E-Commerce: Mechanisms,

Platforms, and Tools 2

Contents Learning Objectives

Opening Case: Pinterest: A New Kid
on the E-Commerce Block....................................... 51 Upon completion of this chapter, you will be able to:
1. Describe the major electronic commerce
2.1 Electronic Commerce Mechanisms:
An Overview .................................................... 54 (EC) activities and processes and the mecha-
nisms that support them.
2.2 E-Marketplaces ............................................... 55
2. Define e-marketplaces and list their
2.3 Customer Shopping Mechanisms: components.
Webstores, Malls, and Portals ........................ 61
3. List the major types of e-marketplaces and
2.4 Merchant Solutions: Electronic describe their features.
Catalogs, Search Engines, 4. Describe electronic catalogs, search engines,
and Shopping Carts ........................................ 64
and shopping carts.
2.5 Auctions, Bartering, 5. Describe the major types of auctions and list
and Negotiating Online ................................... 67
their characteristics.
2.6 Virtual Communities 6. Discuss the benefits and limitations of
and Social Networks........................................ 73
e-auctions.
2.7 Virtual Worlds as an Electronic 7. Describe bartering and negotiating online.
Commerce Platform ........................................ 80 8. Describe virtual communities.
2.8 Emerging EC Platforms: Augmented 9. Describe social networks as EC mechanisms.
Reality and Crowdsourcing ............................ 83 10. Understand virtual worlds and their use in EC.
2.9 The Future: Web 3.0, Web 4.0 11. Describe the emerging technologies of
and Web 5.0 ..................................................... 86 augmented reality and crowdsourcing.
Managerial Issues..................................................... 88 12. Describe Web 3.0 and define Web 4.0.
Closing Case: Madagascar’s Port
Modernizes Customs with TradeNet ...................... 93
OPENING CASE: PINTEREST:
A NEW KID ON THE E-COMMERCE
BLOCK
Electronic supplementary material The online version
of this chapter (doi: 10.1007/978-3-319-10091-3_2)
contains supplementary material, which is available to An e-commerce site talked about a great deal
authorized users since 2011 is Pinterest.

E. Turban et al., Electronic Commerce: A Managerial and Social Networks Perspective, 51

Springer Texts in Business and Economics, DOI 10.1007/978-3-319-10091-3_2,
© Springer International Publishing Switzerland 2015
52 2 E-Commerce: Mechanisms, Platforms, and Tools

The Opportunity Yang’s Suggestions

Quora Corporation posted a question on its
Pinterest is a social bookmarking website where website: “How does Pinterest generate revenue?”
users “pin” images on a virtual “pinboard.” The One of the most comprehensive answers received
social bookmarking of images has been practiced was provided by “Avid Pinterest User” Yang
on the Internet all over the world, for several (2012) who presented 13 potential monetization
years. The company’s founders saw the business opportunities in four categories: charging adv-
potential and the success of similar companies in ertisers (e.g., see Dembosky 2013), charging
Brazil and China. Furthermore, they succeeded in e-commerce partners, charging users, and charg-
attracting initial venture capital (see Chapter 16) ing other B2B partners. Most of these opportuni-
to expand the business. For a guide, see Leland ties have existed in EC for years (e.g., charging
(2013), and for statistics, see Smith (2014). for premium services, creating an online retail
shop, using an affiliate program, and building a
comprehensive advertisement scheme).
The Solution
Selling Data for Market Research
Pinterest is a company that provides virtual pin- and Analysis
boards that allow users to organize and share Brave (2012) suggested selling customer data
images found on the Web (referred to as “pins”). available on Pinterest to retailers who can use ana-
The pinned images (“boards”) are organized by lytics, including data mining, to conduct market
any category the user wants and placed on a virtual research using this data. Customer data may reveal
pinboard, just like on a real bulletin board. For important statistical associations and relationships
example, one can collect pictures of sailboats and between consumer behavior, content (e.g., product
pin them on one pinboard, with appropriate text recommendations, personalization, ads), and ser-
explanation. You can collect decorations for your vices and products provided. These associations
home on another pinboard, while you collect can be used for one-to-one relationships and seg-
Chinese recipes on a third pinboard. Millions of mentation, as well as for marketing promotions and
people create pinboards and anyone can search and advertisements. Retailers can use affinity modeling
view them. You can also add friends to your account and analysis to ascertain relationships so retailers
and “follow” them. According to their website, can better understand consumer purchasing behav-
‘Pinterest is a tool for collecting and organizing the ior. This enables optimal marketing communica-
things that inspire you’ (see [Link]/). tion strategies. Brave also noted that by pinning
For more about what Pinterest is and how it and re-pinning at Pinterest, consumers show their
works, see [Link]/living/articles/852875/ affinity to certain themes or specific products.
pinterest-what-it-is-how-to-use-it-and-why- Brave provided the following types of affinity data:
youll-be-addicted. connection between products and themes, seg-
Having many visitors and a rapid growth rate are menting people based on their affinity to products,
necessary but not sufficient for EC success. Viable or to a collection of products in specific themes.
business and revenue models are also needed.
Other Suggestions for Doing Business
The Business and Revenue Models on Pinterest
Pinterest does not have a formal revenue model. • Hemley (2012) provides 26 different sugges-
(The company is privately held and it does not tions in an A-Z guide (e.g., A=Add a Pinterest
have to report about such a model to the public.) “Follow” and/or “Pin it” Button; B=Brands
It looks as though the company’s current priority and Pinterest; C=Crowdsourcing and so forth)
is growth, as expressed in its mission statement. • Hub Spot ([Link]) offers a free e-book
Nevertheless, many people speculate about (or titled “How to Use Pinterest for Business”
suggest) revenue opportunities for the company, ([Link]/how-to-use-pinterest-
some of which are provided next. for-business). It includes information such as
Opening Case: Pinterest: A New Kid on the E-Commerce Block 53

how to create a Pinterest business account and some managerial issues facing the company.
how Pinterest works. Representative managerial issues are:
• Mitroff (2012) suggested using the approach
of Zappos Corporation. This approach, which Legal Concerns
is called PinPointing, involves product recom- Many people collect images from the Internet to
mendations based on what customers pin. build their pinboards (and possibly a brand) with-
Pinterest may collaborate with retailers such as out asking permission from the content creators,
Zappos to jointly create product recommenda- giving them an attribute, or compensating them.
tions. (See [Link]/.) Some of the collected material is formally copy-
• Wikipedia lists several potential revenue righted; other material may be considered copy-
sources at [Link]/wiki/Pinterest. righted. A similar problem exists with material
• For more suggestions see [Link]. used on Facebook or by bloggers. According to
com/en/pinterest-guides. Pinterest’s ‘Terms of Use,’ members are “solely
responsible for what they pin and repin.”
Using Pinterest for Advertising Furthermore, users must have explicit permission
and Marketing from the owners of contents to post them.
Most of the suggestions cited above, as well as According to Shontell (2012), one lawyer deleted
suggestions by others, concentrate on advertising all her Pinterest boards out of fear of copyright
and marketing opportunities. For comprehensive violation. Note that Pinterest places all blame and
coverage, see Cario (2013), Hayden (2012), and potential legal fees on its users (who may have to
Miles and Lacey (2012). For how retailers can pay the legal fees incurred by Pinterest also).
use Pinterest, see Jopson and Kuchler (2013). Pinterest has taken several steps to alleviate the
legal concerns of users (e.g., see Hempel 2012).
The company is continuously adding measures to
Results and Managerial Issues minimize the legal problems. For example, in
May 2012, the company added a feature that
Pinterest is the fastest growing social network facilitates the attribution of credit to content cre-
ever, and according to a marketing service ators. For a discussion, see Hornor (2012).
(Experian 2012), Pinterest is the third most popu- Finally, legal concerns may include dealing with
lar social network on the Web, behind Facebook the spammers who are busy on the site.
and Twitter (up from 7th place in November 2011).
As of July 2013, the total number of Pinterest The Competition
users worldwide was 70 million (smallbusiness. The popularity of Pinterest has resulted in many
[Link]/advisor/30-reasons-market-business- attempts to clone the company. Since the core
[Link]). concept is basically image sharing, it may not be
Similar reports on this amazing growth rate patentable; therefore, competitors try to jump
and popularity are provided by comScore and into niche markets. For example, TripAdvisor
other reporting companies. This growth has ([Link]) concentrates on travel. We
attracted over $200 million in venture capital in Heart It ([Link]) is a Brazilian company
2012/2013 and generated many suggestions on (operating in the U.S.) that is very similar to
money-making possibilities with Pinterest (e.g., Pinterest. An emerging competitor is Fancy
see Carr 2012; Loren and Swiderski 2012). ([Link]), which partnered with Google+ in
In January 2014, the valuation of Pinterest 2013. Several companies concentrate on adult
was about $3.8 billion. Should the company be entertainment and pornography. Indirect com-
able to generate significant revenue, it probably petitors are several Chinese companies that oper-
will go to the IPO route, in which case the valua- ate in a culturally different environment (see
tion may be much higher. Let us look now at McKenzie 2012). Companies such as Facebook
54 2 E-Commerce: Mechanisms, Platforms, and Tools

and Google may initiate a competitive service.

Some believe that Pinterest may take business 2.1 ELECTRONIC COMMERCE
away from both Facebook and Twitter due to its MECHANISMS: AN OVERVIEW
better match with the business world.
The many EC models and types of transactions
presented in Chapter 1 are enabled by different
Conclusion mechanisms. To begin with, most B2C applica-
tions are conducted on the Internet. In addition,
According to Hempel (2012), Pinterest is more the generic enablers of any information system
business oriented than Facebook or Twitter and including databases, networks, security, soft-
visitors tend to buy more from there, although the ware and server software, operating systems,
latter companies drive more visitors to their sites. hardware (Web servers), and hosting services
It seems that Pinterest has some potential benefits need to be established. Added to the above are
for small businesses (e.g., designers). Many com- the specific EC mechanisms presented in this
panies already use Pinterest to derive benefits chapter, such as electronic markets, shopping
(e.g., see the Etsy case in Chapter 3 and Volpe carts, e-catalogs, and support services such as
2012). However, these applications do not cur- payment and order fulfillment. In addition to of
rently provide any revenue to Pinterest. The suc- all of the above, there are different methods for
cess of Pinterest will be determined by its revenue executing EC, such as buying at a fixed price or
model and the company’s profitability. at an auction, and each method has a different
support mechanism. Finally, there are the Web
Sources: Based on Brave (2012), Carr (2012), 2.0-based collaboration and communication
Hempel (2012), Jopson and Kuchler (2013), mechanisms (e.g., Twitter) and special platforms
Loren and Swiderski (2012), Yang (2012), and such as the one used by Pinterest. In this chapter,
Volpe (2012). we describe the major EC mechanisms so that
you will be able to understand their uses in the
forthcoming chapters.
LESSONS LEARNED FROM THE CASE

