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vi Preface

Although e-commerce today has been impacted by the worldwide economic

recession, in the next five years, e-commerce in all of its forms is still projected to
continue growing at high single-digit rates, becoming the fastest growing form of com-
merce. Just as automobiles, airplanes, and electronics defined the twentieth century,
so will e-commerce of all kinds define business and society in the twenty-first cen-
tury. The rapid movement toward an e-commerce economy and society is being led
by both established business firms such as Walmart, Ford, IBM, JCPenney, and Gen-
eral Electric, and newer entrepreneurial firms such as Google, Amazon, Apple, Face-
book, Yahoo, Twitter, YouTube, and Pinterest. Students of business and information
technology need a thorough grounding in electronic commerce in order to be effec-
tive and successful managers in the next decade. This book is written for tomorrow’s
managers.

BUSINESS. TECHNOLOGY. SOCIETY.

We believe that in order for business and technology students to really understand
e-commerce, they must understand the relationships among e-commerce business
concerns, Internet technology, and the social and legal context of e-commerce. These
three themes permeate all aspects of e-commerce, and therefore, in each chapter, we
present material that explores the business, technological, and social aspects of that
chapter’s main topic.
Given the continued growth and diffusion of e-commerce, all students—regard-
less of their major discipline—must also understand the basic economic and business
forces driving e-commerce. E-commerce has created new electronic markets where
prices are more transparent, markets are global, and trading is highly efficient,
though not perfect. E-commerce has a direct impact on a firm’s relationship with sup-
pliers, customers, competitors, and partners, as well as how firms market products,
advertise, and use brands. Whether you are interested in marketing and sales, design,
production, finance, information systems, or logistics, you will need to know how
e-commerce technologies can be used to reduce supply chain costs, increase produc-
tion efficiency, and tighten the relationship with customers. This text is written to
help you understand the fundamental business issues in e-commerce.
The Web and e-commerce have caused a major revolution in marketing and
advertising in the United States. We have a full chapter devoted to discussing how
marketing and advertising dollars are moving away from traditional media, and
towards online media and their huge audiences, creating significant growth in search
engine marketing, targeted display advertising, online rich media/video ads, and
social marketing techniques. This chapter includes an in-depth look at social, local,
and mobile marketing using the most current examples.
E-commerce is driven by Internet technology. Internet technology, and informa-
tion technology in general, is perhaps the star of the show. Without the Internet,
e-commerce would be virtually nonexistent. Accordingly, we provide three chapters
specifically on the Internet and e-commerce technology, and in every chapter we
provide continuing coverage by illustrating how the topic of the chapter is being
shaped by new information technologies. For instance, Internet technology drives
developments in security and payment systems, marketing strategies and advertis-
 Preface vii

ing, financial applications, media distribution, business-to-business trade, and retail

e-commerce. We discuss the rapid growth of the mobile digital platform, the emer-
gence of cloud computing, new open source software tools and applications that
enable Web 2.0, and new types of Internet-based information systems that support
electronic business-to-business markets.
E-commerce is not only about business and technology, however. The third part
of the equation for understanding e-commerce is society. E-commerce and Internet
technologies have important social consequences that business leaders can ignore
only at their peril. E-commerce has challenged our concepts of privacy, intellectual
property, and even our ideas about national sovereignty and governance. Google,
Facebook, Apple, Amazon, and assorted advertising networks maintain profiles on
millions of shoppers and consumers worldwide. The proliferation of illegally copied
music and videos on the Internet, and the growth of social networking sites often
based on displaying copyrighted materials without permission, are challenging the
intellectual property rights of record labels, Hollywood studios, and artists. And many
countries—including the United States—are demanding to control the content of Web
sites displayed within their borders for political and social reasons. Tax authorities in
the United States and Europe are demanding that e-commerce sites pay sales taxes
just like ordinary brick and mortar stores on mainstreet. As a result of these chal-
lenges to existing institutions, e-commerce and the Internet are the subject of increas-
ing investigation, litigation, and legislation. Business leaders need to understand
these societal developments, and they cannot afford to assume any longer that the
Internet is borderless, beyond social control and regulation, or a place where market
efficiency is the only consideration. In addition to an entire chapter devoted to the
social and legal implications of e-commerce, each chapter contains material high-
lighting the social implications of e-commerce.

FEATURES AND COVERAGE

Strong Conceptual Foundation The book emphasizes the three major driving forces
behind e-commerce: business development and strategy, technological innovations,
and social controversies and impacts. Each of these driving forces is represented in
every chapter, and together they provide a strong and coherent conceptual frame-
work for understanding e-commerce. We analyze e-commerce, digital markets, and
e-business firms just as we would ordinary businesses and markets using concepts
from economics, marketing, finance, sociology, philosophy, and information sys-
tems. We strive to maintain a critical perspective on e-commerce and avoid industry
hyperbole.
Some of the important concepts from economics and marketing that we use to
explore e-commerce are transaction cost, network externalities, information asym-
metry, social networks, perfect digital markets, segmentation, price dispersion, tar-
geting, and positioning. Important concepts from the study of information systems
and technologies play an important role in the book, including Internet standards and
protocols, client/server computing, multi-tier server systems, cloud computing,
mobile digital platform and wireless technologies, and public key encryption, among
many others. From the literature on ethics and society, we use important concepts
viii Preface

such as intellectual property, privacy, information rights and rights management,

governance, public health, and welfare.
From the literature on business, we use concepts such as business process design,
return on investment, strategic advantage, industry competitive environment, oli-
gopoly, and monopoly. We also provide a basic understanding of finance and account-
ing issues, and extend this through an “E-commerce in Action” case that critically
examines the financial statements of Amazon. One of the witticisms that emerged
from the early years of e-commerce and that still seems apt is the notion that e-com-
merce changes everything except the rules of business. Businesses still need to make
a profit in order to survive in the long term.

