the Internet and Web provide: e-mail, messaging applications, online message boards, Internet telephony, and video conferencing, video chatting, and telepresence. Next, it looks at search engines, providing a brief review of the history of search engines, including Google, and explaining how they work. Students may be particularly interested in Figure 3.17, How Google Works, given the importance that Google's search engine plays in everyday life. This is a new, enhanced infographic that should help students better understand what goes on behind the scenes when they type a search query into Google. The section also briefly covers various types of downloadable and streaming media, as well as Web 2.0 applications and technologies that have had a significant impact on e-commerce, most importantly online social networks. The section concludes with a review of two new topics that are starting to make an impact on e-commerce: virtual and augmented reality and intelligent personal assistants such as Apple's Siri, Amazon's Alexa and Google Assistant. Ask your students to offer examples of each of these features/services that they have used within the past month. The Insight on Technology case, Leaping Into the Future with AR and VR, describes the rise of augmented reality and virtual reality applications and their marketing potential. While these technologies have not yet fully entered the mainstream, many of the tech titans are pouring money into AR and VR, expecting it to play a significant role in future marketing campaigns. Class discussion questions include: ● What are some of the challenges to the widespread adoption of AR and VR? ● Why are major players such as Facebook, Google, Apple, Amazon, and telecommunications companies so interested in AR and VR applications? ● Have you used any e-commerce-related AR or VR applications? If you have, did you find them to be useful? What did you like about them? What didn't you like? Mobile Apps: The Next Big Thing Is Here. Section 3.5 focuses on the explosion of mobile apps and their use as entertainment media and shopping tools. The section also briefly reviews the various mobile app development platforms and app marketplaces available. In Section 3.6, information and tips about how the concepts learned in this chapter can help students prepare for an interview for an entry-level position as an e-commerce specialist has been provided.

Raising Capital

Seed capital Elevator pitch Traditional sources -Incubators, angel investors -Commercial banks, venture capital firms -Strategic partners Crowdfunding -J O B S Act

Digital Commerce Marketing and Advertising: Strategies and Tools

•Features of Internet marketing (versus traditional) -More personalized -More participatory -More peer-to-peer -More communal •The most effective Internet marketing has all four features

Table 4.9 Improving the Processing Architecture of Your Site

Separate static content from dynamic content Use specialized servers for each type of workload. Cache static content Increase R A M to the gigabyte range and store static content in R A M. Cache database lookup tables Use cache tables used to look up database records. Consolidate business logic on dedicated servers Put shopping cart, credit card processing, and other C P U-intensive activity on dedicated servers. Optimize A S P code Examine your code to ensure it is operating efficiently. Optimize the database schema Examine your database search times and take steps to reduce access times.

SWOT Analysis

Strengths, weaknesses, opportunities, threats

Key Points: Chapter 5

The opening case, Cyberwar: MAD 2.0, highlights the increasing vulnerability of the Web to large-scale attacks, against both "hard" targets such as physical infrastructure, as well as "soft" targets such as the U.S. political process. Ask students to discuss how their daily life might be affected as a result. Indeed, at times it appears that the Internet itself has become a battlefield involving not just rogue groups of terrorists attacking the systems of developed countries but also involving large nation states like the United States as an active participant in conducting its own cyberwar for its own purposes. Additional questions for class discussion might include the following: ● What is the difference between cyberwar and cyberespionage? ● Why has cyberwar become more potentially devastating in the past decade? ● What damage can be done by cyberweapons like Stuxnet? ● Is it possible to find a political solution to MAD 2.0? Section 5.1 addresses the e-commerce security environment, including the scope of the problem, including the underground economy marketplace, defining good security, the key dimensions of e-commerce security, and the tension between security and other values. The Scope of the Problem. This section is likely to be of interest to students. Ask students to discuss whether they or anyone they know has ever been a victim of cybercrime. Do they think cybercrime is being overplayed or underplayed in the popular press, given the statistics available and discussed in this section? Defining Good Security. Good security has many elements. Table 5.3 lists the six key ingredients required for e-commerce sites and how the key stakeholders (consumers and merchants) view the issue. You may want to walk students through this table, so they understand the nature of the problem as well as the different perspectives. E-commerce Security Threats. Section 5.2 addresses the panoply of security threats in the e- commerce environment. The e-commerce environment holds threats for both consumers and merchants. Figures 5.2 and 5.3 provide illustrations of typical e-commerce transactions and vulnerable points in the transaction process. Malicious code (including exploit kits, malvertising, drive-by-downloads, viruses, worms, ransomware, Trojan horses, and bots), potentially unwanted programs (PUPs), phishing, hacking, cybervandalism and hacktivism, data breaches, credit card fraud/theft, identity fraud, spoofing/pharming, sniffing and man-in-the-middle attacks, as well as DoS/DDoS attacks are threats to e-commerce security. Credit card fraud/theft, although it appears frequently in the news, does not impact consumers as much as students might think because of federal laws that limit liability to $50 for the consumer. However, this leaves the merchant open to much higher losses. Ask students whether they have any personal experience with any of these security threats. The Insight on Society case, Equifax: Really Big Data Hacked, should be a compelling example of the potential damage to users caused by inadequate security. Questions for class discussion might include the following: ● What organization and technological failures led to the data breach at Equifax? ● What technical solutions are available to combat data breaches? ● Have you or anyone you know experienced a data breach? Many students will not necessarily realize the relationship between poorly designed server and client software and security issues, or the security issues posed by social networks or smartphones, so this is something worth pointing out. The Insight on Technology case, Think Your Smartphone Is Secure? highlights the latter issue. Class discussion questions might include the following: ● Which mobile operating system do you think is more secure—Apple's iOS or Google's Android? ● What steps, if any, do you take to make your smartphone more secure? ● What qualities of apps make them a vulnerable security point in smartphone use? As the Internet of Things grows, more of the devices and appliances around us will have components with Internet connectivity, introducing a host of new security issues. These are detailed in Table 5.5. Technology Solutions. Some types of security threats can be ameliorated through technological means, but not all. Section 5.3 focuses on technology solutions for e-commerce security. A variety of encryption techniques, in particular public key encryption, are useful for protecting Internet communications; they address issues of integrity, authenticity, and confidentiality of messages. It is beneficial to walk students slowly and carefully through Figures 5.6 and 5.7 to illustrate public key encryption and digital signatures. Figure 5.9 is useful for discussing the elements of public key infrastructure. Figure 5.10 shows how SSL/TLS—the most common form of encryption used in e-commerce transactions—works. Figure 5.11 demonstrates how firewalls and proxy servers are used to protect merchant servers and networks from hackers. There are limitations to technical security measures, and they often presume a secure organizational environment before they can work. Encryption of any kind is susceptible to disloyal or disgruntled employees and poor client-side security (such as keeping your passwords on an insecure PC directory). Encryption also slows processors and the entire transaction process; the better the security, the worse the performance. Policies, Procedures, and Laws. Even the best technical security is insufficient to protect e- commerce sites. Solid organizational policies and procedures are also required, and laws, covered in Section 5.4, are needed to deter future crime by punishing e-commerce criminal behavior. Figure 5.12 illustrates the steps managers need to follow to develop a security plan. Tables 5.6 and 5.7 illustrate how the U.S. government has used laws and regulations to both impose security, while at the same time ensuring that government can read secure messages. You might ask students to evaluate the claims of the government to be able to read secure commercial messages. How can messages be secure if the government is able to read them? Does the government have a legitimate claim here? As in all previous communications technologies, governments claim access to private messages in a variety of circumstances: war, criminal conspiracy, or imminent threats to public safety and welfare. Perhaps the real issue is who watches the government? In the United States, reliance is placed on the courts to supervise government intrusions, and on legislatures who exercise the power of the purse to control overly aggressive executive branch members. The Insight on Business case, Are Biometrics the Solution for E-commerce Security, describes the effort to improve e-commerce security by identifying individuals by their physiological characteristics, including face, fingerprints, voice, and more. Questions for discussion might include: ● What are biometrics? ● How could the use of biometrics make e-commerce more secure? ● What are some of the potential dangers in using biometrics? Section 5.5 and the end-of-chapter case study focus on e-commerce payment systems. Before delving into the different types of online payment methods, you should spend a few minutes giving students a quick overview of payment systems and stakeholders. Figure 5.13 provides a list of the most popular forms of alternative online payment methods. Online Credit Card Transactions. Payment by credit card is the most common form of e- commerce payment. Figure 5.14 illustrates how a typical online credit card transaction works. These transactions carry risks for merchants in particular. Moreover, credit cards are not equally distributed. Millions of U.S. citizens do not have a credit card, making it difficult for them to shop online. Alternative Online Payment Systems. Other online payment methods include: online stored value payment systems such as PayPal, Pay with Amazon, Visa Checkout, Bill Me Later, mobile payment systems (see also the chapter-ending case study), digital cash, and virtual currencies. Blockchain and Cryptocurrencies. Cryptocurrencies such as Bitcoin and their underlying blockchain technology have burst onto the scene in the past few years. Figure 5.16 illustrates how blockchain technology works. Although Bitcoin was created with an aim towards secure, anonymous transactions, it has nevertheless been vulnerable to theft. Table 5.9 lists some of the largest Bitcoin hacks to date. Electronic Billing Presentment and Payment. EBPP systems, covered in Section 5.6, are essentially a replacement for the physical check system in the United States, which remains the dominant form of payment. Figure 5.15 provides an overview of the players in this marketplace and the different types of bill payment systems available online. In Section 5.7, we offer students information and tips about how the concepts they've learned in this chapter can help them prepare for an interview for an entry-level position as a Cybersecurity Threat Management Team trainee. The chapter-ending case study, Mobile Payments: Fintech vs. the Bank Giants, in Section 5.8, provides further detail on mobile payment systems.