Pinterest is a social network that connects

people who find interesting images on the EC Activities and Support
Web. At the same time, Pinterest is a plat- Mechanisms
form on which several activities of EC can
be supported. For example, companies can EC activities are divided into six categories,
build pinboards that promote their brands. which are listed on the left side of Figure 2.1.
Pinterest can be used as a platform for Each activity is supported by one or more EC
facilitating innovations via idea-generation mechanisms, which are shown on the right
and sharing. Pinterest is a derivative of side of Figure 2.1, along with the section number
Web 2.0 and social media and as such, it is in this chapter where they are presented.
a new mechanism for supporting EC. Other Additional mechanisms exist for special activi-
social media mechanisms that are covered ties, such as payment (Chapter 11), security
in this chapter are social networks and vir- (Chapter 10), and order fulfillment (Chapter
tual worlds; different types of social media 12). Also, standard IT technologies such as
tools such as blogs, microblogs, and wikis, RFID, EDI, and extranets are described in
are discussed in Online File W2.1. This Online Tutorial T2.
chapter also covers the traditional mecha- In the next section, we describe online
nisms of EC such as marketplaces, mer- markets. Before we do this, however, we will
chant software, and auctions. describe what happens during a typical purchas-
ing process.
2.2 E-Marketplaces 55

EC Activities EC Mechanism engine may be useful. Buyers usually like to com-

pare prices; therefore, an online price comparison
Electronic Markets
service can be useful (now available on smart-
(Section 2.2) phones). Some sellers (e.g., American Airlines,
Presence and
Discovery, Find
[Link]) provide price comparisons showing
Information, Storefronts, Malls, competitors. If not satisfied, the buyer may aban-
Compare, Portals
Analyze
don the seller’s site. If satisfied, the buyer will place
(Section 2.3) the chosen item in a virtual shopping cart (or bag).
The buyer may return to the seller’s catalog to
Trading
Buy, Sell,
E-catalogs choose more items. Each selected item is placed in
Search Engines
Exchange
Shopping Carts
the shopping cart. When the item selection is com-
Directories pleted, the buyer goes to a checkout page, where a
E-maps
shipment option is selected from a menu (e.g., stan-
Communicate, (Section 2.4) dard, next day). Finally, a payment option is
Collabrate,
Learn selected. For example, [Link] allows you to
E-auctions
pay by credit card, PayPal, check after billing, in
installments, and so on. After checking all the
(Section 2.5)
details for accuracy, the buyer submits the order.
Entertainment This process is illustrated in Figure 2.2.
Web 2.0 Tools, The major mechanisms that support this pro-
Social Network
Services cess are described in Sections 2.3 and 2.4 of this
chapter. The place where buying and selling
Improve (Section 2.6)
Performance
occurs is called an e-marketplace, which we
introduce next.
Virtual Worlds

Other Activities:
(Section 2.7) SECTION 2.1 REVIEW QUESTIONS
Recruit, 1. List the major EC activities.
Customer
Service
2. List the major EC mechanisms.
Payment
Order Processing 3. Describe the online purchasing process
Security, Support

(Chs. 9–11)
2.2 E-MARKETPLACES
Figure 2.1 The EC activities–mechanism connection
Electronic markets play a central role in the
digital economy, facilitating the exchange of
The Online Purchasing Process information, goods, services, and payments. In
executing the trading process, e-marketplaces
Customers buy goods online in different ways. The create economic value for buyers, sellers, market
most common is purchasing from catalogs at fixed intermediaries, as well as for society at large.
prices. Sometimes prices may be negotiated or dis- Markets (electronic or otherwise) have four
counted. Another way to determine price is dynamic major functions: (1) enabling transactions to
pricing, which refers to non-fixed prices such as occur by providing a meeting place for buyers
those in auctions or stock (commodity) exchanges. and sellers; (2) enabling the flow of relevant
The process starts with a buyer logging on to a information; (3) providing services associated
seller’s website, registering (if needed), and enter- with market transactions, such as payments and
ing an online catalog or the buyer’s “My Account.” escrow; and (4) providing auxiliary services such
E-catalogs can be very large, so using a search as legal, auditing, and security (see Table 2.1).
56 2 E-Commerce: Mechanisms, Platforms, and Tools

Figure 2.2 The buying process in e-markets

2.2 E-Marketplaces 57

Electronic Markets end, a back end, intermediaries and other business

partners, and support services such as security and
The electronic market is the major venue for payments. A brief description of each follows:
conducting EC transactions. An e-marketplace
(also called e-market, virtual market, or mar-
ketspace), is an electronic space where sellers and
buyers meet and conduct different types of transac- • Customers. More than 2 billion Internet
tions. Customers receive goods and services for users worldwide are potential buyers of
money (or for other goods and services, if bartering goods and services offered on the
is used). The functions of an e-market are the same Internet. These consumers are looking
as those of a physical marketplace; however, com- for bargains, customized items, collec-
puterized systems tend to make electronic markets tors’ items, entertainment, socialization,
much more efficient by providing more updated and more. The social customers have
information and various support services, such as more power than regular customers.
rapid and smooth executions of transactions. They can search for detailed informa-
EC has increased market efficiency by expe- tion, compare prices, bid, and sometimes
diting and or improving the functions listed in negotiate. Buying organizations are also
Table 2.1. Furthermore, EC has been able to sig- customers, accounting for more than
nificantly decrease the cost of executing these 85% of EC volume and value activities.
functions. • Sellers. Millions of webstores are adver-
The emergence of electronic marketplaces, tising and offering a huge variety of
especially Internet-enabled ones, has changed items. These stores are owned by com-
several of the processes used in trading and sup- panies, government agencies, or indi-
ply chains. In many cases, these changes, driven viduals. Every day it is possible to find
by technology, have frequently resulted in: new offerings of products and services.
Sellers can sell directly from their web-
sites or from public e-marketplaces.
• Lower the search time for information • Products and services. One of the
and cost to buyers major differences between the market-
• Reduced information misunderstanding place and the marketspace is the possi-
between sellers and buyers ble digitization of products and services
• Possible reduction in the time gap between in a marketspace. Although both types
purchase and possession of physical prod- of markets can sell physical products,
ucts purchased online (especially if the they can also sell digital products,
product can be digitized) which are goods that can be transformed
• The ability of market participants to into a digital format. However, in mar-
be in different locations while trading ketspaces, buyers can buy digitized
online products online, anytime and from any
• The ability to conduct transactions at place in seconds, and receive the pur-
any time (24/7) from any place. chased goods instantly. In addition to
the digitization of software, music, and
airline tickets, it is possible to digitize
dozens of other products and services,
Components of and the Participants as shown in Online File W2.2. Digital
in E-Marketplaces products have different cost curves than
those of physical products. In digitiza-
The major components and players in a mar- tion, most of the costs are fixed, and
ketspace are customers, sellers, products and ser- variable costs are very low. Thus, profits
vices (physical or digital), infrastructure, a front
58 2 E-Commerce: Mechanisms, Platforms, and Tools

will increase rapidly as volume increases, • Intermediaries. In marketing, an inter-

once the fixed costs are paid. mediary is typically a third party that
• Infrastructure. The marketspace infra- operates between sellers and buyers.
structure includes electronic networks, Intermediaries of all kinds offer their
databases, hardware, software, and more. services on the Web. Some intermedia-
• Front end. Customers interact with a tion is done manually; many kinds are
marketspace via a front end. The major done electronically. The role of these
components of the front end can include electronic intermediaries is frequently
the seller’s portal, electronic catalogs, a different from that of regular intermedi-
shopping cart, a search engine, an auc- aries (such as wholesalers or retailers),
tion engine, a payment gateway, and as will be seen throughout the text, espe-
all other activities related to placing cially in Chapters 3 and 4. For example,
orders. online intermediaries create and manage
• Back end. All the activities that are the online markets. They help match
related to order aggregation and fulfill- buyers and sellers, provide escrow ser-
ment, inventory management, purchas- vices, and help customers and/or sellers
ing from suppliers, accounting and complete transactions. Physical inter-
finance, insurance, payment processing, mediaries may be eliminated and their
packaging, and delivery are done in what jobs be computerized (fully or partially)
is termed the back end of the business. as described next.

Table 2.1 Functions of a market

Matching of buyers and sellers Facilitation of transactions Institutional infrastructure
• Determination of product offerings. • Communication • Legal
Product features offered by sellers Posting buyers’ requests Commercial code, contract
Aggregation of different products Posting RFQs law, dispute resolution,
intellectual property
protection
• Search ( buyers for sellers, and • Mechanisms: provide catalogs, etc. • Regulatory
sellers for buyers) Rules and regulations,
Price and product information compliance, monitoring,
Organizing bids and bartering enforcement
Matching the seller’s offerings with
the buyer’s preferences
• Price discovery • Logistics • Discovery
Process determination of prices Delivery of information, goods, or Provides market information
Enabling price comparisons services to buyer (e.g., about competition,
government regulations)
• Others • Settlement
Providing sales leads Transfer of payments to sellers
Providing W2.0 tools Escrow services
Arranging auction
•
Trust
Credit system, reputations, rating
agencies such as Consumer Reports
and the BBB, special escrow and
online trust agencies
Sources: Based on Bakos (1998), E-Market Services (2006), and the authors’ experiences
Case 2.1: EC Application: How Blue Nile Inc. Is Changing the Jewelry Industry 59

Disintermediation start-up in 1999. The company is a textbook case

and Reintermediation of how EC fundamentally changes the way that an
industry conducts its business. For information
Intermediaries usually provide three types of about the company, see [Link]/NILE/
services: (1) they provide relevant information company-people.
about demand: supply, prices, and trading
requirements. (2) they help match sellers and
buyers; and/or (3) they offer value-added services The Opportunity
such as transfer of products, escrow, payment
arrangements, consulting, or assistance in finding Using the B2C EC model – eliminating the need
a business partner. In general, the first and second for physical stores – Blue Nile was able to offer
types of services can be fully automated, and thus discounts of 35%, yet it became profitable in a
it is likely to be assumed by e-marketplaces, info- short time. (The cost of operating online stores is
mediaries, and portals that provide free or low- very low.)
fee services. The third type requires expertise, What are the critical success factors of the
such as knowledge of the industry, the market, the company? First, they offer large discounts. For
products, and the technological trends, and there- example, you can purchase a $6,000 diamond
fore can only be partially automated. for $4,000, which attracts more customers.
Intermediaries that provide only (or mainly) Second, Blue Nile offers a huge selection of
the first two types of services may be eliminated; diamonds online and provides more informa-
this phenomenon is called disintermediation. tion about diamonds than many physical jew-
An example is the airline industry and its push elry stores can offer. In May 2012, Blue Nile
for selling electronic tickets directly by the air- offered about 60,000 round diamonds that could
lines. Most airlines require customers to pay $25 be used to build a customized engagement rings.
or more per ticket processed by an employee via No physical store can offer so many diamonds.
telephone. This results in the disintermediation Third, the company provides educational guides
of many travel agents from the purchasing as well as independent (and trusted) quality rat-
process. In another example, discount stockbro- ings for every stone. A customer can look over
kers that only execute trades manually are disap- a rating scale for cut, clarity, color, and so on,
pearing. However, brokers who manage electronic and then compare prices using Bizrate (bizrate.
intermediation are not only surviving but may com) and other online stores. Note that there
also be prospering (e.g., [Link] and expe- usually is a 30-day 100% money-back guaran-
[Link] in the travel industry and tdameritrade. tee (now an online industry standard). This pro-
com in stock trading). This phenomenon, in vides customers with a comfort level of trust
which disintermediated entities or newcomers against fraud and gives Blue Nile a competitive
take on new intermediary roles, is called reinter- edge against stores that take the stones back but
mediation (see Chapter 3). charge a fee. The site provides live chat, pay-
Disintermediation is more likely to occur in ment options, build-your-own engagement ring,
supply chains involving several intermediaries, gift ideas, and much more. The company has
as illustrated by Case 2.1. a mobile app for iPhone and Android users
([Link]).