Currency Important new developments happen almost every day in e-commerce and
the Internet. We try to capture as many of these important new developments as pos-
sible in each annual edition. You will not find a more current book for a course
offered during the 2013 academic year. Many other texts are already six months to a
year out of date before they even reach the printer. This text, in contrast, reflects
extensive research through October 2012, just weeks before the book hits the press.

Real-World Business Firm Focus and Cases From Akamai Technologies to Google,
Microsoft, Apple, and Amazon, to Facebook, Twitter, and Tumblr, to Netflix, Pandora,
and Elemica, this book contains hundreds of real-company examples and over 60
more extensive cases that place coverage in the context of actual dot.com businesses.
You’ll find these examples in each chapter, as well as in special features such as
chapter-opening, chapter-closing, and “Insight on” cases. The book takes a realistic
look at the world of e-commerce, describing what’s working and what isn’t, rather
than presenting a rose-colored or purely “academic” viewpoint.

In-depth Coverage of Marketing and Advertising The text includes a chapter devoted
solely to e-commerce marketing and advertising. Marketing concepts, including
social, mobile, and local marketing, market segmentation, targeting and re-targeting
ads, personalization, clickstream analysis, bundling of digital goods, long-tail market-
ing, and dynamic pricing, are used throughout the text.

In-depth Coverage of B2B E-commerce We devote an entire chapter to an examina-

tion of B2B e-commerce. In writing this chapter, we developed a unique and easily
understood classification schema to help students understand this complex arena of
e-commerce. This chapter covers four types of Net marketplaces (e-distributors,
e-procurement companies, exchanges, and industry consortia) as well as the develop-
ment of private industrial networks and collaborative commerce.

Current and Future Technology Coverage Internet and related information technolo-
gies continue to change rapidly. The most important changes for e-commerce include
dramatic price reductions in e-commerce infrastructure (making it much less expen-
sive to develop sophisticated Web sites), the explosive growth in the mobile platform
based on smartphones, tablet computers, cloud storage, and expansion in the devel-
opment of social technologies, which are the foundation of online social networks.
 Preface ix

What was once a shortage of telecommunications capacity has now turned into a
surplus, PC prices and sales have continued to fall, smartphone and tablet sales have
soared, Internet high-speed broadband connections are now typical and are continu-
ing to show double-digit growth, and wireless technologies such as Wi-Fi and cellular
broadband are transforming how, when, and where people access the Internet. While
we thoroughly discuss the current Internet environment, we devote considerable
attention to describing Web 2.0 and emerging technologies and applications such as
the advanced network infrastructure, fiber optics, wireless Web and 4G technologies,
Wi-Fi, IP multicasting, and future guaranteed service levels.

Up-to-Date Coverage of the Literature This text is grounded in the e-commerce

research literature. We have drawn especially on the disciplines of economics, mar-
keting, and information systems and technologies, as well as law journals and broader
social science research journals including sociology and psychology. In addition, we
use the latest reports of leading industry sources such as eMarketer, comScore, Hit-
wise, Nielsen, and Gartner; newspapers such as the New York Times and Wall Street
Journal; and industry publications such as Computerworld and InformationWeek,
among others. Figures and tables sourced to “authors’ estimates” reflect analysis of
data from the U.S. Department of Commerce, estimates from various research firms,
historical trends, revenues of major online retailers, consumer online buying trends,
and economic conditions.

Special Attention to the Social and Legal Aspects of E-commerce We have paid special
attention throughout the book to the social and legal context of e-commerce. Chapter
8 is devoted to a thorough exploration of four ethical dimensions of e-commerce:
information privacy, intellectual property, governance, and protecting public welfare
on the Internet. We have included an analysis of the latest Federal Trade Commission
and other regulatory and nonprofit research reports, and their likely impact on the
e-commerce environment.

Writing That’s Fun to Read We’ve aimed for this book to be fun to read and easy to
understand. This is not a book written by committee—you won’t find a dozen differ-
ent people listed as authors, co-authors, and contributors on the title page. We have a
consistent voice and perspective that carries through the entire text and we believe
the book is the better for it.

OVERVIEW OF THE BOOK

The book is organized into four parts.
Part 1, “Introduction to E-commerce,” provides an introduction to the major
themes of the book. Chapter 1 defines e-commerce, and defines the different types of
e-commerce. Chapter 2 introduces and defines the concepts of business model and
revenue model, describes the major e-commerce business and revenue models for
both B2C and B2B firms, and introduces the basic business concepts required through-
out the text for understanding e-commerce firms including industry structure, value
chains, and firm strategy.
x Preface

Part 2, “Technology Infrastructure for E-commerce,” focuses on the technology

infrastructure that forms the foundation for all e-commerce. Chapter 3 thoroughly
describes how today’s Internet works. A major focus of this chapter is mobile technol-
ogy, Web 2.0 applications, and the near-term future Internet that is now under devel-
opment and will shape the future of e-commerce. Chapter 4 builds on the Internet
chapter by focusing on the steps managers need to follow in order to build a commer-
cial Web presence. This e-commerce infrastructure chapter covers the systems analy-
sis and design process that should be followed in building an e-commerce Web
presence; the major decisions regarding outsourcing site development and/or host-
ing; and how to choose software, hardware, and other tools that can improve Web site
performance. It also has a section on developing a mobile Web site and mobile appli-
cations. Chapter 5 focuses on Internet security and payments, building on the e-com-
merce infrastructure discussion of the previous chapter by describing the ways
security can be provided over the Internet. This chapter defines digital information
security, describes the major threats to security, and then discusses both the technol-
ogy and policy solutions available to business managers seeking to secure their firm’s
sites. This chapter concludes with a section on Internet payment systems including
mobile payment systems.
Part 3, “Business Concepts and Social Issues,” focuses directly on the business
concepts and social-legal issues that surround the development of e-commerce. Chap-
ter 6 focuses on e-commerce consumer behavior, the Internet audience, online mar-
keting technologies and branding, and social, local, and mobile marketing. Chapter 7
provides a thorough introduction to the social and legal environment of e-commerce.
Here, you will find a description of the ethical and legal dimensions of e-commerce,
including a thorough discussion of the latest developments in personal information
privacy, intellectual property, Internet governance, jurisdiction, and public health
and welfare issues such as pornography, gambling, and health information.
Part 4, “E-commerce in Action,” focuses on real-world e-commerce experiences
in retail and services, online media, auctions, portals, and social networks, and busi-
ness-to-business e-commerce. These chapters take a sector approach rather than a
conceptual approach as used in the earlier chapters. E-commerce is different in each
of these sectors. Chapter 8 takes a close look at the experience of firms in the retail
marketplace for both goods and services. Chapter 9 explores the world of online con-
tent and digital media, and examines the enormous changes in online publishing and
entertainment industries that have occurred over the last two years, including stream-
ing movies, e-books, and online newspapers. Chapter 10 explores the online world of
social networks, auctions, and portals. Chapter 11 explores the world of B2B e-com-
merce, describing both electronic Net marketplaces and the less-heralded, but very
large arena of private industrial networks and the movement toward collaborative
commerce.