Table 4.8 Vertical and Horizontal Scaling Techniques

Use a faster computer Deploy edge servers, presentation servers, data servers, etc. Create a cluster of computers Use computers in parallel to balance loads. Use appliance servers Use special-purpose computers optimized for their task. Segment workload Segment incoming work to specialized computers. Batch requests Combine related requests for data into groups, process as group. Manage connections Reduce connections between processes and computers to a minimum. Aggregate user data Aggregate user data from legacy applications in single data pools. Cache Store frequently used data in cache rather than on the disk.

________ and ________ are typically the most easily identifiable aspects of a company's business model.

Value proposition; revenue model

Application Servers

Web application servers: -Provide specific business functionality required for a website -Type of middleware ▪Isolate business applications from Web servers and databases -Single-function applications being replaced by integrated software tools that combine all functionality needed for e-commerce site

E-Commerce in 3 stages

an early period of invention a period of consolidation reinvention

E-commerce can be defined as:

digitally enabled commercial transactions between and among organizations and individuals

All of the following may lead to a competitive advantage except:

fewer products.

Which of the following is another name for a revenue model?

financial model

First Movers vs. Fast Followers

first movers: are the people or company who is starting a completely new project and have no background on it at all (they are the starting point) fast followers: are the people or companies that follow the first movers steps and pick up the little mistakes on the way so they know not to do them in what they are creating

network effects

increases in the value of a product to each user, including existing users, as the total number of users rises

Which of the following is not a unique feature of e-commerce technology?

information asymmetry

The existence of many competitors in any one market segment may indicate:

the market is saturated.

friction-free commerce

vision of commerce which info. is equally distributed, low cost, adjustable prices, decline of intermediaries, and unfair competitive advantages are eliminated

Consumers Online: The Internet Audience and Consumer Behavior (1 of 3)

• Around 280 million in the U.S. have Internet access in 2018 • Growth rate has slowed • Intensity and scope of use both increasing • Some demographic groups have much higher percentages of online usage -Income, education, age, ethnic dimensions

B2C Models: Market Creator

• Create digital environment where buyers and sellers can meet and transact - Examples: Priceline, eBay - Revenue model: Transaction fees, fees to merchants for access • On-demand service companies (sharing economy): platforms that allow people to sell services - Examples: Uber, Airbnb

B2B Models: Exchanges

• Independently owned vertical digital marketplace for direct inputs • Revenue model: Transaction, commission fees • Create powerful competition between suppliers • Tend to force suppliers into powerful price competition; number of exchanges has dropped dramatically •Example: Go2Paper

B2B Models: Industry Consortia

• Industry-owned vertical digital marketplace open to select suppliers • More successful than exchanges - Sponsored by powerful industry players - Strengthen traditional purchasing behavior • Revenue model: Transaction, commission fees • Example: SupplyOn

Who Governs the Internet?

• Organizations that influence the Internet and monitor its operations include: -Internet Corporation for Assigned Names and Numbers (I CA N N) -Internet Engineering Task Force (I E T F) -Internet Research Task Force (I R T F) -Internet Engineering Steering Group (I E S G) -Internet Architecture Board (I A B) -Internet Society (I S O C) -Internet Governance Forum (I G F) -World Wide Web Consortium (W3C) -Internet Network Operators Groups (N O G s)

1. Value Proposition

•"Why should the customer buy from you?" •Successful e-commerce value propositions: -Personalization/customization -Reduction of product search, price discovery costs -Facilitation of transactions by managing product delivery

The Web

•1989-1991: Web invented -Tim Berners-Lee at CERN -HTML, HTTP, web server, web browser •1993: Mosaic web browser w/GUI -Andreessen and others at NCSA -Runs on Windows, Macintosh, or Unix •1994: Netscape Navigator, first commercial web browser •1995: Microsoft Internet Explorer

Firm Value Chains

•Activities that a firm engages in to create final products from raw inputs •Each step adds value •Effect of Internet: - Increases operational efficiency - Enables product differentiation - Enables precise coordination of steps in chain

Digital Envelopes

•Address weaknesses of: -Public key cryptography ▪Computationally slow, decreased transmission speed, increased processing time -Symmetric key cryptography ▪Insecure transmission lines •Uses symmetric key cryptography to encrypt document •Uses public key cryptography to encrypt and send symmetric key

Other Types of Traditional Online Marketing

•Affiliate marketing -Commission fee paid to other websites for sending customers to their website •Viral marketing -Marketing designed to inspire customers to pass message to others •Lead generation marketing -Services and tools for collecting, managing, and converting leads

Phishing

•Any deceptive, online attempt by a third party to obtain confidential information for financial gain •Tactics -Social engineering -E-mail scams and B E C phishing -Spear phishing •Used for identity fraud and theft

Web Server Software

•Apache -Leading web server software -Works with U N I X, Linux operating systems -Reliable, stable, part of open software community •Microsoft's Internet Information Server (I I S) -Second major web server software -Windows-based -Integrated, easy-to-use