CASE 2.1: EC APPLICATION: HOW

BLUE NILE INC. IS CHANGING The Results
THE JEWELRY INDUSTRY
Blue Nile’s sales reached $129 million in 2003 (a
Blue Nile Inc. ([Link]), a pure-play online 79% increase over 2002), with a net income of
e-tailer that specializes in diamonds and jewelry, $27 million. In 2013, net sales were $450 million
capitalized on online diamond sales as a dot-com ([Link]/story/blue-nile-announces-
60 2 E-Commerce: Mechanisms, Platforms, and Tools

fourth-quarter-and-full-year-2013-financial- Questions
results-2014-02-06 and [Link]/ 1. Using the classification of EC (Section 1.2,
[Link]?ReleaseID=823747). The Chapter 1), how would you classify the Blue
company became the eighth-largest specialty jew- Nile’s business?
elry company in the United States and went pub- 2. In what ways is the company changing its
lic in 2004 (one of the most successful IPOs of industry?
that year). While sales fell during the economic 3. What are the critical success factors of the
downturn in 2008, in 2009 and 2010 the company company?
rallied again with a 2.3% growth. 4. Research Blue Nile’s affiliate marketing pro-
In order to sell $450 million in jewelry in 1 grams. Write a report. Include how this pro-
year, a traditional retail chain needs over 300 gram helps Blue Nile.
stores and over 3,000 employees. Blue Nile does 5. Competition between Blue Nile and Amazon.
it with one 10,000-square-foot warehouse and com will continue to increase. In your opin-
193 employees. The company also bypasses the ion, which one will win? (Visit their websites
industry’s complex supply chain, in which a dia- and see how they sell jewelry.)
mond may pass through five or more middlemen 6. Compare the following three sites: diamond.
before reaching a retailer. Because they are a com, [Link], and [Link].
large buyer, they can deal directly with original 7. Follow the performance of Blue Nile’s stock
suppliers. since 2003 (symbol: NILE, go to [Link].
As a result, some 465 small jewelry stores com). Compare it to the performance of the
closed in 2003 alone. The survivors specialize in market average. What is your conclusion?
custom-crafted pieces. Large traditional compa- 8. Find the payment options at Blue Nile when
nies compete with Blue Nile by offering online you shop there.
merchandise, becoming click-and-brick multi-
channel organizations, and by streamlining their
supply chain and customer service. Types of E-Marketplaces
The future seems to be clear, as can be seen
in Bloomberg (2004), in the case of Roger The term marketplace differs once it referred to
Thompson, a small jeweler in Lambertville, the Web. It is sometimes refers to as e-market-
New Jersey, who said, “Anyone with half a brain place or marketspace. We distinguish two types
who wants a diamond engagement ring will go of e-marketplaces: private and public.
to the Internet.” In the meantime, grooms who
propose with Blue Nile rings can save $3,000 to Private E-Marketplaces
$5,000. Private e-marketplaces are those owned and oper-
Note that, the competition in the jewelry busi- ated by a single company. [Link], dell.
ness is very intense, not only from jewelry retail- com, [Link], and [Link] sell from their
ers (both offline and online, e.g., [Link]; that websites. Private markets are either sell-side or
now also sell fashion and apparel, fine art, and buy-side. In a sell-side e-marketplace, a com-
accessories), but also from general e-tailers such pany, (e.g., [Link] or [Link]) will
as [Link] and [Link]. sell either standard or customized products to
individuals (B2C) or to businesses (B2B); this
Sources: Based on Rivlin (2007), Bloomberg type of selling is considered to be one-to-many.
(2004), BusinessWeek Online (2006), [Link]- In a buy-side e-marketplace, a company pur-
[Link]/wiki/Blue_Nile_Company, and blue- chases from many potential suppliers; this type of
[Link]/about-blue-nile (both accessed March purchasing is considered to be many-to-one, and
2015). it is a B2B activity. For example, some hotels buy
2.3 Customer Shopping Mechanisms: Webstores, Malls, and Portals 61

their supplies from approved vendors that come Webstores may target an industry, a location, or
to its e-market. Walmart ([Link]) buys a niche market (e.g., [Link]). The webstore
goods from thousands of suppliers. Private mar- may belong to a manufacturer (e.g., geappliances.
ketplaces can be open only to selected members com and [Link]), to a retailer (e.g., amazon.
and are not publicly regulated. We will return to com and [Link]), to individuals selling
the topic of private e-marketplaces in Chapters 3 from home, or to another type of business. Note
(B2C) and 4 (B2B). that companies that sell services (such as insur-
ance) may refer to their webstores as portals.
Public E-Marketplaces A webstore includes tools known as merchant
Public e-marketplaces are in many cases B2B software (available in a suite), that are necessary
markets. They often are owned by a third party for conducting online sales. The most common
(not a seller or a buyer) or by a group of buying or tools are an electronic catalog; a search engine
selling companies (referred to as a consortium), that helps the consumer find products in the cata-
and they serve many sellers and many buyers. log; an electronic shopping cart for holding items
These markets also are known as exchanges (e.g., until checkout; e-auction facilities where auc-
a stock exchange). They are open to the public tions take place; a payment gateway where pay-
and usually are regulated by the government or ment arrangements can be made; a shipment
the exchange’s owners. Public e-marketplaces center where shipping arrangements are made;
(for B2B) are discussed in detail in Chapter 4. and customer services, which include product
and warranty information and CRM.
SECTION 2.2 REVIEW QUESTIONS
1. Define e-marketplace and describe its Microsites
attributes. A microsite is a webpage(s) that acts as a supple-
2. What is the difference between a physical mar- ment to a primary website, but is external to it. It
ketplace and an e-marketplace (marketspace)? expands on the content by adding editorial, com-
3. List the components of a marketspace. mercial, or educational material.
4. Define a digital product and provide five
examples.
5. Describe private versus public e-markets.
Electronic Malls

In addition to shopping at individual webstores,

2.3 CUSTOMER SHOPPING consumers can shop in electronic malls (e-malls).
MECHANISMS: WEBSTORES, Similar to malls in the physical world, an e-mall
MALLS, AND PORTALS (online mall) is an online shopping location where
many stores present their catalogs. The mall
Several kinds of interactions exist among sellers, charges commission from the sellers based on
buyers, and e-marketplaces. The major B2C their sale volume. For example, the Emall of
mechanisms are webstores (storefronts) and Maine ([Link]) is an e-mall that
Internet malls. Let us elaborate on these, as well aggregates products, services, and providers in the
as on the gateways to e-marketplaces – portals. state of Maine. It contains a directory of vacation
services and product categories and the vendors in
each category. When a consumer indicates the cat-
Webstores egory he or she is interested in, the consumer is
transferred to the appropriate independent web-
A webstore (or storefront) refers to a single store. This kind of mall does not provide any
company’s (or individual seller’s) website where shared services; it is merely a directory. Other
products and services are sold. malls, such as [Link], or [Link] (see
62 2 E-Commerce: Mechanisms, Platforms, and Tools

Chapter 3) do provide some shared services. Both

[Link] and [Link] operate electronic enterprise information portals. Corporate
malls. portals appear in different forms and are
described in detail in Chapters 4 and 5.
Examples of e-commerce portals can be
Web (Information) Portals found at [Link]/software/products/
en/websphere-portal-family.
A portal is an information gateway that is used in • Patient Portals. Several companies
e-marketplaces, webstores, and other types of offer patient portals. For example,
EC (e.g., in e-collaboration, intrabusiness, and Quality Systems, Inc. ([Link]) and
e-learning). A Web (information) portal is a [Link] .
single point of access, through a Web browser, to Quality Systems provides software for
critical business information located inside and health care providers so they can offer
outside of organizations. This information is information for their patients (in English,
aggregated and is accessed and presented in a Spanish and Chinese) via a portal.
consistent way. Many Web portals personalize for Patients have access to their personal
users. Note that wireless devices are becoming information. The portal also allows com-
portals for both enterprise and Internet access. A munication between patients and their
schematic view of a portal is shown in Figure 2.3. caregivers. Called ‘Next Gen Patient
Information sources (external and internal) are Portal the portal increases patients’
shown on the left side, and integrated and process engagement in their healthcare.
data are shown as output on the monitor’s screen. • Publishing portals. These portals are
Web portals offer some generic services such as intended for communities with specific
e-mail, news, stock prices, entertainment, shop- interests and involve relatively little cus-
ping capabilities, and so forth. tomization of content; however, they pro-
vide extensive online search features and
Types of Portals some interactive capabilities. Examples
Portals can assume many shapes. One way to dis- of such sites are [Link] and
tinguish among them is to look at their content, [Link].
which can vary from narrow to broad, and their • Mobile portals. Mobile portals are
community or audience, which also can differ. portals that are accessible from mobile
The major types of portals are as follows: devices (see Chapter 6 for details). An
increasing number of portals are acces-
sible via mobile devices. One example
• Commercial (public) portals. These of such a mobile portal is i-mode, which
popular portals offer content for anyone. is described in Chapter 6.
Although they can be customized by the • Voice portals. Voice portals are web-
user, they are still intended for broad sites, usually portals, with audio inter-
audiences and offer fairly routine con- faces. This means that they can be
tent, some in real time (e.g., a stock ticker accessed by a standard telephone or a
and news). Examples of such sites are cell phone. AOLbyPhone (aolbyphone.
[Link], [Link], and [Link]. com) is an example of a service that
• Corporate (private) portals. Corporate allows users to retrieve e-mail, news, and
portals provide organized access to inter- other content from AOL via telephone.
nal corporate information. These also It uses both speech recognition and
are known as enterprise portals or text-to-speech technologies. Products by
2.3 Customer Shopping Mechanisms: Webstores, Malls, and Portals 63

