E-commerce

business. technology. society.

Second Edition

Kenneth C. Laudon
Carol Guercio Traver

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Chapter 1
The Revolution Is Just Beginning

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Burst of the dot.com Bubble

Late 1990s flourish of new dot.com

businesses
March 2000 stock market value of ecommerce, telecom, and technology stocks
plummeted by more than 90%
Many forecasters predicted the demise of ecommerce

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E-commerce Revolution

E-commerce revolution is in the early phases

In 2003, 75 million American consumers
spent $100 billion purchasing products and
services on the Internet
In 2007, consumer spending is expected to
be around $250 billion and businesses will
complete another $5.4 trillion in online
transactions (eMarketer, 2003)
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Focus of the Course

How are business models changing given the

increase in e-commerce?
How can businesses position themselves for
profitability in this new environment?

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E-commerce Defined

E-commerce involves digitally enabled

commercial transactions between and among
organizations and individuals

Digitally enabled transactions include all

transactions mediated by digital technology

Commercial transactions involve the exchange of

value across organizational or individual
boundaries in return for products or services

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How is e-commerce different from

traditional commerce?

Ubiquitous (available everywhere, all the time)

Expands global reach (across cultural/national
boundaries)
Richness video, audio, text
Interactive (between technology and user)
Increases information density (amount and quality
of information available to all market participants)
Permits personalization/customization
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Major Types of E-commerce

Table 1.3, Page 17

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Growth of the Internet

The Internet is a worldwide network of computer

networks built on common standards
Internet was first created in 1960s
Today is worlds largest network, connecting over 500
million computers worldwide
Services include the Web, e-mail, file transfers, etc.
Can measure growth of Internet by looking at number
of Internet hosts with domain names:
In January 2003, there were 170 million Internet
hosts with domain names, up from 70 million in 2000
Growing at about 50% a year

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The Growth of the Internet, Measured by Number

of Connections
Figure 1.3, Page 20

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Growth of the Web

Web is the most popular service on the Internet

Developed in early 1990s
Provides access to Web pages -- documents
created with HTML
Can include text, graphics, animations, music,
videos
Web content in form of Web pages has grown
exponentially, from over 2 billion pages in 2000
to over 6 billion pages in 2003

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The Growth of Web Content

Figure 1.4, Page 21

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Origins and Growth of E-commerce

For our purposes, we will date the
beginning of e-commerce to 1995
First banner advertisements October 1994
First sales of banner ad space - early
1995
Since then, has been fastest growing
form of commerce in U.S.

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The Growth of B2C E-commerce

Figure 1.5, Page 24

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The Growth of B2B E-commerce

Figure 1.6, Page 25

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Future of E-Commerce

Technology of e-commerce (i.e., wireless) will continue to grow

and overall revenues of e-commerce will rise 20%-25% per year
through 2010
E-commerce prices will cover the real costs of doing business
on the Web and pay investors a reasonable rate of return on
their capital
E-commerce margins (the difference between the revenues
from sales and the cost of goods) and profits will rise to levels
more typical of retailers
The cast of players will change radically traditional Fortune
500 companies will play a growing and dominant role in ecommerce
The number of successful pure online companies will remain
smaller than integrated online/offline stores

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E-commerce I and E-commerce II Compared

Table 1.5, Page 35

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Understanding E-commerce:
Organizing Themes

Technology: Development and mastery of

digital computing and communications
technology
Business: New technologies present
businesses and entrepreneurs with new ways
of organizing production and transacting
business
Society: Intellectual property, individual
privacy and public policy
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