Online Marketing Metrics: Lexicon

•Audience size/market share metrics -Impressions, click-through rate (C T R), page views, viewability rate, stickiness, loyalty, reach, recency •Conversion to customer metrics -Acquisition rate, conversion rate, browse-to-buy ratio, cart conversion rate, abandonment rate •Video ad metrics -View time, completion rate •E-mail campaign metrics -Open rate, delivery rate, click-through rate, bounce-back rate

Display Ad Marketing (1 of 2)

•Banner ads •Rich media ads -Interstitial ads •Video ads -Far more effective than other display formats •Sponsorships •Native advertising

Site Management Tools

•Basic tools included in all web servers -Verify that links on pages are still valid -Identify orphan files •Third-party software for advanced management -Monitor customer purchases -Marketing campaign effectiveness -Keep track of hit counts and other statistics -Example: Webtrends Analytics 10

Hadoop and the Challenge of Big Data

•Big data -Petabyte, exabyte range -Web traffic, e-mail, social media, content -Traditional D B M S unable to process the increasing volume of data •Hadoop -Open-source software framework -Processes any type of data, even unstructured -Distributed processing

What Consumers Shop for and Buy Online

•Big ticket items ($1000 or more) -Travel, computer hardware, electronics -Consumers now more confident in purchasing costlier items •Small ticket items ($100 or less) -Apparel, books, office supplies, software, etc. •Sales of bulky goods, furniture and large appliances, rapidly expanding

Blockchain

•Blockchain -Enables organizations to create and verify transactions nearly instantaneously using a distributed P2P database (distributed ledger) •Benefits: -Reduces costs of verifying users, validating transactions, and risks of storing and processing transaction information -Transactions cannot be altered retroactively and therefore are more secure •Foundation technology for cryptocurrencies and supply chain management, as well as potential applications in financial services and healthcare industries

Consumers Online: The Internet Audience and Consumer Behavior (2 of 3)

•Broadband and mobile -Significant inequalities in broadband access -Older adults, lower income, lower educational levels -Non-broadband household still accesses Internet via mobile or other locations •Community effects -Role of social emulation in consumption decisions -"Connectedness" ▪Top 10-15% are more independent ▪Middle 50% share more purchase patterns of friends -Recommender systems - co-purchase networks

Potentially Unwanted Programs

•Browser parasites -Monitor and change user's browser •Adware -Used to call pop-up ads •Spyware -Tracks users keystrokes, e-mails, I M s, etc.

The Internet and Web: Features

•Features on which the foundations of e-commerce are built: -Communication tools -Search engines -Downloadable and streaming media -Web 2.0 applications and services -Virtual reality and augmented reality -Intelligent digital assistants

Web Transaction Logs

•Built into web server software •Record user activity at website •Provides much marketing data, especially combined with: -Registration forms -Shopping cart database •Answers questions such as: -What are major patterns of interest and purchase? -After home page, where do users go first? Second?

E-commerce Business Models

•Business model -Set of planned activities designed to result in a profit in a marketplace •Business plan -Describes a firm's business model •E-commerce business model -Uses/leverages unique qualities of Internet and Web

System Analysis/Planning

•Business objectives: -List of capabilities you want your site to have •System functionalities: -List of information system capabilities needed to achieve business objectives •Information requirements: -Information elements that system must produce in order to achieve business objectives *Business Objective* Display goods Provide productinformation Personalize/customize product Engage customers in conversations Execute a transaction Accumulate customer information Provide after-sale customer support Coordinate marketing/advertising Understand marketing effectiveness Provide production and supplier links *System Functionality* Digital Catalog Product database Customer on-site tracking On-site blog; user forums Shopping cart/payment system Customer database Sales database Ad server, e-mail server, e-mail, campaign manager, ad banner manager Site tracking and reporting system Inventory management system *Information Requirements* Dynamic text and graphics catalog Product description, stocking numbers, inventory levels Site log for every customer visit; data mining capability to identify common customer paths and appropriate responses Software with blogging and community forum functionality Secure credit card clearing; multiple payment options Name, address, phone, and e-mail for all customers; online customer registration Customer I D, product, date, payment, shipment date Site behavior log of prospects and customers linked to e-mail and banner ad campaigns Number of unique visitors, pages visited, products purchased, identified by marketing campaign Product and inventory levels, supplier I D and contact, order quantity data by product

Major Trends in E-commerce

•Business trends include: -All forms of e-commerce show very strong growth •Technology trends include: -Mobile platform has made mobile e-commerce reality •Societal trends include: -Increased online social interaction and sharing

Types of E-commerce

•Business-to-Consumer (B2C) •Business-to-Business (B2B) •Consumer-to-Consumer (C2C) •Mobile e-commerce (M-commerce) •Social e-commerce •Local e-commerce

Tools for Interactivity and Active Content

•C G I (Common Gateway Interface) •A S P (Active Server Pages)/A S P.NET •Java, J S P, and JavaScript (including Angular J S, D3, jQuery and Ajax) •ActiveX and V B Script •ColdFusion •P H P, Ruby on Rails, Django •Other design elements: -Widgets, mashups

Internet of Things Security Issues

•Challenging environment to protect •Vast quantity of interconnected links •Near identical devices with long service lives •Many devices have no upgrade features •Little visibility into workings, data, or security

Insight on Business: Weebly Makes Creating Websites Easy

•Class Discussion -What value does Weebly offer to small businesses? -Are there any drawbacks to using Weebly to create an e-commerce presence? -How are service providers like Weebly changing the nature of e-commerce?

Insight on Business: Y Combinator's Startup Boot Camp

•Class Discussion -Why do you think investors today are still interested in investing in startups? -What are the benefits of investing in a company that is a graduate of a Y Combinator boot camp? -Is an incubator the best solution for startups to find funding? Why or why not?

Insight on Society: Foursquare: Check Your Privacy at the Door

•Class discussion: -What revenue model does Foursquare use? What other revenue models might be appropriate? -Are privacy concerns the only shortcoming of location-based mobile services? -Should business firms be allowed to text or call mobile devices with advertising messages based on location?

Insight on Society: Facebook and the Age of Privacy

•Class discussion: -Why are social networks interested in collecting user information? -What types of privacy invasion are described in the case? Which is the most privacy-invading, and why? -How is e-commerce different from traditional markets with respect to privacy? Don't merchants always want to know their customer? -How do you protect your privacy online?

The Internet Backbone

•Comprised of fiber-optic cable: hundreds of glass strands that use light to transmit data -Faster speeds and greater bandwidth -Thinner, lighter cables -Less interference -Better data security •Tier 1 Internet Service Providers (Tier 1 ISPs) or transit ISPs •Numerous private networks physically connected to each other •Undersea fiber optics, satellite links

Intelligent Digital Assistants

•Computer search engine using: -Natural language -Conversational interface, verbal commands -Situational awareness •Can handle requests for appointments, flights, routes, event scheduling, and more. -Examples: § Apple's Siri § Google Now/Google Assistant § Amazon Alexa

Consumers Online: The Internet Audience and Consumer Behavior (3 of 3)

•Consumer behavior models -Study of consumer behavior; social science discipline -Attempt to predict or explain wide range of consumer decisions -Based on background demographic factors and other intervening, more immediate variables •Profiles of online consumers -Consumers shop online primarily for convenience

Display Ad Marketing (2 of 2)

•Content marketing •Advertising networks •Ad exchanges, programmatic advertising, and real-time bidding (R T B) •Display advertising issues -Ad fraud -Viewability -Ad blocking