Figure 2.3 How a portal works

The Roles and Value of Intermediaries

companies such as Microsoft’s Tellme in E-Marketplaces
([Link]/[Link])
and Nuance OnDemand ([Link]/ Intermediaries, such as brokers, play an impor-
for-business/by-solution/customer- tant role in commerce by providing value-added
service-solutions/solutions-services/ activities and services to buyers and sellers.
hosted-contact-center-solutions/ There are several types of intermediaries. The
[Link]) offer access to the Internet most well-known intermediaries in the physical
from telephones, as well as tools to world are wholesalers and retailers.
build voice portals. Voice portals are The two major types of online intermediaries
especially popular for 1–800 numbers are brokers and infomediaries.
(enterprise 800 numbers) that provide
self-service to customers with informa- Brokers
tion available in Internet databases (e.g., A broker in EC is a person or a company that
finding your balance or last deposit made facilitates transactions between buyers and sellers.
at your bank). The following are different types of brokers:
• Knowledge portals. Knowledge por-
tals enable easy access to knowledge
by knowledge workers and facilitate • Trading. A company that aids online
collaboration. trading (e.g., E*TRADE or eBay).
• Communities’ portals. These are usu- • Organization of online malls. A com-
ally parts of online communities. They pany that organizes many online stores
are dedicated to some theme and may be in one place (e.g., Yahoo! Shopping and
sponsored by a vendor such as Sony. [Link]).
• An example is [Link]-- portal for • Comparison agent. A company that helps
gamers in China. consumers compare prices, encourages
64 2 E-Commerce: Mechanisms, Platforms, and Tools

One example of such software is osCom-

user comments, and provides customer merce, which is open-source software (see
service at different stores (e.g., Bizrate [Link]). Another example can be
for a great diversity of products and seen at [Link]/ecommerce.
Hotwire, Inc. for travel-related products
and services.
• Shopping aids provider. A company Electronic Catalogs
that helps online shopping by providing
escrow, payments, shipping, and secu- Catalogs have been printed on paper for genera-
rity (e.g., PuntoMio, Inc.). tions. Recently, electronic catalogs on a DVD (or
• Matching services. These services CD-ROM) and on the Internet have gained popu-
match entities such as jobs to applicants, larity. Electronic catalogs (e-catalogs) consist
and buyers to sellers. of a product database, directory, and a presenta-
tion function. They are the backbone of most
e-commerce sales sites. For merchants, the
Distributors in B2B objective of e-catalogs is to advertise and pro-
A special type of intermediary in e-commerce is mote products and services. For the customer,
the B2B e-distributor. These intermediaries con- the purpose of such catalogs is to locate informa-
nect manufacturers with business buyers (cus- tion on products and services. E-catalogs can be
tomers), such as retailers (or resellers in the searched quickly with the help of search engines.
computer industry). E-distributors aggregate Some offer tools for interactions. For an exam-
product information from many manufacturers, ple, see Infinisys ‘Change My Image’ for
sometimes thousands of them, in the e-distributor’s Microsoft Windows at [Link]/prod-
catalog. An example is W.W. Grainger (grainger. uct/cmimage, and for Macintosh at [Link].
com). The distributor buys the products and then [Link]/product/cmimage_mac. This product
sells them, as supermarkets do. permits a buyer to insert his/her photo and then
change the hairstyle and color in the photo, so
SECTION 2.3 REVIEW QUESTIONS the buyer can see his/her look with a new hair-
1. Describe webstores and e-malls. style. E-catalogs can be very large; for example,
2. List the various types of webstores and [Link]’s catalog contains millions of
e-malls. products.
3. What are Web (information) portals? List the Most early online catalogs were static presen-
major types. tations of text and messages from paper catalogs.
4. Describe e-distributors. However, online catalogs have evolved to become
more dynamic, customizable, and integrated with
selling and buying procedures, shopping carts,
2.4 MERCHANT SOLUTIONS: order taking, and payment. E-catalogs may
ELECTRONIC CATALOGS, include video clips. The tools for building them
SEARCH ENGINES, are being integrated with merchant software
AND SHOPPING CARTS suites and Web hosting tools (e.g., see smallbusi-
[Link]/ecommerce). Examples of a
To enable selling online, a website usually needs simple product catalog can be seen at JetPens
EC merchant server software. Merchant soft- ([Link] and Starbucks Store ([Link]-
ware includes several tools and platforms. Such [Link]).
software offers basic tools that include electronic Although used only occasionally in B2C
catalogs, search engines, and shopping carts; all are commerce, customized catalogs are used fre-
intended to facilitate the electronic trading process. quently in B2B e-commerce.
2.4 Merchant Solutions: Electronic Catalogs, Search Engines, and Shopping Carts 65

EC Search Activities, Types,

and Engines puter files (e.g., using [Link] or
[Link]/en-us/win-
Search activities are popular in EC, and many dows7/products/features/windows-
tools for conducting searches are available. A search). Searching for documents is
study by Stambor (2010) published in Internet done by looking through all the infor-
Retailer revealed that 94% of shoppers conduct mation that is available on the user’s
research online before making any purchase, and PC. A simple example is the ability to
61% use a search engine when shopping online. search all files related to your e-mail
Consumers may search inside one company’s archive. A search also can be extended
catalog to find a product or service, or use Google to photos, USB ports, and Word
or Bing to find companies that sell the product documents. For details, see pcmag.
they need. Here we describe only the essentials com/encyclopedia/term/41175/
for EC search. For a video illustration, see desktop-search.
“Google Commerce Search” (2009) by Google+
Your Business (2:15 minutes) at [Link]/
watch?v=gj7qrotOmVY. To read publications
on electronic research and e-commerce at the All search types discussed above are accom-
Research at Google website, see research. plished by using search software agents.
[Link]/pubs/EconomicsandElectronic
[Link]. Let us now look at three major Search Engines
types of searches. Customers tend to ask for information (e.g.,
requests for product information or pricing) in
Types of EC Searches similar ways. This type of request is repetitive,
The three major types of EC searches are Internet/ and answering such requests manually is costly.
Web search, enterprise search, and desktop Search engines deliver answers economically
search. and efficiently by matching questions with fre-
quently asked question (FAQ) templates, which
respond with “canned” answers. In general, a
search engine is a computer program that can
Internet/Web Search. This is the most access databases of Internet or intranet resources,
popular search that involves looking for search for specific information or keywords, and
any documents on the Web. According report the results.
to Pew Research Internet Project Google and Bing are the most popular search
([Link]) and other statistical engines in the U.S. Baidu is the primary search
sites (e.g., see [Link]/ipa/ engine in China. Portals such as Yahoo! and MSN
[Link]), finding information is have their own search engines. Special search
one of the most frequent activities done engines organized to answer certain questions or
on the Web. search in specified areas include [Link],
Enterprise Search. An enterprise search [Link], and [Link]. Thousands
describes the search for information of different public search engines are available
within the files and databases of an orga- (see [Link]). Each of these
nization. For example, Google has a tools excels in one area. These can be very spe-
powerful Enterprise Search Appliance cialized with different capabilities. In addition,
(known as GSA). many companies have their own enterprise search
Desktop Search. A desktop search engines. For example, Endeca Commerce from
involves a search of a user’s own com- Oracle ([Link]/technetwork/apps-tech/
commerce/endeca-commerce/[Link]) is a
66 2 E-Commerce: Mechanisms, Platforms, and Tools

special search engine for online catalogs. For The technology lets users see what terms like
more information about training in Oracle Endeca “red high-heeled pumps” mean. It also created
Commerce, see [Link]/pls/web_ algorithms that evaluate how well red pumps
prod-plq-dad/ou_product_category.getPage? match specific clothing the consumer plans to
p_cat_id=338. buy. Visual search is popular when conducted on
mobile devices.
Voice-Powered Search
To ease searching, especially when using a smart- Social Network Search Engines
phone, Google introduced a voice-powered tool Social network search, also known as social
(Google Voice Search; [Link]/insidesearch/ search is a class of online search engines that
features/voicesearch/[Link]) that help people find material about social networking
allows you to skip the keyboard altogether. The activities, such as in user generated content, dis-
first product was included as part of iPhone’s cussion groups, or recommendations. Like all
mobile search application. It allows you to talk search engines, these organize, prioritize, and fil-
into your phone, ask any question, and the results ter search results. Examples of such search
of your query are provided on your iPhone. In engines are: [Link] – ‘real time
addition to asking questions by talking into your social media search and analysis,’ [Link] –
iPhone, you can also listen to search engine ‘people search across social networks, blogs, and
results. For an example of Apple’s intelligent per- more,’ [Link]/explore/social. For an over-
sonal assistant, “Siri,” see [Link]/ios/siri and view, see the blog “Social is the Next Search”
[Link]/siri. available at [Link]/rs/gigya/images/
[Link]. For a dis-
Video and Mobile Search cussion of the benefits and concerns, see en.
There are dozens of dedicated search tools and [Link]/wiki/Social_search.
sites that will search for videos and other images.
Some of them, such as [Link]/videos will
search across multiple sites; others, such as
YouTube will search only for their own content. Shopping Carts
For a list of over 40 sites (compiled in 2010)
see [Link]/video-search. For An electronic shopping cart (also known as
another example, the search engine Bing has a shopping bag or shopping basket) is software that
search feature that allows you to listen to more allows customers to accumulate items they wish
than 5 million fulllength songs. to buy before they arrange payment and check
out, much like a shopping cart in a supermarket.
Mobile Search The electronic shopping cart software program
Several search engines are adapted to mobile automatically calculates the total cost, and adds
search. Notable are Google, Yippy, and Yahoo! tax and shipping charges when applicable.
Customers can review and revise their shopping
Visual Shopping Search Engine list before finalizing their purchase by clicking
Visual search means looking for information that on the “submit” button.
is presented visually (photos, images, etc.) For an Shopping carts for B2C are fairly simple (visit
overview, see [Link]/article/Visual_ [Link] to see an example), but for B2B, a
search. This technology can be used to support shopping cart may be more complex. Shopping
e-commerce. For example, [Link]/ cart software is sold or provided free to store
shopping provides a visual search engine based builders as an independent component outside a
on machine learning and computer vision that merchant suite (e.g., see networksolutions.
focuses on consumer products. com/e-commerce/[Link] – ‘create an
2.5 Auctions, Bartering, and Negotiating Online 67

online store now, [Link], and easycart.

com). It also is embedded in merchants’ servers, 2.5 AUCTIONS, BARTERING,
such as [Link]/ecommerce. AND NEGOTIATING ONLINE
Free online shopping carts (trials and demos) are
available at [Link] and [Link]; One of the most interesting market mechanisms
powered by [Link]. For shop- in e-commerce is the electronic auction. Auctions
ping cart applications for Facebook, see ecwid. are used in B2C, B2B, C2C, G2B, and G2C.
com/[Link] and the Ecwid app
page on Facebook at [Link]/ecwid.
Definition and Characteristics
Product Configuration
(Self Customization) An online auction is an electronic space where
A key characteristic of EC is the ability to sellers and buyers meet and conduct different
self-customize products and services, as done types of transactions. This market mechanism
by [Link], [Link], or [Link]. uses a competitive process where a seller solicits
Manufacturers like to produce customized prod- consecutive bids from buyers (forward e-auctions)
ucts in economical and rapid ways so that the or a buyer solicits bids from sellers (reverse
price of their products will be competitive. e-auctions). A wide variety of online markets
qualify as auctions using this definition. Prices
Questions and Answers Online are determined dynamically by the bids. Auctions,
Intelligent search engines can answer users’ an established method of commerce for genera-
questions. A leading engine is [Link], a subsid- tions, deal with products and services when con-
iary of IAC. As of 2009, [Link] had over 300 ventional marketing channels are ineffective or
million questions and answers in its database (see inefficient. For example, e-auctions can expedite
[Link]/pages/askcom-unveils- the clearance of items that need to be liquidated
database- of-300-million-questions-and- or sold quickly. Rare coins, stamps, and other
answers). The Q&A service matches answers collectibles are frequently sold at e-auctions.
from the database to questions users ask. For There are several types of auctions, each with
details, see [Link] and [Link]. A its own specialties and procedures. (For coverage,
competing engine is [Link], a question see [Link]/wiki/Online_auction_
and answer (Q&A) site, which comprises wiki- business_model.) Auctions can be conducted on
[Link]. Wiki Answers is a community- public auction sites, such as [Link], or on pri-
generated social knowledge Q&A platform vate auction sites, which may be by invitation
available in several languages. People ask ques- only. For example, the state of New York periodi-
tions on the platform and the community answers cally auctions old vehicles from its fleet on eBay.
them. Another similar platform is answers.
[Link]/wiki/Wikianswers.
Dynamic Pricing
SECTION 2.4 REVIEW QUESTIONS
1. List and briefly describe the dimensions by One major characteristic of auctions is that they
which electronic catalogs can be classified. are based on dynamic pricing. Dynamic pricing
2. List the benefits of e-catalogs. refers to prices that are not fixed, but are allowed
3. Describe an electronic shopping cart. to fluctuate, and are determined by supply and
4. Describe voice- and vision-related search demand. In contrast, catalog prices are fixed, as
engines. are prices in department stores, supermarkets,
5. What is self-customization? and most webstores.
68 2 E-Commerce: Mechanisms, Platforms, and Tools