PEDAGOGY AND CHAPTER OUTLINE

The book’s pedagogy emphasizes student cognitive awareness and the ability to ana-
lyze, synthesize, and evaluate e-commerce businesses. While there is a strong data
and conceptual foundation to the book, we seek to engage student interest with lively
 Preface xi

writing about e-commerce businesses and the transformation of business models at

traditional firms.
Each chapter contains a number of elements designed to make learning easy as
well as interesting.

Learning Objectives A list of learning objectives that highlights the key concepts in
the chapter guides student study.

Chapter-Opening Cases Each chapter opens with a story about a leading e-commerce
company that relates the key objectives of the chapter to a real-life e-commerce busi-
ness venture.
xii Preface

“Insight on” Cases Each chap-

ter contains three real-world
cases illustrating the themes of
technology, business, and soci-
ety. These cases take an in-
depth look at relevant topics to
help describe and analyze the
full breadth of the field of
e-commerce. The cases probe
such issues as the ability of
governments to regulate
Internet content, how to
design Web sites for accessi-
bility, the challenges faced
by luxury marketers in
online marketing, and
smartphone security.

Margin Glossary Through-

out the text, key terms and
their definitions appear in
the text margin where
they are first introduced.

Real-Company Examples Drawn

from actual e-commerce ven-
tures, well over 100 pertinent
examples are used throughout
the text to illustrate concepts.
 Preface xiii

Chapter-Closing Case Studies Each chapter concludes

with a robust case study based on a real-world organi-
zation. These cases help students synthesize chapter
concepts and apply this knowledge to concrete
problems and scenarios such as evaluating Pando-
ra’s freemium business model, ExchangeHunter-
Jumper’s efforts to build a brand, and the fairness
of the Google Books settlement.

Chapter-Ending Pedagogy Each chapter con-

tains extensive end-of-chapter materials
designed to reinforce the learning objectives of
the chapter.

Key Concepts Keyed to the learning objec-

tives, Key Concepts present the key points
of the chapter to aid student study.

Review Questions Thought-provoking ques-

tions prompt students to demonstrate their
comprehension and apply chapter concepts
to management problem solving.

Projects At the end of each chapter are a number of

projects that encourage students to apply chapter concepts and to
use higher level evaluation skills. Many make use of the Internet and require stu-
dents to present their findings in an oral or electronic presentation or written report.
For instance, students are asked to evaluate publicly available information about a
company’s financials at the SEC Web site, assess payment system options for compa-
nies across international boundaries, or search for the top 10 cookies on their own
computer and the sites they are from.

Web Resources Web resources that can extend students’ knowledge of each chapter
with projects, exercises, and additional content are available at www.azimuth-
interactive.com/essentials1e. The Web site contains the following content provided
by the authors:
• Additional projects, exercises, and tutorials
• Information on how to build a business plan and revenue models
• Essays on careers in e-commerce

SUPPORT PACKAGE
The following supplementary materials are available to qualified instructors through
the Online Instructor Resource Center. Contact your Prentice Hall sales representa-
tive for information about how to access them.
xiv Preface

• Instructor’s Manual with solutions This comprehensive manual pulls together

a wide variety of teaching tools so that instructors can use the text easily and effec-
tively. Each chapter contains an overview of key topics, a recap of the key learning
objectives, additional topics for class discussion and debate, lecture tips, discussion
of the chapter-ending case, and answers to the Case Study Questions, Review
Questions, and Student Projects.
• Test Bank For quick test preparation, the author-created Test Bank contains mul-
tiple-choice, true/false, and short-essay questions that focus both on content and
the development of critical/creative thinking about the issues evoked by the chap-
ter. The Test Bank is available in Microsoft Word and TestGen format.
The TestGen is also available in WebCT and BlackBoard-ready format. TestGen
allows instructors to view, edit, and add questions.
• PowerPoint lecture presentation slides These slides illustrate key points,
tables, and figures from the text in lecture-note format. The slides can be easily
converted to transparencies or viewed electronically in the classroom. The slides
also include additional questions for the opening cases and the “Insight on”
vignettes throughout the book. These questions are very useful for in-class discus-
sions, or quizzes.
• Video Cases The authors have created a collection of video case studies that inte-
grate short videos, supporting case study material, and case study questions.
Video cases can be used in class to promote discussion or as written assignments.
See the following page for a list of video cases available for this edition.
• Learning Tracks These additional essays, created by the authors, provide instruc-
tors and students with more in-depth content on selected topics in e-commerce.
See the following page for a list of Learning Tracks available for this edition.
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 Preface xv