B2B Models: E-Procurement

•Creates digital markets where participants transact for indirect goods - B2B service providers, S a a S and P a a S providers - Scale economies •Revenue model: - Service fees, supply-chain management, fulfillment services •Example: Ariba

Right-Sizing Your Hardware Platform: the Demand Side

•Customer demand: -Most important factor affecting speed of site •Factors in overall demand: -Number of simultaneous users in peak periods -Nature of customer requests (user profile) -Type of content (dynamic versus static Web pages) -Required security -Number of items in inventory -Number of page requests -Speed of legacy applications

Other Online Marketing Strategies

•Customer retention strategies -One-to-one marketing (personalization) -Behavioral targeting (interest-based advertising) -Retargeting •Customization and customer co-production •Customer service -F A Qs -Real-time customer service chat systems -Automated response systems

Cloud Security Issues

•D D o S attacks •Infrastructure scanning •Lower-tech phishing attacks yield passwords and access •Use of cloud storage to connect linked accounts •Lack of encryption and strong security procedures

Data Warehouses and Data Mining

•Data warehouse: -Collects firm's transactional and customer data in single location for offline analysis by marketers and site managers •Data mining: -Analytical techniques to find patterns in data, model behavior of customers, develop customer profiles •Query-driven data mining •Model-driven data mining •Rule-based data mining

The Online Purchasing Decision (2 of 2)

•Decision process similar for online and offline behavior •General online behavior model -User characteristics -Product characteristics -Website features: latency, usability, security -Attitudes toward online purchasing -Perceptions about control over Web environment •Clickstream behavior

Denial of Service (D o S) and Distributed Denial of Service (D D o S) Attacks

•Denial of service (D o S) attack -Flooding website with pings and page request -Overwhelm and can shut down site's web servers -Often accompanied by blackmail attempts -Botnets •Distributed Denial of Service (D D o S) attack -Uses hundreds or thousands of computers to attack target network -Can use devices from Internet of Things, mobile devices •D D o S smokescreening

Digital Certificates and Public Key Infrastructure (P K I)

•Digital certificate includes: -Name of subject/company -Subject's public key -Digital certificate serial number -Expiration date, issuance date -Digital signature of C A •Public Key Infrastructure (P K I): -C A s and digital certificate procedures -P G P

Private Industrial Networks

•Digital network used to coordinate among firms engaged in business together •Typically evolve out of large company's internal enterprise system - Key, trusted, long-term suppliers invited to network •Example: Walmart's network for suppliers

E-mail Marketing

•Direct e-mail marketing -Messages sent directly to interested users -Benefits include ▪Inexpensive ▪Average around 3% to 4% click-throughs ▪Measuring and tracking responses ▪Personalization and targeting •Three main challenges -Spam -Anti-spam software -Poorly targeted purchased e-mail lists

E-commerce Technology and Business Model Disruption

•Disruptive technologies •Digital disruption •Sustaining technology •Stages - Disruptors introduce new products of lower quality - Disruptors improve products - New products become superior to existing products - Incumbent companies lose market share

Limitations of P K I

•Doesn't protect storage of private key -P K I not effective against insiders, employees -Protection of private keys by individuals may be haphazard •No guarantee that verifying computer of merchant is secure •C A s are unregulated, self-selecting organizations

Domain Names, DNS, and URLs

•Domain name -I P address expressed in natural language •Domain name system (DNS) -Allows numeric I P addresses to be expressed in natural language •Uniform resource locator (U R L) -Address used by web browser to identify location of content on the Web

Downloadable and Streaming Media

•Downloads: -Growth in broadband connections enables large media file downloads •Streaming technologies -Enables music, video, and other large files to be sent to users in chunks so that the file can play uninterrupted •Podcasting •Explosion in online video viewing

Dynamic Page Generation Tools

•Dynamic page generation: -Contents stored in database and fetched when needed •Common tools: -C G I, A S P, J S P, O D B C, J D B C •Advantages -Lowers menu costs -Permits easy online market segmentation -Enables cost-free price discrimination -Enables content management system (C M S)

The Difference between E-commerce and E-business

•E-business: -Digital enabling 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

How E-commerce Changes Business

•E-commerce changes industry structure by changing: - Rivalry among existing competitors - Barriers to entry - Threat of new substitute products - Strength of suppliers - Bargaining power of buyers •Industry structural analysis

Communication Tools

•E-mail -Most used application of the Internet •Messaging Applications -Instant messaging •Online message boards •Internet telephony -VOIP •Videoconferencing, video chatting, telepresence

B2C Business Models

•E-tailer •Community provider (social network) •Content provider •Portal •Transaction broker •Market creator •Service provider

The Tension between Security and Other Values

•Ease of use -The more security measures added, the more difficult a site is to use, and the slower it becomes •Public safety and criminal uses of the Internet -Use of technology by criminals to plan crimes or threaten nation-state

Databases

•Enable profiling •Store records and attributes •Database management system (D B M S): •S Q L (Structured Query Language): -Industry-standard database query and manipulation language used in a relational database •Relational databases

Encryption

•Encryption -Transforms data into cipher text readable only by sender and receiver -Secures stored information and information transmission -Provides 4 of 6 key dimensions of e-commerce security: ▪Message integrity ▪Nonrepudiation ▪Authentication ▪Confidentiality

Malicious Code

•Exploits and exploit kits •Malvertising •Drive-by downloads •Viruses •Worms •Ransomware •Trojan horses •Backdoors •Bots, botnets

Protecting Networks

•Firewall -Hardware or software that uses security policy to filter packets ▪Packet filters ▪Application gateways -Next-generation firewalls •Proxy servers (proxies) -Software servers that handle all communications from or sent to the Internet •Intrusion detection systems •Intrusion prevention systems

The Internet "Cloud Computing" Model

•Firms and individuals obtain computing power and software over Internet •Three types of services -Infrastructure as a service (IaaS) -Software as a service (SaaS) -Platform as a service (PaaS) •Public, private, and hybrid clouds •Drawbacks -Security risks -Shifts responsibility for storage and control to providers •Radically reduces costs of: -Building and operating websites -Infrastructure, I T support -Hardware, software

The First Thirty Seconds

•First two decades of e-commerce -Just the beginning -Rapid growth and change •Technologies evolve at exponential rates -Disruptive business change -New opportunities •Why study e-commerce -Understand opportunities and risks -Analyze e-commerce ideas, models, issues

The Online Purchasing Decision (1 of 2)

•Five stages in consumer decision process -Awareness of need -Search for more information -Evaluation of alternatives -Actual purchase decision -Post-purchase contact with firm

Pricing Strategies (2 of 2)

•Free and freemium •Versioning •Bundling •Dynamic pricing -Auctions -Yield management -Surge pricing -Flash marketing

Other Innovative Internet Access Technologies: Drones, Balloons, and White Space

•Google: Project Loon •Facebook: Facebook Connectivity Lab/Acquila drone •Microsoft: Airband Initiative (white spaces)

Hacking, Cybervandalism, and Hacktivism

•Hacking -Hackers versus crackers -White hats, black hats, grey hats -Tiger teams -Goals: cybervandalism, data breaches •Cybervandalism: -Disrupting, defacing, destroying Web site •Hacktivism

Choosing Hardware

•Hardware platform: -Underlying computing equipment needed for e-commerce functionality •Objective: -Enough platform capacity to meet peak demand without wasting money •Important to understand the factors that affect speed, capacity, and scalability of a site

How Consumers Shop

•How shoppers find online vendors -Highly intentional, goal-oriented -Search engines -Marketplaces (Amazon, e Bay) -Specific retail site •About 8% of Internet users don't shop online -Trust factor -Hassle factors (shipping costs, returns, etc.)