Dynamic pricing appears in several forms. to an IBISWorld report, e-commerce and Internet
Perhaps the oldest forms are negotiation and auction industry sales are expected to increase to
bargaining, which have been practiced for many 10% to $278 billion in the U.S. in 2013 (from
generations in open-air markets. The most popu- $219 billion in 2011). The annual growth rate of
lar today are online auctions. the industry is expected to increase at a rate of
11.6% in the 5 years to 2013 (between 2007 and
2012 was 10.4%) (IBISWorld 2012, 2013).
Traditional Auctions Versus Electronic auctions (e-auctions) are similar
E-Auctions to offline auctions except that they are conducted
online. E-auctions (or online auctions) have been
Traditional, physical auctions are still very popu- in existence since the 1980s over LANs (e.g., for
lar. However, the volume traded on e-auctions is flowers; see Saarinen et al. 2006). Host sites on
significantly larger and continues to increase. In the Internet, which were started in 1995, serve as
addition, person-to-person auctions are done brokers, offering services for sellers to post their
mostly online. goods for sale and enabling buyers to bid on
those items.
Limitations of Traditional Offline Auctions Major online auction sites, such as eBay (see
Traditional offline auctions, regardless of their Online File W2.3), offer consumer products,
type, have several limitations. They usually last electronic parts, artwork, vacation packages, air-
only a few minutes, or even seconds, for each line tickets, and collectibles, as well as excess
item sold. This rapid process may give potential supplies and inventories that are being auctioned
buyers little time to make a decision, so they may off by businesses. Another type of B2B online
decide not to bid. Therefore, sellers may not get auction is used to trade special types of commod-
the highest possible price; bidders may not get ities, such as electricity transmission capacities
what they really want, or they may pay too much and gas and energy options (e.g., see energyauc-
for the items. Additionally, in many cases, the [Link]). Furthermore, conventional
bidders do not have much time to examine the business practices that traditionally have relied
goods before placing a bid. Bidders have diffi- on contracts and fixed prices increasingly are
culty learning about auctions and cannot com- converted into auctions with bidding for online
pare what is offered at each location. Bidders procurements.
must usually be physically present at auctions; For a comparison of 10 online auction
thus, many potential bidders are excluded. sites (2014), see [Link]-
Similarly, it may be difficult for sellers to [Link].
move goods to an auction site. Commissions are
fairly high because a physical location must be
rented, the auction needs to be advertised, and an Types of Auctions
auctioneer and other employees need to be paid.
Electronic auctioning removes these drawbacks. It is customary to classify auctions into the fol-
lowing major types based on how many buyers
Electronic Auctions and sellers are involved.
The Internet provides an infrastructure for execut-
ing auctions electronically at lower cost, with a One Buyer, One Seller
wide array of support services, and with many In this configuration, one can use negotiation,
more participating sellers and buyers than physical bargaining, or bartering. The resulting price will
auctions. Individual consumers and corporations be determined by each party’s bargaining power,
can both participate in this rapidly growing and supply and demand in the item’s market, and
very convenient form of e-commerce. According (possibly) business environment factors.
2.5 Auctions, Bartering, and Negotiating Online 69

One Seller, Many Potential Buyers 2003, bidders pushed the bid from $30,000 to
In this configuration, the seller uses a forward $250,100. The highest winning bid was in 2012,
auction, which is an auction where a seller enter- by an anonymous bidder, in the record-setting
tains bids from multiple buyers. (Because for- amount of $3,456,789. However, in 2014, the
ward auctions are the most common and highest bid was $2.2million. In addition to ben-
traditional form, they often are simply called efiting the needy, the auction provides an
auctions.) The four major types of forward opportunity for people (with money) to meet
auctions are English and Yankee auctions, in Mr. Buffett.
which bidding prices increase as the auction pro-
gresses, and Dutch and free-fall auctions, in One Buyer, Many Potential Sellers
which bidding prices decline as the auction pro- Two popular types of auctions in which there is
gresses. Each of these can be used for either liq- one buyer and many potential sellers are reverse
uidation or for market efficiency. auctions (tendering) and name-your-own-price
auctions.
Example: Warren Buffet’s Annual Power
Lunch Auctions Reverse Auctions
Every year, Warren Buffet, the famous U.S. When there is one buyer and many potential sell-
investment guru, has an auction with the prize ers, a reverse auction (bidding or tendering
being a lunch with him; the winner may also system) is in place. In a reverse auction, the buyer
bring along up to seven friends. The winner places an item he or she wants to buy for a bid (or
pays big money for the honor. The money is tender) on a request for quote (RFQ) system.
donated to a charity called the Glide Foundation, Potential suppliers bid on the item, reducing the
which helps the poor and homeless in San price sequentially (see Figure 2.4). In electronic
Francisco. In the past, Buffett charged $30,000 bidding in a reverse auction, several rounds of
per group. Since July 2003, Buffett has placed bidding may take place until the bidders do not
the invitation on an online auction (eBay). In reduce the price any further. The winning supplier

Figure 2.4 The reverse auction process

70 2 E-Commerce: Mechanisms, Platforms, and Tools

is the one with the lowest bid (assuming that only Because most bidders will receive nothing in
price is considered). Reverse auctions are primar- return for their paid bids, some observers have
ily a B2B or G2B mechanism. (For further dis- stated that the fee spent on the bid is actually
cussion and examples, see Chapter 4, including equivalent to a lottery or wager. The auctioneer
its opening case). receives income both in the form of the fees col-
lected for each participant bidder as well as in the
The Name-Your-Own-Price Model form of a commission for the winning bid.
[Link] pioneered the name-your-own- Examples of penny auction companies are us.
price model. In this model, a would-be buyer [Link] and [Link]/en. At 100auc-
specifies the price (and other terms) that he or she [Link], you can find a list of several penny
is willing to pay to any willing and able seller. auction companies. Some companies allow the
For example, [Link] ([Link]) auction’s unsuccessful bidders to use all their
presents consumers’ requests to sellers, who fill bidding fees toward a purchase of items at regular
as much of the guaranteed demand as they wish or slightly discounted prices. Users need to be
at prices and terms requested by buyers. The sell- careful of scams. For additional information, see
ers may come up with counter offers managed by [Link]/wiki/Bidding_fee_auction.
Priceline. Alternatively, [Link] searches Several other innovative auctions are available.
its own database that contains the participating
vendors’ lowest prices and tries to match supplies
with requests. [Link] asks customers to Benefits and Limitations
guarantee acceptance of the offer if it is at or of E-auctions
below the requested price by giving a credit card
number. This is basically a C2B model, although E-auctions are becoming important selling and
some businesses also use it. buying channels for many companies and indi-
viduals. E-auctions enable buyers to access goods
Many Sellers, Many Buyers and services anywhere auctions are conducted.
When there are many sellers and many buyers, Moreover, almost perfect market information is
buyers and their bidding prices are matched with available about prices, products, current supply
sellers and their asking prices based on the quanti- and demand, and so on. These characteristics
ties on both sides. Stocks and commodities markets provide benefits to all.
are typical examples of this configuration. Buyers
and sellers may be individuals or businesses. Such Benefits of E-Auctions
an auction is also called a double auction. The auction culture seems to revolutionize the way
customers buy, sell, and obtain what they want.
A listing of the benefits of e-auctions to sellers,
Penny Auctions buyers, and e-auctioneers is provided in Table 2.2.

A bidding fee auction, also called a penny auc- Limitations of E-Auctions

tion, is a new type of online forward auction in E-auctions have several limitations. The most
which participants must pay a small nonrefund- significant limitations are minimal security, the
able fee each time they place a bid (usually in possibility of fraud, and limited participation.
small increments above the previous bid). When
the time expires, the last participant to have Minimal Security
placed a bid wins the item and also pays the final Some of the C2C auctions conducted on the
bid price, which is usually significantly lower Internet are not secure because they are done in
than the retail price of the item. For a tutorial, see an unencrypted (or poorly protected) environ-
the video titled “BidBidSold Penny Auction ment. This means that credit card numbers can be
Site Tutorial” (2:23 minutes) at [Link]/ stolen during the payment process. Payment
watch?v=ngr2kJcnAr4. methods such as PayPal ([Link]) can be
2.5 Auctions, Bartering, and Negotiating Online 71

Table 2.2 Benefits of e-auctions

Benefits to sellers Benefits to buyers Benefits to E-auctioneers
• Increased revenues from • Opportunities to find unique • Higher repeat purchases.
broadening bidder base and items and collectibles [Link] found that auction
shortening cycle time. Can sites, such as eBay, tend to garner higher
sell anywhere globally repeat-purchase rates than the top B2C
sites, such as [Link]
• Opportunity to bargain • Entertainment. Participation in • High “stickiness” to the Web site (the
instead of selling at a fixed e-auctions can be entertaining tendency of customers to stay at sites
price. Can sell at any time and exciting (e.g. virtual live longer and come back more often).
and conduct frequent auction site [Link]) Auction sites are frequently “stickier”
auctions than fixed-priced sites. Stickier sites
generate more ad revenue for the
e-auctioneer
• Optimal price setting • Convenience. Buyers can bid • Easy expansion of the auction business
determined by the market from anywhere, even using a
(more buyers, more mobile device; they do not have
information) to travel to a physical auction
place
• Sellers can gain more • Anonymity. With the help of a
customer dollars by offering third party, buyers can remain
items directly (saves on the anonymous
commission to
intermediaries; also, physical
auctions are very expensive
compared to e-auctions)
• Can liquidate large quantities • Possibility of finding bargains,
quickly. for both individuals and
• Improved customer organizations
relationship and loyalty (in
the case of specialized B2B
auction sites and electronic
exchanges)

used to solve the problem (see Chapter 10). In on internet fraud in general, see [Link]/learn/
addition, some B2B auctions are conducted over internet-fraud and for information for sellers,
highly secure private lines. see [Link]/component/content/article/2-
uncategorised/62-seller-beware. Lately, several
Possibility of Fraud people have warned about fraud on penny auctions
In many cases, auction items are unique, used, or sites. For examples of scams, see [Link]/
antique. Because the buyer cannot see and touch penny-auction-fraud-scam-cheat-bidders.
the items, the buyer may receive something differ-
ent than she (or he) had in mind. In addition, prod- Limited Participation
ucts may be defective. Buyers may also commit Some auctions are by invitation only; others are
fraud (e.g., by receiving goods or services without open only to dealers. Limited participation may
paying for them). Thus, the fraud rate in e-auctions be a disadvantage to sellers, who usually benefit
is relatively high. For a discussion of e-auction from as large a pool of buyers as possible. Buyers
fraud and fraud prevention, see [Link]/scams/ also may be unhappy if they are excluded from
internet-fraud/online-auctions. For information participation.
72 2 E-Commerce: Mechanisms, Platforms, and Tools