VIDEO CASES
Chapter 1 1.1 The Future of E-commerce
Chapter 2 2.1 Deals Galore at Groupon
Chapter 3 3.1 Google Data Center Efficiency Best Practices
3.2 NBA: Competing on Global Delivery
Chapter 4 4.1 ESPN Goes to eXtreme Scale
4.2 Data Warehousing at REI: Understanding the Customer
Chapter 5 5.1 Cyberespionage: The Chinese Threat
5.2 Stuxnet and Cyberwarfare
5.3 IBM Zone Trusted Information Channel (ZTIC)
5.4 Open ID and Web Security
Chapter 6 6.1 The Power of Like
6.2 Nielsen Online Campaign Ratings
Chapter 7 7.1 Facebook Privacy
7.2 What Net Neutrality Means for You
7.3 Lawrence Lessig on Net Neutrality
Chapter 8 8.1 Etsy: A Marketplace and a Community
Chapter 9 9.1 YouTube’s 7th Birthday
Chapter 10 10.1 Mint Returns for Goodwill’s eBay Auctions of Thrift-Store
Finds
Chapter 11 11.1 Ford AutoXchange B2B Marketplace

LEARNING TRACKS
Chapter 1 1.1 Global E-commerce Europe
1.2 Global E-commerce Latin America
1.3 Global E-commerce China
Chapter 6 6.1 Basic Marketing Concepts
6.2 Social Media Marketing - Facebook
6.3 Social Media Marketing - Twitter
6.4 Social Media Marketing - Blogging

ACKNOWLEDGMENTS
Pearson Education sought the advice of many excellent reviewers, all of whom
strongly influenced the organization and substance of this book. The following indi-
viduals provided extremely useful evaluations of our e-commerce texts:
xvi Preface

Deniz Aksen, Koç University (Istanbul) Sharon Heckel, St. Charles Community
Carrie Andersen, Madison Area College
Technical College David Hite, Virginia Intermont College
Dr. Shirley A. Becker, Northern Arizona Gus Jabbour, George Mason University
University Ellen Kraft, Georgian Court University
Prasad Bingi, Indiana-Purdue Gilliean Lee, Lander University
University, Fort Wayne Zoonky Lee, University of Nebraska,
Christine Barnes, Lakeland Community Lincoln
College Andre Lemaylleux, Boston University,
Cliff Butler, North Seattle Community Brussels
College Haim Levkowitz, University of
Joanna Broder, University of Arizona Massachusetts, Lowell
James Buchan, College of the Ozarks Yair Levy, Nova Southeastern
Ashley Bush, Florida State University University
Mark Choman, Luzerne City Richard Lucic, Duke University
Community College John Mendonca, Purdue University
Andrew Ciganek, Jacksonville State Dr. Abdulrahman Mirza, DePaul
University University
Daniel Connolly, University of Denver Kent Palmer, MacMurray College
Tom Critzer, Miami University Karen Palumbo, University of
Dursan Delen, Oklahoma State St. Francis
University Wayne Pauli, Dakota State University
Abhijit Deshmukh, University of Jamie Pinchot, Thiel College
Massachusetts Kai Pommerenke, University of
Brian L. Dos Santos, University of California at Santa Cruz
Louisville Barry Quinn, University of Ulster,
Robert Drevs, University of Notre Dame Northern Ireland
Akram El-Tannir, Hariri Canadian Michelle Ramim, Nova Southeastern
University, Lebanon University
Kimberly Furumo, University of Hawaii Jay Rhee, San Jose State University
at Hilo Jorge Romero, Towson University
John H. Gerdes, University of John Sagi, Anne Arundel Community
California, Riverside College
Philip Gordon, University of California Patricia Sendall, Merrimack College
at Berkeley
Dr. Carlos Serrao, ISCTE/DCTI,
Allan Greenberg, Brooklyn College Portugal
Bin Gu, University of Texas at Austin Neerja Sethi, Nanyang Business School,
Peter Haried, University of Wisconsin- Singapore
La Crosse Amber Settle, DePaul CTI
Sherri Harms, University of Nebraska at Vivek Shah, Texas State University-San
Kearney Marcos
 Preface xvii

Seung Jae Shin, Mississippi State Catherine Wallace, Massey University,

University New Zealand
Sumit Sircar, University of Texas at Biao Wang, Boston University
Arlington Haibo Wang, Texas A&M International
Hongjun Song, University of Memphis University
Pamela Specht, University of Nebraska Harry Washington, Lincoln University
at Omaha Rolf Wigand, University of Arkansas at
Esther Swilley, Kansas State University Little Rock
Tony Townsend, Iowa State University Erin Wilkinson, Johnson & Wales
Bill Troy, University of New Hampshire University
Susan VandeVen, Southern Polytechnic Alice Wilson, Cedar Crest College
State University Dezhi Wu, Southern Utah University
Hiep Van Dong, Madison Area Gene Yelle, SUNY Institute of
Technical College Technology
Mary Vitrano, Palm Beach Community David Zolzer, Northwestern State
College University
Andrea Wachter, Point Park University

We would like to thank eMarketer, Inc. and David Iankelevich for their permission to
include data and figures from their research reports in our text. eMarketer is one of
the leading independent sources for statistics, trend data, and original analysis cover-
ing many topics related to the Internet, e-business, and emerging technologies. eMar-
keter aggregates e-business data from multiple sources worldwide.
In addition, we would like to thank all those at Pearson Prentice Hall who have
worked so hard to make sure this book is the very best it can be. We want to thank Bob
Horan, Executive Editor of the Pearson Prentice Hall MIS and business law list, and
Karalyn Holland, Senior Production Project Manager, for their support; Judy Leale for
overseeing production of this project; and DePinho Design for the outstanding cover
design. Very special thanks to Robin Pickering, Megan Miller, and Will Anderson at
Azimuth Interactive, Inc., for all their hard work on the production of, and supple-
ments for, this book.
A special thanks also to Susan Hartman, Executive Editor for the first and second
editions and to Frank Ruggirello, Publisher at Addison-Wesley when we began this
project, and now Vice President and Editorial Director at Benjamin-Cummings.
Finally, last but not least, we would like to thank our family and friends, without
whose support this book would not have been possible.
Kenneth C. Laudon
Carol Guercio Traver
This page intentionally left blank
Brief C on te nts