Markup Languages

•Hypertext Markup Language (H T M L) -Fixed set of pre-defined markup "tags" used to format text -Controls look and feel of web pages -Used in conjunction with C S S (Cascading Style Sheets) -H T M L5 the newest version •eXtensible Markup Language (X M L) -Designed to describe data and information -Tags used are defined by user

Internet (I P) Addresses

•IPv4 - 32-bit number -Four sets of numbers marked off by periods: 201.61.186.227 §Class C address: Network identified by first three sets, computer identified by last set •IPv6 -128-bit addresses, able to handle up to 1 quadrillion addresses (I P v4 can handle only 4 billion) Figure 3.5, Page 122. The Internet uses packet-switched networks and the TCP/IP communications protocol to send, route, and assemble messages. Messages are broken into packets, and packets from the same message can travel along different routes. Alt Text Long description: An illustration explains how T C P, I P, and packet switching are used to route internet messages, as follows: A message is sent from the sender. Step 1, T C P, I P breaks the data into packets. Step 2, the packets travel from router to router over the Internet. Step 3, T C P, I P reassembles the packets into the original whole. The message arrives at the receiver.

Planning and Building a Mobile Presence

•Identify business objectives, system functionality, and information requirements •Choice: -Mobile website or mobile Web app ▪Less expensive -Native app ▪Can use device hardware, available offline

Search Engines

•Identify web pages that match queries based on one or more techniques -Keyword indexes -Page ranking •Also serve as: -Shopping tools -Advertising vehicles (search engine marketing) -Tool within e-commerce sites •Top three providers: Google, Microsoft's Bing, Verizon Media (Yahoo)

E-commerce Payment Systems

•In U.S., credit and debit cards are primary online payment methods -Other countries have different systems •Online credit card purchasing cycle •Credit card e-commerce enablers •Limitations of online credit card payment -Security, merchant risk -Cost -Social equity

Poorly Designed Software

•Increase in complexity of and demand for software has led to increase in flaws and vulnerabilities •S Q L injection attacks •Zero-day vulnerability •Heartbleed bug; Shellshock (BashBug); F R E A K

The Evolution of the Internet 1961-Present

•Innovation Phase, 1961-1974 -Creation of fundamental building blocks •Institutionalization Phase, 1975-1995 -Large institutions provide funding and legitimization •Commercialization Phase, 1995-present -Private corporations take over, expand Internet backbone and local service

Merchant Server Software Packages

•Integrated environment that includes most of functionality needed -Shopping cart -Merchandise display -Order management •Different options for different-sized businesses -Small and medium-sized businesses: Yahoo Small Business; open-source solutions -Mid-range: I B M WebSphere Commerce Express; Sitecore Experience Commerce -High-end: I B M WebSphere Professional/Enterprise; S A P Hybris, Oracle A T G Web Commerce, etc. •Many now also available as cloud-based SaaS solutions. •Key factors in selecting a package -Functionality -Support for different business models, including m-commerce -Business process modeling tools -Visual site management and reporting -Performance and scalability -Connectivity to existing business systems -Compliance with standards -Global and multicultural capability -Local sales tax and shipping rules

Multi-Channel Marketing

•Integration of online and offline marketing •Increasing percentage of American media consumers use several media at once •Reinforce branding messages across media •Most effective multi-channel campaigns use consistent imagery across media

The Internet: Technology Background

•Internet -Interconnected network of thousands of networks and millions of computers -Links businesses, educational institutions, government agencies, and individuals •World Wide Web (Web) -One of the Internet's most popular services -Provides access to billions, possibly trillions, of web pages

Technological Building Blocks Underlying E-commerce

•Internet •World Wide Web -H T M L -Deep Web versus "surface" Web •Mobile platform -Mobile apps

Long Tail Marketing

•Internet allows for sales of obscure products with little demand •Substantial revenue because -Near zero inventory costs -Little marketing costs -Search and recommendation engines

The Internet: Key Technology Concepts

•Internet defined as network that: -Uses I P addressing -Supports T C P/I P -Provides services to users, in manner similar totelephone system •Three important concepts: -Packet switching -T C P/I P communications protocol -Client/server computing

Internet Infrastructure

•Internet has been able to grow exponentially without disruption because of: -Client/server computing model -Hourglass, layered architecture § Network Technology Substrate § Transport Services and Representation Standards § Middleware Services § Applications

Other Internet Protocols and Utility Programs

•Internet protocols -H T T P -E-mail: SMTP, POP3, IMAP -F T P, Telnet, SSL/TLS •Utility programs -Ping -Tracert

Internet Marketing Technologies

•Internet's main impacts on marketing: -Scope of marketing communications broadened -Richness of marketing communications increased -Information intensity of marketplace expanded -Always-on mobile environment expands marketing opportunities

Insider Attacks

•Largest threat to business institutions come from insider embezzlement •Employee access to privileged information •Poor security procedures •Insiders more likely to be source of cyberattacks than outsiders

The Role of Laws and Public Policy

•Laws that give authorities tools for identifying, tracing, prosecuting cybercriminals: -U S A Patriot Act -Homeland Security Act •Private and private-public cooperation -U S-C E R T -C E R T Coordination Center •Government policies and controls on encryption software -O E C D, G7/G8, Council of Europe, WassenerArrangement

Mobile Platform Security Issues

•Little public awareness of mobile device vulnerabilities •2017: Over 26,500 different mobile malware variants identified by Symantec •Vishing •Smishing •S M S spoofing •Madware

Campus/Corporate Area Networks

•Local area networks operating within single organization, such as N Y U or Microsoft Corporation •Lease Internet access directly from regional and national carriers

Marketing Automation and Customer Relationship Management (C R M) Systems

•Marketing automation systems -Track steps in lead generation •C R M systems -Manage relationship with customers once purchase is made -Create customer profiles •Customer data used to: -Develop and sell additional products -Identify profitable customers -Optimize service delivery, and so on

Planning: The Systems Development Life Cycle

•Methodology for understanding business objectives of a system and designing an appropriate solution •Five major steps: -Systems analysis/planning -Systems design -Building the system -Testing -Implementation

Mobile Presence: Performance and Cost Considerations

•Mobile first design -Most efficient •Mobile website -Resizing existing website for mobile access is least expensive •Mobile web app -Can utilize browser A P I •Native app -Most expensive; requires more programming

Mobile Presence: Performance and Cost Considerations

•Mobile first design -Most efficient •Mobile website -Resizing existing website for mobile access is least expensive •Mobile web app -Can utilize browser A P I •Native app -Most expensive; requires more programming

Building an E-commerce Site: A Systematic Approach

•Most important management challenges: 1.Developing a clear understanding of business objectives 2.Knowing how to choose the right technology to achieve those objectives •Main factors to consider -Management -Hardware architecture -Software -Design -Telecommunications -Human resources

B2B Business Models

•Net marketplaces - E-distributor - E-procurement - Exchange - Industry consortium •Private industrial network

Firm Value Webs

•Networked business ecosystem •Uses Internet technology to coordinate the value chains of business partners •Coordinates a firm's suppliers with its own production needs using an Internet-based supply chain management system

Cross-Platform Mobile App Development Tools

•Objective C, Java •Low cost, open-source alternatives -Appery.io -Codiqa -Swiftic -PhoneGap -Axway Appcelerator