Impacts of Auctions be very effective. Representative bartering web-

sites include [Link] – ‘Trade anything,
Because the trade objectives and contexts for Pay nothing,’ [Link] – ‘Swap anything for
auctions are very diverse, the rationale behind anything,’ and [Link]. The typical
auctions and the motives of the different bartering process works like this: First, the com-
participants for setting up auctions are quite dif- pany tells the bartering exchange what it wants to
ferent. The following are some representative offer. The exchange then assesses the value of the
impacts of e-auctions. company’s products or services and offers it cer-
tain “points” or “bartering dollars.” The company
Auctions as a Mechanism can use the “points” to buy the things it needs
to Determine a Price from a participating member in the exchange.
Given their characteristics, auctions create a mar- Bartering sites must be financially secure; oth-
ket where prices are determined. This is espe- erwise, users may not have a chance to use the
cially true in markets for unique or rare items. points they accumulate. (For further details, see
Typical examples are fine art or rare stamp auc- [Link] and [Link].)
tions. For example, wine collectors can find a
global wine auction site at [Link].
Online Negotiating
Auctions and Social Networks
Some social networks enable auctions (e.g., see Dynamic prices also can be determined by nego-
Internet Exercise #3). tiation. Negotiated pricing is commonly used for
expensive or specialized products. Negotiated
prices also are popular when large quantities are
Online Bartering purchased. Much like auctions, negotiated prices
result from interactions and bargaining among
Bartering, the exchange of goods and services, sellers and buyers. Negotiation also deals with
is the oldest method of trade. Today, it is done terms, such as the payment method, timing, and
primarily between organizations. The problem credit. Negotiation is a well-known process in the
with bartering is that it is difficult to match trad- offline world (e.g., in real estate, automobile pur-
ing partners. Businesses and individuals may use chases, and contract work). A simple peer-to-peer
classified ads to advertise what they need and (P2P) negotiation can be seen at [Link]. For
what they offer in exchange, but they still may more on negotiation in P2P money lending, see
not be able to find what they want. Intermediaries the ZOPA and Prosper cases in Online File W7.1.
may be helpful, but they are expensive (20–30% Online (electronic) negotiation may be more
commissions) and very slow. effective and efficient than offline negotiation.
E-bartering (electronic bartering) – barter-
ing conducted online – can improve the matching SECTION 2.5 REVIEW QUESTIONS
process by attracting more partners to the barter. 1. Define auctions and describe how they work.
In addition, matching can be done faster, and as a 2. Describe the benefits of e-auctions over tra-
result, better matches can be found. Items that are ditional (offline) auctions.
frequently bartered online include office space, 3. List the four major types of auctions.
storage, and factory space; unused facilities; and 4. Distinguish between forward and reverse
labor, products, and banner ads. (Note that auctions.
e-bartering may have tax implications that need 5. Describe the “name-your-own-price” auc-
to be considered.) tion model.
E-bartering is usually done in a bartering 6. Describe penny auctions.
exchange, a marketplace where an intermediary 7. List the major benefits of auctions to buyers,
arranges the transactions. These exchanges can sellers, and auctioneers.
2.6 Virtual Communities and Social Networks 73

8. What are the major limitations of auctions? Table 2.3 Types of virtual communities
9. List the major impacts of auctions on Community type Description
markets. Transaction and Facilitate buying and selling
10. Define bartering and describe the advantages other business Combines an information portal with
activities an infrastructure for trading. Members
of e-bartering.
are buyers, sellers, intermediaries, etc.,
11. Explain the role of online negotiation in EC. who are focused on a specific
commercial area (e.g., fishing)
Purpose or No trading, just exchange of
2.6 VIRTUAL COMMUNITIES interest information on a topic of mutual
interest. Examples: Investors consult
AND SOCIAL NETWORKS The Motley Fool ([Link]) for
financial advice; music lovers go to
A community is a group of people with [Link]
common interests who interact with one another. Relations or Members are organized around certain
A virtual community is one where the interac- practices life experiences. Examples: ivillage.
com caters to women and seniornet.
tion takes place over a computer network, mainly com is for senior citizens. Professional
the Internet. Virtual communities parallel typical communities also belong to this
physical communities, such as neighborhoods, category. Examples: [Link]/
clubs, or associations, but people do not meet [Link] is a space for information
systems faculty, students, and
face-to-face. Instead, they meet online. Virtual professionals
communities offer several ways for members to Fantasy/role Members share imaginary
interact, collaborate, and trade (see Table 2.3 for playing environments. Examples: sports
types of virtual communities). fantasy teams at [Link] see games.
[Link], [Link]
Social networks Members communicate, collaborate,
create, share, form groups, entertain,
Characteristics of Traditional and more. Facebook is the leader
Online Communities and Their Virtual worlds Members use avatars to represent
Classification themselves in a simulated 3-D
environment where they can play
games, conduct business, socialize,
Most virtual communities are Internet-based, and fantasize about whatever they like
known also as Internet communities.
Hundreds of thousands of communities
exist on the Internet, and the number is grow-
ing rapidly. Pure-play Internet communities Classifications of Virtual
may have thousands, or even hundreds of mil- Communities
lions of members. By early 2014 (its 10th anni- Virtual communities can be classified in several
versary), Facebook had grown to about 1.23 ways.
billion members around the world (see busi-
[Link]/articles/2014-01-30/ Public Versus Private Communities
facebook-turns-10-the-mark- zuckerberg- Communities can be designated as public, mean-
interview). This is one major difference from ing that their membership is open to anyone. The
traditional purely physical communities, which owner of the community may be a privately held
usually are smaller. Another difference is that corporation (e.g., Twitter), public for profit, or
offline communities frequently are confined to non-profit organizations. Many of the large social
one geographic location, whereas only a few networks, including Facebook, belong to the
online communities are geographically con- public for profit category.
fined. For images of virtual communities, do a In contrast, private communities belong to a
Google search. company, an association, or a group of companies
74 2 E-Commerce: Mechanisms, Platforms, and Tools

and their membership is limited to people who work is Facebook. LinkedIn is a business-
meet certain requirements (e.g., work for a par- oriented network.
ticular employer or work in a particular profes-
sion). Private communities may be internal (e.g., The Size of Social Network Sites
only employees can be members), or external Social network sites are growing rapidly, with
(for customers). some having over 100 million members. For
example, in late 2013, Pinterest had 70 million
Classification Categories members. The typical annual growth of a suc-
Another option is to classify the members as cessful site is 40–50% in the first few years and
traders, players, just friends, enthusiasts, or 15–25% thereafter. For a list of the major
friends in need. A more common classification sites (including user counts), see leveragenew-
recognizes six types of Internet communities: (1) [Link]/blog/social-media-infographic
transaction, (2) purpose or interest, (3) relations and [Link]/wiki/List_of_social_
or practices, (4) fantasy, (5) social networks, and networking_websites.
(6) virtual worlds.
The most popular type of virtual community A Global Phenomenon
today is the social network, the subject of our Although Facebook, Pinterest, Twitter,
next section. Google+, and other social networks attract the
majority of media attention in the United States,
they also have many members in other coun-
Online Social Networks and Social tries. Other country-based social network sites
Network Sites are proliferating and growing in popularity
worldwide. For example, [Link], weixin.
Let us first define social networks and then look [Link] and [Link] are large communi-
at some of the services they provide and ties in China; [Link] has been widely adopted
capabilities. in Japan; and [Link] in Europe (primarily in
Russia). Dutch users have embraced [Link];
A Definition and Basic Information and Nasza Klasa ([Link]) has captured Poland.
As you may recall, in Chapter 1 we defined a [Link], a social network (now part of Tagged)
social network site as a company, such as has been popular in Latin America, the U.S.,
Facebook, that provides free Web space and South America, and Europe. [Link] is an
tools for its community members to build pro- English language site geared toward the
files, interact, share, connect, and create and Hispanic community. Additionally, previously
publish content. popular communication and community ser-
A list of the characteristics and capabilities of vices have begun implementing social network-
social networks was provided in Section 1.3 of ing features. For example, the Chinese instant
Chapter 1. messaging service [Link] became one of the
largest social networking services in the world
once it added profiles and made friends visible
Social Network Services to one another. Finally, Cyworld conquered the
Korean market by adding ‘buddies.’ Note that,
Social network services (or sites) are companies international entrepreneurs, inspired by the suc-
that host social communities. They are also cess of the largest social network sites and their
known as social networks. capabilities, have created their own local clones
Social networks appear in a variety of forms; of successful U.S. companies. Information about
the most well-known, mostly social-oriented net- the magnitude of social networks is changing
2.6 Virtual Communities and Social Networks 75

rapidly; therefore, to get the most up-to-date Business-Oriented Public Social

data, go to [Link] and [Link]. Networks

Representative Capabilities and Services Business-oriented social networks, also known