PART 1 Introduction to E-commerce

1 THE REVOLUTION IS JUST BEGINNING 2

2 E-COMMERCE BUSINESS MODELS AND CONCEPTS 34

PART 2 Technology Infrastructure for E-commerce

3 E-COMMERCE INFRASTRUCTURE: THE INTERNET, WEB, AND MOBILE PLATFORM 68

4 BUILDING AN E-COMMERCE PRESENCE: WEB SITES, MOBILE SITES, AND APPS 120

5 E-COMMERCE SECURITY AND PAYMENT SYSTEMS 162

PART 3 Business Concepts and Social Issues

6 E-COMMERCE MARKETING AND ADVERTISING CONCEPTS 206

7 ETHICAL, SOCIAL, AND POLITICAL ISSUES IN E-COMMERCE 258

xix
xx Contents

PART 4 E-commerce in Action

8 ONLINE RETAIL AND SERVICES 310

9 ONLINE CONTENT AND MEDIA 346

10 SOCIAL NETWORKS, AUCTIONS, AND PORTALS 382

11 B2B E-COMMERCE: SUPPLY CHAIN MANAGEMENT AND COLLABORATIVE COMMERCE 412

Conte n ts

PART 1 Introduction to E-commerce

1 THE REVOLUTION IS JUST BEGINNING 2

Learning Objectives 2
Pinterest: A Picture Is Worth A Thousand Words 3

1.1 E-commerce: The Revolution Is Just Beginning 5

The First 30 Seconds 7
What Is E-commerce? 7
Why Study E-commerce? 8
Eight Unique Features of E-commerce Technology 8
Ubiquity 8
Global Reach 9
Universal Standards 10
Richness 10
Interactivity 10
Information Density 11
Personalization/Customization 11
Social Technology: User Content Generation and Social Networking 11
Web 2.0: Play My Version 11
Types of E-commerce 13
Business-to-Consumer (B2C) E-commerce 13
Business-to-Business (B2B) E-commerce 14
Consumer-to-Consumer (C2C) E-commerce 14
Social E-commerce 14
Mobile E-commerce (M-commerce) 15
Local E-commerce 15
Growth of the Internet and the Web 15

1.2 E-commerce: A Brief History 17

E-commerce 1995–2000: Invention 18

xxi
xxii Contents

E-commerce 2001–2006: Consolidation 20

E-commerce 2007—Present: Reinvention 20
Insight on Business: Is the Party Already Over? 22

1.3 Understanding E-commerce: Organizing Themes 23

Technology: Infrastructure 23
Business: Basic Concepts 24
Society: Taming the Juggernaut 24
Insight on Society: Facebook and the Age of Privacy 25
Academic Disciplines Concerned with E-commerce 27
Technical Approaches 27
Behavioral Approaches 27

1.4 Case Study: The Pirate Bay: The World’s Most Resilient Copyright
Infringer? 28

1.5 Review 30
Key Concepts 30
Questions 32
Projects 32

2 E-COMMERCE BUSINESS MODELS AND CONCEPTS 34

Learning Objectives 34
Tweet Tweet: What’s Your Business Model? 35

2.1 E-commerce Business Models 37

Introduction 37
Eight Key Elements of a Business Model 37
Value Proposition 37
Revenue Model 38
Market Opportunity 40
Competitive Environment 40
Competitive Advantage 41
Market Strategy 41
Organizational Development 42
Management Team 42

2.2 Major Business-to-Consumer (B2C) Business Models 42

Insight on Business: Is Groupon’s Business Model Sustainable? 44
E-tailer 45
Community Provider 45
Content Provider 45
Portal 46
 Contents xxiii

Transaction Broker 46
Insight on Technology: Battle of the Titans: Music in the Cloud 47
Market Creator 48
Service Provider 48

2.3 Major Business-to-Business (B2B) Business Models 49

E-distributor 49
E-procurement 50
Exchanges 50
Industry Consortia 50
Private Industrial Networks 51

2.4 E-commerce Enablers 51

2.5 How the Internet and the Web Change Business: Strategy, Structure, and
Process 51
Industry Structure 53
Industry Value Chains 54
Firm Value Chains 55
Firm Value Webs 56
Business Strategy 57

2.6 Case Study: Pandora and the Freemium Business Model 60

2.7 Review 63
Key Concepts 63
Questions 65
Projects 65

PART 2 Technology Infrastructure for E-commerce

3 E-COMMERCE INFRASTRUCTURE: THE INTERNET, WEB, AND MOBILE PLATFORM 68

Learning Objectives 68
Google Glass: Augment My Reality 69

3.1 The Internet: Technology Background 71

The Evolution of the Internet: 1961—the Present 72
The Internet: Key Technology Concepts 73
Packet Switching 73
Transmission Control Protocol/Internet Protocol (TCP/IP) 74
IP Addresses 76
Domain Names, DNS, and URLs 76
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different content
Stearns, 30 H. P. The F. B. Stearns Co., Cleveland, Ohio

PRICE: $4,500 (Pullman, $4,750)

BODY: Cast aluminum
SEATS: 5 to 7 persons
WEIGHT: 3,250 pounds
WHEEL-BASE: 120 inches
TREAD: 56 inches
TIRES, FRONT: 36 × 4 inches
TIRES, REAR: 36 × 4½ inches
STEERING: Worm and gear
BRAKES: External band on transmission; internal expanding on
rear wheels
SPRINGS: Semi-elliptic
FRAME: Pressed steel
BORE: 5⅜ in.; STROKE: 5⅞ in.
CYLINDERS: 4 vertical, in front
VALVE ARRANGEMENT: One side of motor, in side ports
MOTOR SUSPENSION: From side members of frame
COOLING: Water, vertical flat tube radiator
CURRENT SUPPLY: Magneto and batteries
CARBURETER: 2; 1 small and 1 large
IGNITION: Jump spark
LUBRICATION: Mechanical force feed oiler; gear-driven
MOTOR-CONTROL: Spark and throttle, foot accelerator
CLUTCH: Internal expanding on rim of flywheel
CHANGE GEAR: Sliding type; H. B. ball bearings
SPEEDS: 4 forward; 1 reverse
CHANGE-GEAR CONTROL: Side lever
DRIVE: Side chains
Matheson, 35 H.P. Matheson Motor Car Co., Wilkes Barre,
Pa.