The Internet of Things (IOT)

•Objects connected via sensors/R F I D to the Internet •"Smart things" •Interoperability issues and standards •Security and privacy concerns

Web 2.0 Features and Services

•Online Social Networks -Services that support communication among networks of friends, peers •Blogs -Personal web page of chronological entries -Enables web page publishing with no knowledge of HTML •Wikis -Enables documents to be written collectively and collaboratively -E.g., Wikipedia

Online Marketing and Advertising

•Online advertising -Display, search, mobile messaging, sponsorships, classifieds, lead generation, e-mail -Advantages: ▪18-34 audience is online ▪Ad targeting to individuals ▪Price discrimination ▪Personalization

Electronic Billing Presentment and Payment (E B P P)

•Online payment systems for monthly bills •Four E B P P business models: -Online banking model (most widely used) -Biller-direct -Mobile -Consolidator •All models are supported by E B P P infrastructure providers

B2C Models: Service Provider

•Online services - Example: Google-Google Maps, Gmail, and so on •Value proposition - Valuable, convenient, time-saving, low-cost alternatives to traditional service providers •Revenue models: - Sales of services, subscription fees, advertising, sales of marketing data

Alternative Online Payment Systems

•Online stored value systems: -Based on value stored in a consumer's bank, checking, or credit card account -Example: PayPal •Other alternatives: -Amazon Pay -Visa Checkout, Mastercard's MasterPass -Dwolla

B2C Models: E-Tailer

•Online version of traditional retailer •Revenue model: Sales •Variations: -Virtual merchant -Bricks-and-clicks -Catalog merchant -Manufacturer-direct •Low barriers to entry

Protecting Servers and Clients

•Operating system security enhancements -Upgrades, patches •Anti-virus software -Easiest and least expensive way to prevent threats to system integrity -Requires daily updates

Data Breaches

•Organization loses control over corporate information to outsiders •Over 1,575 breaches in 2017, 45% increase over 2016 •Yahoo and Equifax two of the most notorious; Facebook breach in 2018 exposed personal information of 30 million •Leading causes -Hacking -Unauthorized access -Employee error/negligence

Building the System: In-House Versus Outsourcing

•Outsourcing: Hiring vendors to provide services involved in building site •Build own versus. outsourcing: -Build your own requires team with diverse skill set; choice of software tools; both risks and possible benefits •Host own versus. outsourcing -Hosting: Hosting company responsible for ensuring site is accessible 24/7, for monthly fee -Co-location: Firm purchases or leases web server (with control over its operation), but server is located at vendor's facility

Personalization Tools

•Personalization -Ability to treat people based on personal qualities and prior history with site •Customization -Ability to change the product to better fit the needs of the customer •Cookies -Primary method to achieve personalization

Business Strategy

•Plan for achieving superior long-term returns on capital invested: that is, profit •Five generic strategies - Product/service differentiation - Cost competition - Scope - Focus/market niche - Customer intimacy

Mobile Presence Design Considerations

•Platform constraints -Graphics, file sizes •Mobile first design -Desktop website design after mobile design •Responsive web design (R W D) -C S S site adjusts layout of site according to device screen resolutions •Adaptive web design (A W D) -Server delivers different templates or versions of site optimized for device

Careers in E-commerce

•Position: Category specialist in E-commerce Retail Program •Qualification/Skills •Preparing for the Interview •Possible Interview Questions

Client/Server Computing

•Powerful desktop computers (clients) connected in network with one or more servers •Servers perform common functions for the clients -Storing files -Software applications -Access to printers, and so on

E-commerce: A Brief History

•Precursors -Baxter Healthcare modem-based system -Order entry systems -Electronic Data Interchange (E D I) standards -French Minitel •1995-2000: Invention -Sale of simple retail goods -Limited bandwidth and media -Euphoric visions of ▪Friction-free commerce ▪First-mover advantages -Dot-com crash of 2000 •2001-2006: Consolidation -Emphasis on business-driven approach -Traditional large firms expand presence -Start-up financing shrinks -More complex products and services sold -Growth of search engine advertising -Business web presences expand •2007-Present: Reinvention -Rapid growth of: ▪Web 2.0, including online social networks ▪Mobile platform ▪Local commerce ▪On-demand service economy -Entertainment content develops as source of revenues -Transformation of marketing

The Costs of Online Advertising

•Pricing models -Barter, cost per thousand (C P M), cost per click (C P C), cost per action (C P A), hybrid, sponsorship •Measuring issues -Correlating online marketing to online or offline sales •In general, online marketing is more expensive on C P M basis, but more efficient in producing sales •Effective cost-per-thousand (e C P M)

Pricing Strategies (1 of 2)

•Pricing: integral part of marketing strategy •Traditional pricing based on fixed costs, variable costs, demand curve -Marginal costs -Marginal revenue •Piggyback strategy •Price discrimination

The Mobile Platform

•Primary Internet access is now through smartphones and tablets •Smartphones are a disruptive technology -New processors and operating systems -Over 245 million in U.S. access Internet with mobile phone •Tablets supplement P C s for mobile situations -Over 170 million in U . S. use Internet with tablets

Web Browsers

•Primary purpose is to display web page, but may include added features -Google's Chrome: almost 70% of desktop market and about 65% of mobile market § Open source -Mozilla Firefox: 8% desktop, >1% mobile § Open source -Microsoft Edge: 7% desktop -Internet Explorer: 6% desktop -Apple's Safari: 4% desktop, 27% mobile

The Information Policy Set

•Privacy policy -Set of public statements declaring how site will treat customers' personal information that is gathered by site •Accessibility rules -Set of design objectives that ensure users with disabilities can effectively access site

B2C Models: Transaction Broker

•Process online transactions for consumers - Primary value proposition-saving time and money •Revenue model: - Transaction fees •Industries using this model: - Financial services - Travel services - Job placement services

Technology Solutions

•Protecting Internet communications -Encryption •Securing channels of communication -S S L, T L S, V P N s, Wi-Fi •Protecting networks -Firewalls, proxy servers, I D S, I P S •Protecting servers and clients -O S security, anti-virus software

Alternative Web Development Methodologies

•Prototyping •Agile development •DevOps •Component-based development •Web services

B2C Models: Community Provider

•Provide online environment (social network) where people with similar interests can transact, share content, and communicate - Examples: Facebook, LinkedIn, Twitter, Pinterest •Revenue models: - Typically hybrid, combining advertising, subscriptions, sales, transaction fees, and so on

Internet Exchange Points (IXPs)

•Regional hubs where Tier 1 ISPs physically connect with one another and with regional Tier 2 ISPs. •Tier 2 ISPs provide Tier 3 ISPs with Internet access. •Originally called Network Access Points (NAPs) or Metropolitan Area Exchanges (MAEs).