Provided by Social Network Sites as professional social networks, are social networks
Social network sites provide many capabilities whose primary objective is to facilitate business.
and services such as: The prime example here is [Link], which
provides business connections and enables
recruiting and finding jobs. Another example is
[Link], the largest classified ad site,
• Users can construct a Web page where which offers many social-oriented features (see
they present their profile to the public. Case 2.2 later in this section). Another example
• Users can create a circle of friends who is The Brain Yard, a place for executives to find
are linked together. news, knowledge and contacts. Finally, doxim-
• The site provides discussion forums (by [Link] is a medical network for U.S. physicians
subgroup, by topic). and health care professionals. Businesses are
• Photo, video, and document viewing using business social networks to advertise their
and sharing (streaming videos, user- brands as well as making and enhancing con-
supplied videos) are supported. tacts globally.
• Wikis can be used to jointly create
documents. Example of a Business-Oriented
• Blogs can be used for discussion, dissem- Social Network
ination of information, and much more. Originating in Germany, [Link] is a business
• These sites offer community e-mail and network that attracts millions of executives, sales
instant messaging (IM) capabilities. representatives, and job seekers from over 200
• Experts can be made available to answer countries (2014 data). The site offers secure ser-
member queries. vices in 16 languages. According to [Link]
• Consumers can rate and comment on and the authors’ experiences, users can visit the
products and services. site to:
• Online voting may be available to poll • Establish new business contacts and find sales
member opinions. trends.
• The site may provide an e-newsletter. • Promote themselves professionally to
• The site supports conference (group) employers.
chatting, combined with document and • Identify experts that can give their advice on
image sharing. problems and opportunities (for a fee or for
• Message and bulletin board services are free).
available for posting information to • Participate in or organize meetings and
groups and individuals on the website. events.
• The site provides storage for content, • Develop and grow a network of contacts.
including photos, videos, and music. • Control the level of privacy and ensure that
• Users can bookmark self-created their personal data are protected.
content. • Keep up-to-date with industry groups.
• Users can find other networks, friends,
or topics of interest. Some Capabilities of Business-Oriented
Networks
With Web 2.0 tools, companies can engage users
These capabilities can make social networks in new innovative ways (for an example, see
user-friendly. Online File W2.4). More direct communication
76 2 E-Commerce: Mechanisms, Platforms, and Tools

is achieved by offering additional ways for con- Finally, there are over 50 billion page views per
sumers to engage and interact among them- month. For more statistics, see [Link]/
selves and with organizations. For example, a siteinfo/[Link] and [Link]-
company can: [Link]/[Link]/#.Uw27nfmICm4 .
According to [Link], Craigslist is the elev-
enth most visited site in the United States.
In addition, Craigslist features over 100
• Encourage consumers to rate and
topical discussion forums with more than 200
comment on products and services.
million user postings. Every day, people from
• Allow consumers to create their own
700 local sites in 70 countries worldwide check
topic areas and build communities
classified ads and interact on forums. Craigslist
(forums) around shared interests possi-
is considered by many as one of the few web-
bly related to a company’s products.
sites that could change the world because it is
• Hire bloggers or staff editors who can lead
simply a free social-oriented, popular, and use-
discussions about customer feedback.
ful notice site. Although many other sites offer
• Provide incentives such as sweepstakes
free classifieds, no other site comes close to
and contests for customers to get
Craigslist.
involved in new product (service) design
and marketing campaigns.
• Encourage user-made videos about
products/services and offer prizes for • It gives people a voice.
winning video ads. • It is consistent and champions down-to-
• Provide interesting stories in earth values.
e-newsletters. • It illustrates simplicity.
• It has social-networking capabilities.
• It can be used for free in most cases (you
can post free ads, except for business;
for rent, or for sale ads in a few large
An interesting business-oriented company cities; some employment ads; and for
that uses classified ads is [Link], which is adult and therapeutic services).
described in Case 2.2. • It is effective and well visited.

CASE 2.2: EC APPLICATION:

CRAIGSLIST: THE ULTIMATE For more information, see [Link]/
ONLINE CLASSIFIED COMMUNITY about/factsheet.
Users cite the following reasons for the
If you want to find (or offer) a job, housing, goods popularity of Craigslist:
and services, social activities, romance, advice, As an example of the site’s benefits, we
and much more in over 700 local sites in 13 lan- provide the personal experience of one of the
guages, and in more than 70 countries worldwide authors, who needed to rent his condo in Long
(2014 data), go to Craigslist ([Link]). The Beach, California. The usual process to get the
site has much more information than you will condo rented would take 2–4 weeks and $400 to
find in newspapers. According to their website, $700 in newspaper ads, plus ads in local online
Craigslist receives 80 million new classified ads sites for rental services. With Craigslist, it took
every month. Each month there are more than 60 less than a week at no cost. As more people dis-
million visitors to the site in the United States cover Craigslist, the traditional newspaper-based
alone (see [Link]/about/factsheet). classified ad industry will probably be the loser;
Case 2.2: EC Application: Craigslist: The Ultimate Online Classified Community 77

ad rates may become lower, and fewer ads will be 5. What are some of the risks and limitations of
printed. using this site?
In some cities, Craigslist charges for “help
wanted” ads and apartments listed by brokers. In
addition, Craigslist may charge for ads with rich Private (or Enterprise)
media features. Social Networks

In addition to public-oriented business social

Concerns About Craigslist networks such as LinkedIn and Craigslist, there
are many private social networks (also called
Critics charge that some users post illegitimate or enterprise networks) within an organization.
false ads on the site and the Craigslist staff are An example is the opening case in Chapter 1
unable to effectively monitor this practice. Some (Starbucks). Other companies with notable
users have complained about questionable ads and internal networks for employees only include
scams being posted. Craigslist also attracts crimi- Northwestern Mutual. According to the com-
nals seeking to commit fraud by paying with bad pany, they have an internal blog (“Mutualblog”)
checks. The anonymity of Craigslist’s users as well and a Yammer account internally, which is used
as the lack of ratings encourages unlawful acts. by over 1,000 employees to dialog and make
Another concern is that adult services make connections on non-proprietary topics. Private
up a significant portion of the total traffic on the networks are for employees, business partners,
site and may involve illegal activities, especially and customers.
concerning minors. With the sheer volume of
users and ads posted per day, such monitoring is
not possible given the modest workforce of only Business Models and Services
40 plus that the site employs (data of 2014). (As Related to Social Networking
of September 8, 2010, Craigslist has been trying
to control such activities.) Social networking sites provide innovative busi-
On the other side, many supporters contend ness models, ranging from customer reviews of
that attempts to control Craigslist may simply food and night life in India ([Link].
cause users to use other, less-regulated sites. com), to users who dress up paper dolls that look
In China, a company called [Link] Inc. (58. like celebrities ([Link]). New revenue
com) is modeled after Craigslist and provides models are being created almost daily. Although
similar information and generates sizeable reve- some generate limited revenue, others succeed.
nue and profits. The company is listed in the Lately, the Pinterest model has become popular,
NYSE under the symbol WUBA. as described in Chapter 7.
Many communities attract advertisers. For
Sources: Based on Clark (2008), Liedtke (2009), example, [Link] attracts pet lovers with
and [Link] (accessed May 2014). wiki contributions in its attempt to catalog all pet
breeds. The site attracts hundreds of thousands of
Questions unique visitors per month. Obviously, pet food-
1. Identify the business model used by Craigslist. related vendors are interested in placing ads
2. Visit [Link] and identify the social net- there.
work and business network elements. Some of the popular social-oriented services are:
3. What do you like about the site? What do you 1. [Link] hosts blogs, photoblogs, and
dislike about it? social networking profiles. Users of Xanga are
4. Why is Craigslist considered by some as a site referred to as “Xangans.” Xanga was originally
that “could change the world?” launched as a site for sharing book and music
78 2 E-Commerce: Mechanisms, Platforms, and Tools

reviews. Today it is one of the most popular Mobile social networking is especially popu-
blogging and networking services, with an lar in Japan, South Korea, and China, generally
estimated 10,000,000–100,000,000 million due to better data pricing (flat rates are wide-
users worldwide. Xanga has a very popular spread in Japan). In Japan and South Korea,
blogring in Hong Kong, Macao, and where 4G networks offer more bandwidth, the
Singapore. (A blogring links together a num- leaders in social networking are [Link] and
ber of blogs that share mutual interests and Mobage by Dena ([Link]). Numerous other
can be searched by subject matter). In 2013 mobile social networking sites have been
the company was planning to get involved in launched in Japan. For statistics on the exponen-
online gambling. tial growth of mobile social networks, see com-
2. [Link] is a community-based website that [Link].
takes short reports from members on podcasts, Experts predict that mobile social networks
news articles, and videos, which are then voted will experience explosive growth, as evidenced in
on by other participants. Digg is available on a 2012. For how social platforms are powering
website, iPhone app, and daily e-mail. mobile commerce see Gupta (2011).

Mobile Enterprise Networks

Several companies have developed (or fully
Mobile Social Commerce sponsor) mobile-based social networks. For
example, Coca-Cola has a social network that
Mobile computing is growing faster than any other can only be accessed by mobile devices. There
type of EC computing. According to Bent (2014), Coca-Cola employees attempt to influence young
mobile data traffic grew 81% (from 820 petabytes people to buy its products.
per month in 2012 to 1.5 exabytes per month in
2013). This clearly boosts mobile commerce. Examples of Social Mobile
According to The Retail Bulletin (2012), 64% of Commerce Applications
smartphone consumers used them to shop online. There are several types of social mobile applica-
In subsequent chapters, we will discuss many tions. Illustrative examples are provided next.
mobile applications. Here we present the basic
definitions, technologies, and a few examples. Example 1
Coca-Cola created a social network under its
Sprite brand (Sprite Yard), which is only acces-
Mobile Social Networking sible via cellphones. The network was aimed at
the youth market, and members could set pro-
Mobile social networking refers to social net- files, meet friends, share photos and so on. The
working where members chat and connect with idea was to use the site mainly for promoting the
one another using any mobile device. Most major brand. To attract visitors, the company offered
social networking websites now offer mobile ser- free content (music and video clips). However,
vices. According to Protalinski (2012), in July the free access requires a PIN code found under
2012 the number of mobile subscribers accessing Coca-Cola bottle lids. This service was discon-
Facebook was 543 million out of a total member- tinued in 2013.
ship of 955 million. By Q4 2013, Facebook had
945 million mobile users out of a total 1.23 Example 2
billion million monthly active users (see IBM is a leader in social commerce adoption on
[Link]/2014/01/29/facebook-is-a-mobile- mobile devices. Following are some examples of
ad-company and [Link]/Company- IBM’s initiatives according to Taft (2011).
info). Some social networking sites offer mobile- • IBM Mobile Connect (formerly IBM Lotus
only services (e.g., [Link] and [Link]). Mobile Connect) (social media and social
Case 2.2: EC Application: Craigslist: The Ultimate Online Classified Community 79

networks building software, abbreviated as

Connect) is popular in industry.. Customers mobile messaging app for smartphones.
can get immediate access to blogs, wikis, and Users can form groups, send each other
other tools. They can also share photos, vid- unlimited images, video and audio media
eos, and files on major mobile devices (e.g., messages. The company was acquired by
Android, BlackBerry, iOS). Facebook in 2014 for around $19 billion.
• IBM Connections allows people to generate • [Link] − Enabler of real-time con-
and vote on ideas at work (see [Link]/con- versational translation mainly in social
nections/blogs/SametimeBlog/?lang=en). media.
• The capabilities in IBM Connections 4.0, such as • Droid Translator (droid-translator.
Moderations, or Ideation Blogs, enabled workers [Link]) – Translates
to embrace networks of engaged people. phone calls, video chats (e.g., Skype),
and text conversations into 29 different
Example 3 languages. (For more information, see
A poll conducted by [Link] in October Petroff 2014).
2011 revealed that half of the participating hote- • [Link] − A maker of social dis-
liers around the globe are investing in mobile covery products that enable people to
technologies to support social commerce (see meet and socialize with other people
[Link]/2011/10/travelclick-hotels-to- through playing games, browsing fea-
[Link]). tures, shared interests, and more. You
With the current technology, we also see a can share tags, browse profiles, and
trend toward sophisticated interactions of Internet exchange virtual gifts.
social networks with images, voice, and videos. • [Link], [Link]/en, etc. –
This is expected to be a powerful managerial and Companies that provide free voice and
marketing feature in the near future. video calling, etc. for mobile devices
and desktops (e.g. Viber for Desktop).
• [Link] − A free platform for
Recent Innovative Tools sharing photos and videos. As a social
and Platforms for Social Networking network, it allows for creation of reviews,
etc. (Acquired by Facebook in 2012.)
A large number of software tools and platforms • [Link]; (‘A social media search
are available for social networking. Well known engine dedicated to hashtags’) –Enables
tools are blogs, microblogs, and wikis, which are users to see in real-time, all public con-
described in Online File W2.1. Note that the tent related to any keyword and join any
capabilities of these tools are changing related public conversation in real time
continuously. Here we provide a representative (see [Link]/social-media/
list of recent innovative tools: new-search-engine-like-google-social-
web).