PRICE: $4,500
BODY: Aluminum
SEATS: 7 persons
WEIGHT: 3,000 pounds
WHEEL-BASE: 117 inches
TREAD: 56½ inches
TIRES, FRONT: 36 × 4 inches
TIRES, REAR: 36 × 4½ inches
STEERING: Gemmer
BRAKES: 2 foot on differential; 2 expanding rear wheels
SPRINGS: Semi-elliptical
FRAME: Nickel steel
BORE: 4½ in.; STROKE: 6 in.
CYLINDERS: 4 individual
VALVE ARRANGEMENT: On top of cylinder
MOTOR SUSPENSION: 4-point on main frame
COOLING: Water; honeycomb radiator
IGNITION: Make-and-break
CURRENT SUPPLY: Magneto and battery
CARBURETER: Multiple port; no float
LUBRICATION: Force feed
MOTOR-CONTROL: Hand and foot lever
CLUTCH: Multiple disc
CHANGE GEAR: Sliding type
SPEEDS: 4 forward and reverse
CHANGE-GEAR CONTROL: Selective system
DRIVE: Side chains
"Locomobile," Model "H," 35 H.P. The Locomobile Co. of
America, Bridgeport, Conn.

PRICE: $4,500
BODY; Side entrance tonneau
SEATS: 7 persons
WEIGHT: 2,900 pounds
WHEEL-BASE: 120 inches
TREAD: 56 inches
TIRES, FRONT: 34 × 4 inches
TIRES, REAR: 34 × 4½ inches
STEERING: Adjustable worm gears
BRAKES: 3, metal-to-metal
SPRINGS: Semi-elliptic
FRAME: Pressed steel
BORE: 4½ in.; STROKE: 5½ in.
CYLINDERS: 4, cast in pairs
VALVE ARRANGEMENT: Opposite sides
MOTOR SUSPENSION: Main frame
COOLING: Water; cellular radiator
IGNITION: Make-and-break
CURRENT SUPPLY: Magneto
CARBURETER: Locomobile automatic
LUBRICATION: Mechanical
MOTOR-CONTROL: Governor
CLUTCH: Special cone
CHANGE GEAR: Sliding type
SPEEDS: 4 forward, one reverse
CHANGE-GEAR CONTROL: Selective system
DRIVE: Double side chains
Haynes, Model T, Limousine, 50 H.P. Haynes Automobile
Co., Kokomo, Ind.

PRICE: $4,500
BODY: Limousine
SEATS: 7 persons
WEIGHT: 3,500 pounds
WHEEL-BASE: 108 inches
TREAD: 56 inches
TIRES, FRONT: 34 × 4½ inches
TIRES, REAR: 34 × 4½ inches
STEERING: Worm and sector
BRAKES: Internal and external drums on rear wheels
SPRINGS: Semi-elliptical
BORE: 5¼ inches
STROKE: 6 inches
FRAME: Pressed steel (channel) reinforced with wood
CYLINDERS: 4 vertical in front
VALVE ARRANGEMENT: Opposite sides
MOTOR SUSPENSION: To side members of frame
COOLING: Water—gear-driven pump
IGNITION: Jump spark
CURRENT SUPPLY: Magneto and storage battery
CARBURETER: With automatic mixture regulator
LUBRICATION: Force feed oiler, gear-driven
MOTOR-CONTROL: Spark and throttle
CLUTCH: External steel band on bronze drum
CHANGE GEAR: Sliding type
SPEEDS: 3 forward, 1 reverse
CHANGE-GEAR CONTROL: Side lever, selective system
DRIVE: Shaft
Thomas "Flyer," Model 37, 60 H.P. E. R. Thomas Motor
Co., Buffalo, New York

Maker's illustration not ready—will be published later and of a

size suitable for insertion in this space.

PRICE: $4,500
BODY: Demi-limousine; side entrance, enclosed
SEATS: 7 persons
WEIGHT: 3,500 pounds
WHEEL-BASE: 118½ inches
TREAD: 56½ inches
TIRES, FRONT: 36 × 4 in.
TIRES, REAR: 36 × 5 in.
STEERING: Worm and sector
BRAKES: 2 contracting on countershaft drums and 2 contracting
on rear hubs
SPRINGS: Semi-elliptical
FRAME: Pressed channel steel
BORE: 5½ in.; STROKE: 5½ in.
CYLINDERS: 4 vertical, in front
VALVE ARRANGEMENT: On opposite sides
MOTOR SUSPENSION: Direct from main frame
COOLING: Water; cellular radiator and shaft driven fan
IGNITION: Jump spark
CURRENT SUPPLY: Magneto and dry batteries through Atwater-
Kent spark generator
LUBRICATION: Mechanical gear-driven, force feed oiler,
augmented by splash system
CARBURETER: Automatic, variable, water-jacketed
MOTOR-CONTROL: Spark and throttle
CLUTCH: Triple disc, metal-to-metal
CHANGE GEAR: Sliding, all Hess-Bright bearings except main
shaft, which is roller
SPEEDS: 4 forward and reverse
CHANGE-GEAR CONTROL: Side lever, with anti-stripping device;
selective
DRIVE: Side chains
Marmon Limousine, Model F, 35 H.P. Nordyke & Marmon
Co., Indianapolis, Ind.