Tier 3 Internet Service Providers

•Retail providers -Lease Internet access to homeowners, small businesses -Large providers: Comcast, Charter Spectrum, A T&T, Verizon, Altice (Optimum) -Smaller local providers •Services -Narrowband -Broadband -Digital subscriber line (D S L) -Cable Internet -Satellite Internet

A Security Plan: Management Policies

•Risk assessment •Security policy •Implementation plan -Security organization -Access controls -Authentication procedures, including biometrics -Authorization policies, authorization management systems •Security audit

Right-Sizing Your Hardware Platform: the Supply Side

•Scalability: -Ability of site to increase in size as demand warrants •Ways to scale hardware: -Vertically ▪Increase processing power of individual components -Horizontally ▪Employ multiple computers to share workload -Improve processing architecture -Outsource hosting, use content delivery network

The E-commerce Security Environment

•Scope of the problem -Overall size of and losses due to cybercrime unclear -McAfee/Center for Strategic and International Studies study: Global economic impact of cybercrime and cyberespionage between $455 billion to $600 billion -Reports by security product providers indicate increasing cybercrime -Online credit card fraud one of the most high-profile forms •Underground economy marketplaces sell stolen information, malware and more

Search Engine Marketing and Advertising (1 of 2)

•Search engine marketing (S E M) -Use of search engines for branding •Search engine advertising -Use of search engines to support direct sales •Types of search engine advertising -Paid inclusion -Pay-per-click (P P C) search ads ▪Keyword advertising ▪Network keyword advertising (context advertising)

Traditional Online Marketing and Advertising Tools

•Search engine marketing and advertising •Display ad marketing •E-mail marketing •Affiliate marketing •Viral marketing •Lead generation marketing

Search Engine Marketing and Advertising (2 of 2)

•Search engine optimization (S E O) •Google search engine algorithms •Social search -Utilizes social contacts and social graph to provide fewer and more relevant results •Search engine issues -Paid inclusion and placement practices -Link farms, content farms -Click fraud

B2C Business Models: Portal

•Search plus an integrated package of content and services •Revenue models: - Advertising, referral fees, transaction fees, subscriptions for premium services •Variations: - Horizontal/general (example: Yahoo, A O L, M S N) - Vertical/specialized (vortal) (example: Sailnet) - Search (example: Google, Bing)

Securing Channels of Communication

•Secure Sockets Layer (S S L)/Transport Layer Security (T LS) -Establishes secure, negotiated client-server session •Virtual Private Network (V P N) -Allows remote users to securely access internal network via the Internet •Wireless (Wi-Fi) networks -W P A 2 -W P A3

Symmetric Key Cryptography

•Sender and receiver use same digital key to encrypt and decrypt message •Requires different set of keys for each transaction •Strength of encryption: Length of binary key •Data Encryption Standard (D E S) •Advanced Encryption Standard (A E S) •Other standards use keys with up to 2,048 bits

Public Key Cryptography Using Digital Signatures and Hash Digests

•Sender applies a mathematical algorithm (hash function) to a message and then encrypts the message and hash result with recipient's public key •Sender then encrypts the message and hash result with sender's private key-creating digital signature-for authenticity, nonrepudiation •Recipient first uses sender's public key to authenticate message and then the recipient's private key to decrypt the hash result and message

Industry Value Chains

•Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services •Internet reduces cost of information and other transactional costs •Leads to greater operational efficiencies, lowering cost, prices, adding value for customers

Shoppers: Browsers and Buyers

•Shoppers: Over 90% of Internet users -Around 80% are buyers -Around 13% are browsers (purchase offline) •Online research influenced about $2.6 trillion of retail purchases in 2017 •Online traffic also influenced by offline brands and shopping •E-commerce and traditional commerce are coupled: Part of a continuum of consuming behavior

Packet Switching

•Slices digital messages into packets •Sends packets along different communication paths as they become available •Reassembles packets once they arrive at destination •Uses routers •Less expensive, wasteful than circuit-switching Figure 3.3, Page 119. In packet switching, digital messages are divided into fixed-length packets of bits (generally about 1,500 bytes). Header information indicates both the origin and the ultimate destination address of the packet, the size of the message, and the number of packets the receiving node should expect. Because the receipt of each packet is acknowledged by the receiving computer, for a considerable amount of time, the network is not passing information, only acknowledgments, producing a delay called latency. Alt Text Long description: An illustration explains how packet switching works, as follows: The original text message reads, I want to communicate with you. The text message is digitized into bits, or a series of 1's and 0's. Digital bits are broken into packets of 7 or 8 1's and 0's. Header information is added to each packet indicating destination and other control information, such as how many bits are in the total message and how many packets.

Sniffing and Man-In-The-Middle Attacks

•Sniffer -Eavesdropping program monitoring networks -Can identify network trouble spots -Can be used by criminals to steal proprietary information •E-mail wiretaps -Recording e-mails at the mail server level •Man-in-the-middle attack -Attacker intercepts and changes communication between two parties who believe they are communicating directly

Identity Fraud/Theft

•Unauthorized use of another person's personal data for illegal financial benefit -Social security number -Driver's license -Credit card numbers -Usernames/passwords •2017: Almost 17 million U.S. consumers suffered identity fraud

Social, Mobile, and Local Marketing and Advertising

•Social marketing and advertising -Use of online social networks and communities •Mobile marketing and advertising -Use of mobile platform -Influence of mobile apps •Local marketing -Geotargeting -Display ads in hyperlocal publications -Coupons

Social Network Security Issues

•Social networks an environment for: -Viruses, site takeovers, identity fraud, malware-loaded apps, click hijacking, phishing, spam •Manual sharing scams -Sharing of files that link to malicious sites •Fake offerings, fake Like buttons, and fake apps

Marketing Analytics

•Software that analyzes data at each stage of the customer conversion process -Awareness -Engagement -Interaction -Purchase activity -Loyalty and post-purchase •Helps managers -Optimize R O I on website and marketing efforts -Build detailed customer profiles -Measure impact of marketing campaigns

Spoofing, Pharming, and Spam (Junk) Websites

•Spoofing -Attempting to hide true identity by using someone else's e-mail or IP address •Pharming -Automatically redirecting a U R L to an different address, to benefit the hacker •Spam (junk) websites -Offer collection of advertisements for other sites, which may contain malicious code

Credit Card Fraud/Theft

•Stolen credit card incidences about 0.9% on the Web and about 0.8% of mobile transactions •Hacking and looting of corporate servers is primary cause •Central security issue: establishing customer identity -E-signatures -Multi-factor authentication -Fingerprint identification

Assessing E-commerce

•Stunning technological success •Early years a mixed business success -Few early dot-coms have survived -Online sales growing rapidly •Many early visions not fulfilled -Price dispersion -Information asymmetry -New intermediaries •Other surprises -Fast-follower advantages -Start-up costs -Impact of mobile platform -Emergence of on-demand e-commerce

Simple versus Multi-Tiered Website Architecture

•System architecture -Arrangement of software, machinery, and tasks in an information system needed to achieve a specific functionality •Two-tier -Web server and database server •Multi-tier -Web application servers -Backend, legacy databases

Systems Design: Hardware and Software Platforms

•System design specification: -Description of main components of a system and their relationship to one another •Two components of system design: -Logical design ▪Data flow diagrams, processing functions, databases -Physical design ▪Specifies actual physical, software components, models, and so on

Implementation, Maintenance, and Optimization

•Systems break down unpredictably •Maintenance is ongoing •Maintenance costs: Similar to development costs -A $40K e-commerce site may require $40K annually to upkeep •Benchmarking

Academic Disciplines Concerned with Technology

•Technical -Computer science, management science, information systems •Behavioral -Information systems research, economics, marketing, management, finance/accounting, sociology

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

Testing the System

•Testing -Unit testing -System testing -Acceptance testing -A/B testing (split testing) -Multivariate testing

Hypertext

•Text formatted with embedded links -Links connect documents to one another, and to other objects such as sound, video, or animation files •Uses Hypertext Transfer Protocol (HTTP) and URLs to locate resources on the Web

Security Threats in the E-commerceEnvironment

•Three key points of vulnerability in e-commerce environment: -Client -Server -Communications pipeline (Internet communications channels)

What is Good E-commerce Security?

•To achieve highest degree of security -New technologies -Organizational policies and procedures -Industry standards and government laws •Other factors -Time value of money -Cost of security versus potential loss -Security often breaks at weakest link

TCP/IP

•Transmission Control Protocol (T C P) -Establishes connections among sending and receiving Web computers -Handles assembly of packets at point of transmission, and reassembly at receiving end •Internet Protocol (I P) •Four T C P/I P layers -Network interface layer -Internet layer -Transport layer -Application layer Figure 3.4, Page 121. TCP/IP is an industry-standard suite of protocols for large internetworks. The purpose of TCP/IP is to provide high-speed communication network links. Alt Text Long description: An illustration depicts the T C P and IP protocol architecture layers and the related elements of the T C P and I P protocol suite., as follows: From the bottom up, Network Interface layer: Ethernet, token ring, frame relay, and A T M; Internet Layer: I P; Host to host transport layer, T C P; Application layer: H T T P, Telnet, F T P, S M T P, and B G P.

Mobile Internet Access

•Two basic types of wireless Internet access: -Telephone-based (mobile phones, smartphones) -Computer network-based (wireless local area network-based) •Telephone-based wireless Internet access -Currently based on 3G and 4G technologies -5G will provide higher bandwidth with speeds reaching 10 G b p s or more

Trust, Utility, and Opportunism in Online Markets

•Two most important factors shaping decision to purchase online: -Utility: ▪Better prices, convenience, speed -Trust: ▪Perception of credibility, ease of use, perceived risk ▪Sellers develop trust by building strong reputations for honesty, fairness, delivery

Developing a Mobile Website and Building Mobile Applications

•Types of m-commerce software -Mobile website ▪Responsive Web design -Mobile Web app -Native app -Hybrid app ▪Runs inside native container ▪App distribution ▪Based on H T M L5, C S S, JavaScript

Cookies and Tracking Files

•Types of tracking files -Cookies -Flash cookies -Web beacons ("bugs") -Tracking headers (supercookies) •Other tracking methods -Deterministic cross-device tracking -Probabilistic cross-device tracking

Spam

•Unsolicited commercial e-mail •Around 55% of all e-mail in 2017 •Most originates from bot networks •Efforts to control spam have largely failed: -Government regulation (C A N - S P A M) -State laws -Voluntary self-regulation by industries (D M A) -Canada's stringent anti-spam laws

How Well Does Online Advertising Work?

•Use R O I to measure ad campaign •Difficulty of cross-platform attribution •Highest click-through rates: Search engine ads, permission e-mail campaigns •Online channels compare favorably with traditional •Most powerful marketing campaigns use multiple channels, including online, catalog, T V, radio, newspapers, stores

Cryptocurrencies

•Use blockchain technology and cryptography to create a purely digital medium of exchange •Bitcoin the most prominent example -Value of Bitcoins have widely fluctuated -Major issues with theft and fraud -Some governments have banned Bitcoin, although it is gaining acceptance in the U.S. •Other cryptocurrencies (altcoins) include Ethereum/Ether, Ripple, Litecoin and Monero •Initial coin offerings (I C Os) being used by some startups to raise capital

Introduction to E-commerce

•Use of Internet to transact business -Includes Web, mobile browsers and apps •More formally: -Digitally enabled commercial transactions between and among organizations and individuals

Mobile Apps

•Use of mobile apps has exploded -Most popular entertainment media, over T V -Always present shopping tool -Almost all top 100 brands have an app •Platforms -iPhone/iPad (i O S), Android •App marketplaces -Google Play, Apple's App Store, Amazon's Appstore

Mobile Payment Systems

•Use of mobile phones as payment devices -Established in Europe and Asia -Expanding in United States •Near field communication (N F C) •Different types of mobile wallets -Universal proximity mobile wallets, such as Apple Pay, Google Pay, Samsung Pay, PayPal Mobile -Branded store proximity wallets, offered by Walmart, Target, Starbucks, others -P2P mobile payment apps, such as Zelle, Venmo

Public Key Cryptography

•Uses two mathematically related digital keys -Public key (widely disseminated) -Private key (kept secret by owner) •Both keys used to encrypt and decrypt message •Once key used to encrypt message, same key cannot be used to decrypt message •Sender uses recipient's public key to encrypt message; recipient uses private key to decrypt it

B2B Models: E-Distributor

•Version of retail and wholesale store, M R O goods, and indirect goods •Owned by one company seeking to serve many customers •Revenue model: Sales of goods •Example: Grainger

Virtual Reality and Augmented Reality

•Virtual reality (VR) -Immersing users within virtual world -Typically uses head-mounted display (HMD) -Oculus Rift, Vive, PlayStation VR •Augmented reality (AR) -Overlaying virtual objects over the real world, via mobile devices or HMDs -Pokémon GO •Mixed reality (AR) -Enhanced version of AR

Web Servers and Web Clients

•Web server software -Enables a computer to deliver web pages to clients on a network that request this service by sending an HTTP request -Basic capabilities: Security services, FTP, search engine, data capture •Web server -May refer to either web server software or physical server -Specialized servers: Database servers, ad servers, and so on •Web client -Any computing device attached to the Internet that is capable of making HTTP requests and displaying HTML pages

Multi-Channel Marketing Plan

•Website •Traditional online marketing -Search engine, display, e-mail, affiliate •Social marketing -Social networks, blogs, video, game •Mobile marketing -Mobile/tablet sites, apps •Offline marketing -Television, radio, newspapers

Other E-commerce Site Tools

•Website design: Basic business considerations -Enabling customers to find and buy what they need •Tools for search engine optimization -Search engine placement ▪Metatags, titles, content ▪Identify market niches ▪Offer expertise ▪Links ▪Buy ads ▪Local e-commerce

Establishing the Customer Relationship

•Website functions to: -Establish brand identity and customer expectations ▪Differentiating product -Anchor the brand online ▪Central point for all marketing messages -Inform and educate customer -Shape customer experience

Imagine Your E-commerce Presence (1 of 3)

•What's the idea? The vision includes: -Mission statement -Target audience -Intended market space -Strategic analysis -Marketing matrix -Development timeline -Preliminary budget •Where's the money? -Business model(s) -Revenue model(s) •Who and where is the target audience? -Demographics, lifestyle, consumption patterns, etc. •What is the ballpark? Characterize the marketplace -Size, growth, demographics, structure •Where's the content coming from? •Know yourself-S W O T analysis •Develop an e-commerce presence map •Develop a timeline: Milestones •How much will this cost? -Simple website: up to $5000 -Small startup: $25,000 to $50,000 -Large corporate website: $100,000+ to millions

Strategic Issues and Questions

•Which part of the marketing plan should you focus on first? •How do you integrate the different platforms for a coherent message? •How do you allocate resources? -How do you measure and compare metrics from different platforms? -How do you link each to sales revenues?

Wireless Local Area Network (W L A N) -Based Internet Access

•Wi-Fi (various 802.11 standards) -High-speed, fixed broadband wireless L A N (W L AN) -Wireless access point ("hot spots") -Limited range but inexpensive •WiMax •Bluetooth

Management Policies, Business Procedures, and Public Laws

•Worldwide, companies spend more than $86 billion on security hardware, software, services •Managing risk includes: -Technology -Effective management policies -Public laws and active enforcement