PRICE: $4,500
BODY: Limousine
SEATS: 5 persons
WEIGHT: 2,900 pounds
WHEEL-BASE: 104 inches
TREAD: 56½ inches
TIRES, FRONT: 34 × 4 inches
TIRES, REAR: 34 × 4½ inches
STEERING: Worm and nut
BRAKES: Internal expanding on rear wheels
SPRINGS: Full elliptic
FRAME: Pressed channel steel
BORE: 5 in.; STROKE: 4½ in.
CYLINDERS: 4 in pairs at 90°
VALVE ARRANGEMENTS: In heads
MOTOR SUSPENSION: Sub-frame, 3 point
COOLING: Air
IGNITION: Jump spark
CURRENT SUPPLY: Storage and dry cells
CARBURETER: Automatic
LUBRICATION: Force feed
MOTOR-CONTROL: Spark, throttle and foot accelerator
CLUTCH: Disc
CHANGE GEAR: Sliding type
SPEEDS: 3 forward and reverse
CHANGE-GEAR CONTROL: Selective system
DRIVE: Shaft
Simplicity, Model C Limousine, 40 H.P. Evansville
Automobile Co., Evansville, Ind.

PRICE: $4,500
BODY: Limousine
SEATS: 5–7 persons
WEIGHT: 2,750 pounds
WHEEL-BASE: 105 inches
TREAD: 56 inches
TIRES, FRONT: 34 × 4 in.
TIRES, REAR: 34 × 4 in.
STEERING: Worm and segment
BRAKES: On rear hubs
SPRINGS: Semi-elliptical
FRAME: Pressed channel steel
BORE: 4½ in.; STROKE: 5¾ in.
CYLINDERS: 4 vertical, in pairs
VALVE ARRANGEMENT: Inlets in heads, exhaust in side ports
MOTOR SUSPENSION: 3 point
COOLING: Water; cellular radiator
IGNITION: Jump spark
CURRENT SUPPLY: Storage battery
CARBURETER: With automatic mixture regulation by governor
LUBRICATION: Gear-driven mechanical force feed oiler
MOTOR-CONTROL: Spark and throttle
CHANGE GEAR: Friction
CHANGE-GEAR CONTROL: Side lever
DRIVE: Side chains
B. L. M. Landaulet, 16 H.P. B-L-M Motor Car Co.,
Brooklyn, N. Y.

PRICE: $4,500
BODY: Landaulet
SEATS: 4 persons
WEIGHT: 2,000 pounds
WHEEL-BASE: 98 inches
TREAD: 56 inches
TIRES, FRONT: 34 × 3½ inches
TIRES, REAR: 34 × 3½ inches
STEERING: Worm and sector
BRAKES: On transmission and rear wheels
SPRINGS: Semi-elliptical
FRAME: Pressed steel
CYLINDERS: 4, vertical in front
VALVE ARRANGEMENT: Opposite sides
COOLING: Water; Livingston radiator
IGNITION: Jump spark
CURRENT SUPPLY: Magneto
CARBURETER: Automatic with mercury dash pot
MOTOR-CONTROL: Foot and hand throttle
CLUTCH: Cone with cork inserts
CHANGE GEAR: Sliding type
SPEEDS: 3 forward and 1 reverse
CHANGE-GEAR CONTROL: Progressive system
DRIVE: Shaft
Tourist Limousine, Model G-7, 35–40 H.P. Auto Vehicle
Co., Los Angeles, Cal.

PRICE: $4,500
BODY: Limousine
SEATS: 7 persons
WEIGHT: 2,800 pounds
WHEEL-BASE: 108 inches
TREAD: 56 inches
TIRES, FRONT: 34 × 4 in.
TIRES, REAR: 34 × 4 in.
STEERING: Worm and segment
BRAKES: Internal and external on rear hubs
SPRINGS: Semi-elliptic
FRAME: Pressed channel steel
BORE: 4½ in.; STROKE: 5 in.
CYLINDERS: 4 vertical
VALVE ARRANGEMENT: In same side ports
MOTOR SUSPENSION: Side members of frame
COOLING: Honeycomb radiator
IGNITION: Jump spark
CURRENT SUPPLY: Storage and dry batteries
CARBURETER: Schebler
LUBRICATION: Geared oiler
MOTOR-CONTROL: Spark and throttle
CLUTCH: Leather-faced cone
CHANGE GEAR: Sliding type
SPEEDS: 3 forward and reverse
CHANGE-GEAR CONTROL: Two side levers
DRIVE: Shaft, bevel gear
Belden, 30 H.P. Belden Auto Co., Pittsburgh, Pa.

PRICE: $4,500
BODY: Side entrance tonneau
SEATS: 7 persons
WEIGHT: 2,450 pounds
WHEEL-BASE: 124 inches
TREAD: 56 inches
TIRES, FRONT: 36 × 3½ inches
TIRES, REAR: 36 × 4½ inches
STEERING: Worm and sector
BRAKES: Two on rear hubs
SPRINGS: Semi-elliptical front; platform rear
FRAME: Pressed steel
BORE: 5⅛ in.; STROKE: 5½ in.
CYLINDERS: 4 vertical, in front
VALVE ARRANGEMENT: Mechanical intake and exhaust
MOTOR SUSPENSION: From side members of frame
COOLING: Water; cellular radiator
IGNITION: Jump spark
CURRENT SUPPLY: Magneto and battery
CARBURETER: Automatic
LUBRICATION: Force feed
MOTOR-CONTROL: Spark and throttle
CLUTCH: Multiple disc
CHANGE GEAR: Belden selective
SPEEDS: 3 forward and reverse
CHANGE-GEAR CONTROL: Side lever
DRIVE: Shaft
Cleveland Limousine, Model H, 30–35 H.P. Cleveland
Motor Car Co., Cleveland, O.

PRICE: $5,000
BODY: Limousine
SEATS: 7 persons
WEIGHT: 2,550 pounds
WHEEL-BASE: 104 inches
TREAD: 54 inches
TIRES, FRONT: 34 × 4 in.
TIRES, REAR: 34 × 4½ in.
STEERING: Screw and nut
BRAKES: On transmission and rear hubs
SPRINGS: Semi-elliptical
FRAME: Pressed channel steel
BORE: 4½ in.; STROKE: 5¼ in.
CYLINDERS: 4 vertical
VALVE ARRANGEMENT: On opposite sides
MOTOR SUSPENSION: Channel sub-frame
COOLING: Water; cellular radiator
 IGNITION: Low-tension, make-and-break
CURRENT SUPPLY: Simms-Bosch magneto
CARBURETER: Rotary balanced valve; automatic mixture
regulator
LUBRICATION: Force feed, mechanical oiler
MOTOR-CONTROL: Hand spark and throttle; foot accelerator
CLUTCH: Cork inserted leather-faced cone
CHANGE GEAR: Sliding type
SPEEDS: 3 forward and reverse
CHANGE-GEAR CONTROL: Progressive system
DRIVE: Shaft

Notice of change in price received too late for classification.

Apperson, Model I, 50–55 H.P. Apperson Bros. Auto Co.,
Kokomo, Ind.

PRICE: $4,700
BODY: Side entrance tonneau
SEATS: 7 persons
WEIGHT: 3,000 pounds
WHEEL-BASE: 115 inches
TREAD: 56 inches
TIRES, FRONT: 34 × 4 inches
TIRES, REAR: 34 × 4½ inches
STEERING: Worm and segment
BRAKES: Contracting
SPRINGS: Semi-elliptic
FRAME: Pressed steel
BORE: 5¼ inches
STROKE: 5½ inches
CYLINDERS: 4, separately cast
VALVE ARRANGEMENT: On opposite sides
MOTOR SUSPENSION: From main frame
COOLING: Water
CURRENT SUPPLY: Magneto and battery
IGNITION: Jump spark
CARBURETER: Automatic
LUBRICATION: Force feed oiler
MOTOR-CONTROL: Throttle and spark
CLUTCH: Compression band
CHANGE GEAR: Sliding type
SPEEDS: 4 ahead and reverse
CHANGE-GEAR CONTROL: Selective system
DRIVE: Double chain
Car De Luxe, 50–60 H.P. De Luxe Motor Car Co., Detroit,
Mich.

PRICE: $4,750 (complete)

BODY: Side entrance tonneau
SEATS: 7 persons
WHEEL-BASE: 121 inches
TREAD: 56 inches
TIRES, FRONT: 36 × 3½ inches
TIRES, REAR: 36 × 4½ inches
STEERING: Worm and segment
BRAKES: On rear hubs and propeller shaft
SPRINGS: Semi-elliptic
FRAME: Pressed channel chrome nickel steel
BORE: 5 in.; STROKE: 5¼ in.
CYLINDERS: 4 vertical, in pairs
VALVE ARRANGEMENT: In cylinder heads
MOTOR SUSPENSION: Sub-frame
COOLING: Water; planetic radiator
IGNITION: Jump spark
CURRENT SUPPLY: Magneto and storage battery
CARBURETER: Float-feed
LUBRICATION: Force feed
MOTOR-CONTROL: Spark and throttle
CLUTCH: Cone
CHANGE GEAR: Sliding type
SPEEDS: 4 forward and reverse
CHANGE-GEAR CONTROL: Selective system
DRIVE: Shaft
Woods, 40–45 H.P. Woods Motor Vehicle Co., Chicago,
Ill.

PRICE: $4,750
BODY: Side entrance tonneau
SEATS: 7 persons
WEIGHT: 3,500 pounds
WHEEL-BASE: 120 inches
TREAD: 56 inches
TIRES, FRONT: 36 × 4½ inches
TIRES, REAR: 36 × 4½ inches
STEERING: Wheel
BRAKES: Internal expanding
SPRINGS: Semi-elliptic
FRAME: Pressed chrome steel
BORE: 5 in.; STROKE: 5 in.
CYLINDERS: 4 vertical, individual
VALVE ARRANGEMENT: Same side
MOTOR SUSPENSION: On sub-frame
COOLING: Water
IGNITION: Jump spark
CURRENT SUPPLY: Battery and magneto
CARBURETER: Automatic
LUBRICATION: Force feed
MOTOR-CONTROL: Spark and throttle
CLUTCH: Adjustable cone
CHANGE GEAR: Sliding type, annular ball bearings
SPEEDS: 3 forward and reverse
CHANGE-GEAR CONTROL: Side lever
DRIVE: Side chains
S & M "Simplex" Runabout, 30–35 H.P. Smith & Mabley
M'f'g. Co., New York

PRICE: $4,950
BODY: Runabout
SEATS: 3 persons
WEIGHT: 2,200 pounds (chassis)
WHEEL-BASE: 106 inches
TREAD: 54 inches
TIRES, FRONT: 910 × 90 mm.
TIRES, REAR: 920 × 120 mm.
STEERING: Worm and sector
BRAKES: On counter shaft and rear wheels
SPRINGS: Semi-elliptic
FRAME: Pressed steel
BORE: 4½ inches; STROKE: 5½ inches
CYLINDERS: 4, arranged in pairs
VALVE ARRANGEMENT: Opposite sides
MOTOR SUSPENSION: From main frame
COOLING: Water; honeycomb radiator
CURRENT SUPPLY: Batteries and magneto
IGNITION: Jump spark
CARBURETER: Float-feed
LUBRICATION: Pressure feed
MOTOR-CONTROL: Spark and throttle
CLUTCH: Reverse cone
CHANGE GEAR: Sliding type
SPEEDS: 4 forward and reverse
CHANGE-GEAR CONTROL: Progressive system
DRIVE: Double chain