• [Link] − A mobile photo mes-

saging service for “chatting” with friends
through photos, videos, and captions Mobile Community Activities
“like ‘texting’ with pictures or videos” In many mobile social networks, devices can be
(see [Link]/od/Iphone- utilized to conduct the same activities that are per-
Apps/a/[Link]). formed in a non-mobile configuration. Customers
• [Link] − According to its web- can even create their own mobile community.
site, WhatsApp is a cross-platform free Mobile video sharing, which sometimes is
combined with photo sharing, is a new techno-
80 2 E-Commerce: Mechanisms, Platforms, and Tools

logical and social trend. Mobile video-sharing the video titled “Philip Rosedale: Second Life,
portals are becoming popular (e.g., see myubo. Where Anything Is Possible” (28:31 minutes) at
com). Many social networking sites offer mobile [Link]/watch?v=lHXXsEtE3b4.
features.

SECTION 2.6 REVIEW QUESTIONS Major Features

1. Define virtual communities and describe their
characteristics. There are several different types and purposes
2. List the major types of virtual communities. of virtual worlds; however all share the
3. Define social network. following features (compiled from The Virtual
4. Describe mobile social commerce. Policy Network’s ‘A Virtual Worlds Primer’ at
5. List some major social network sites. [Link]/resources/virtual-worlds-
6. Describe the global nature of social networks. primer), and the authors’ experiences:
7. Describe social networking.
8. Describe mobile social networking and
commerce
• The worlds can be used by many users
who access them via online interface
2.7 VIRTUAL WORLDS AS AN • The interface is mostly 3D, which is
ELECTRONIC COMMERCE more engaging than 2D.
PLATFORM • All interactions are in real time from
anywhere.
A virtual world is a site for online communities • Most of the content is user-generated. It
in a computer-generated setting, where users is facilitated by tools provided on the
socialize and work with one another through the sites.
use of avatars. The creation of objects, jobs, • The virtual world is always in motion,
homes, and businesses in the 3D environment, regardless of the presence of its
which are owned by their residents, is the founda- residents.
tion of these worlds. It is an interactive environ- • Socialization is encouraged. Tools are
ment, which is fun and satisfying. Virtual worlds provided for engagement and for creating
(also referred to as digital worlds or Metaverse), groups and socially-oriented activities.
usually structured as interactive 3-D virtual envi-
ronments, are created for users to inhabit and
interact in. Users feel as if they are actually within
Additional features are:
the environment because they have the ability to
• Communication among users can
control certain features of the virtual world.
include text, graphical icons, visual ges-
Virtual worlds, according to Wikipedia, initially
tures, video clips, sound, and so forth.
appeared in massively multiplayer online games;
• Use of avatars is a common way to rep-
however, they are not limited to games. Players
resent the residents of the virtual worlds.
can create a character that travels between build-
ings, towns, and even planets and stars as well as
conducting activities there. In a virtual world, you
can be anyone you want. You can build a dream
house, decorate it, have a job, or fly a spaceship. Avatars
For a comprehensive overview, see Malaby
(2009). For research directions, see Wasko et al. Residents of virtual worlds can represent them-
(2011). To learn more about Second Life, see selves by 2-D or 3-D images known as avatars.
[Link]/wiki/Video_Tutorials, and Avatars are interactive, animated, computerized
2.7 Virtual Worlds as an Electronic Commerce Platform 81

“characters” that are graphical images designed ers a conversational interface to web visitors
to look like humans and are programmed to which stimulates human conversation. Nuance’s
exhibit people’s behavior. Avatars have unique Natural Language Understanding (NLU) technol-
names and can move around. Advanced avatars ogy allows applications like Ask Jess to under-
can “speak” and display behaviors such as emo- stand a customer’s intent through an interactive,
tions, gestures, and facial expressions. They can text-based chat experience. By understanding
be fully automated to act like robots. Avatars are what customers want, Ask Jess makes getting
designed to gain the trust of users. Then, they can information on booking, baggage and seating eas-
be programmed to perform human tasks. Many ier than navigating pages on a Web site. Jetstar’s
companies use avatars as tour guides or to staff Ask Jess virtual assistant is also fully integrated
virtual reception desks. For a demonstration of with the company’s existing live chat service,
avatars in action, see [Link]. delivering a seamless handover to human support
The purpose of avatars is to make the human– when required.” (To ask Jess a question, see
computer interface more realistic. Thus, they are [Link]/au/en/customer-service.)
sometimes referred to as interactive conversa-
tional characters. They are being used exten- Example 2: American TESOL
sively to support users’ Internet chat with The American TESOL, Teaching English to
companies (e.g., Live Chat), representing the Speakers of Other Languages Institute (american-
company’s people. A popular use is the live chat tesol. com/blogger/p=1367) teaches and certifies
with avatars. You ask questions and the avatar, qualified individuals to teach English worldwide.
using natural language processing, attempts to The company deploys multiple avatars throughout
understand your question. Then, the avatar its website. The avatars provide tips for ESL
matches an answer from a database. For an exam- (English as a Second Language) students to help
ple, see “Ted”, at [Link]. Instant- them improve their conversational abilities. Other
messaging programs such as [Link]/ activities are:
hangouts use avatars (e.g., see hangoutapps. • Engaging students with talking avatars
com). Avatars can improve customer satisfaction • Students introducing their avatars in Second
and retention by offering personalized, one-to- Life
one service. They also can help companies get to • Using avatars in text-to-movie and much
know their customers in order to better design more.
promotions. For more on avatars you must see For more information see [Link].
the 2009 movie Avatar.

Example 1: Jetstar Airways Business Activities and Value

According to Business Wire (2013), Nuance in Virtual Worlds
Communications, Inc., announced that Jetstar
“has launched a new virtual assistant called ‘Ask Virtual worlds provide an interesting platform for
Jess,’ which is based on Nuance Nina Web, an business activities. Businesses compete in virtual
intelligent virtual assistant that delivers a human- worlds, just like they do in the real world. Many
like, conversational customer service experience. companies and organizations now incorporate
Customers simply type their request to Jess, and virtual worlds as a new form of advertising and
Jess provides the answers. Jetstar is the first air- sales.
line to deploy Nuance Nina Web virtual assistant There are several types of business activities
for customer service. The new Ask Jess virtual in virtual worlds:
assistant draws on Nuance Nina, an intelligent • Creating and managing a virtual business
virtual assistant that leverages innovative technol- (see Terdiman 2008 for guidelines on how to
ogy for natural language understanding and deliv- do this)
82 2 E-Commerce: Mechanisms, Platforms, and Tools

• Conducting regular business activities (e.g., gers by giving them information about ground
advertising, marketing, collaboration) within transportation, etc. (see [Link]/
the framework of the virtual world Travel/york-airports-introduce-avatars-
• Providing services for those who build, man- assist-passengers/story?id=16957584). The
age, or make money with virtual properties avatars are human sized. For a demonstration of
For additional business activities, see Mahar the avatars in the New York airports, watch
and Mahar (2009) and Chapter 8. WNYC’s video titled “Airport Avatar
In a cover story in Businessweek Magazine, Demonstration” (47 seconds) at [Link]/
Hof (2006) discusses the various opportunities watch?v=tI3YBf36twk. Advanced avatars can
for conducting business in Second Life. conduct vocal conversations with passengers
Specifically, he introduces seven residents who (sometimes in several languages). Similar avatars
make substantial amounts of money. These act as guides in some companies, universities,
include the Anshe Chung avatar, known as the and tourist attractions. New York airports are
“Rockefeller of Second Life.” Her successful working on developing avatars that will allow
company buys virtual land from Second Life, customers to ask questions about the airport
“develops” it, and sells or rents it globally. (see [Link]/cool-tech/new-york-
For more on business applications for virtual airports-are-installing-virtual-avatars- to-
worlds, see [Link]/?s= help-visitors).
virtual+worlds.
Following is an example of how companies Virtual Shopping
use virtual worlds in businesses: You can go shopping with friends while each
shopper is located at his or her individual home.
Example: Market Research You enter a virtual store in the virtual mall and
Starwood Hotels constructed a prototype of its find jeans on sale. Your avatar tries on the jeans
Aloft brand hotels before they were built in 2008. (the avatar’s body’s size is the same as yours) and
People using Second Life were asked to view the displays it to your friends. If you like it, you may
prototype and give the company their opinions on buy the pants online or visit the physical store
the model. Then, using the feedback, the com- later. Virtual shopping is gaining popularity (see
pany completed the design and built the hotel. Turban et al. 2015, and Chapter 7).
Using virtual worlds gives companies a chance One type of virtual shopping is described next.
to receive and examine feedback about new prod-
ucts or services. This can be crucial because it Trading Virtual Properties
gives the companies insight into what the market As you will see in the closing case, trading virtual
and customers really want from new products. properties is a very popular activity in Second
The 3D presentation helps users better under- Life. [Link] (formerly known as Habbo
stand products; thus giving companies a competi- Hotel), a Finnish social networking site for teenag-
tive edge. For other potential activities, see Mahar ers, sells more virtual furniture worldwide than the
and Mahar (2009), Stinton (2013), and the clos- giant Swedish retailer IKEA sells actual furniture.
ing case of this chapter. There is an increased use The virtual furniture is designed by teens on the
of avatars in help desks. site who decorate their Habbo rooms with the fur-
nishings. The teen users are buying not only furni-
Example ture but also clothes, bags, etc., for their avatars.
Avatars guide and advise passengers in airports.
As of 2012 you can see avatars acting as greeters SECTION 2.7 REVIEW QUESTIONS
in many airports in Europe (e.g., Paris) and the 1. Define virtual worlds.
U.S. (New York), that are there to help passen- 2. Describe avatars. Why do we use them?
2.8 Emerging EC Platforms: Augmented Reality and Crowdsourcing 83

3. List some business activities in virtual worlds. potential applications. Finally, Wikipedia lists
Categorize them by type. many e-commerce related applications of AR.
4. Describe virtual shopping.
Example 1: Net-a-Porter
This innovative company (Chapter 1) is using an
2.8 EMERGING EC PLATFORMS: iPhone/iPad app to view an AR ‘shopping
AUGMENTED REALITY window.’ As can be seen in the video “Net-A-
AND CROWDSOURCING Porter Augmented Reality Shopping Windows”
(1:37 minutes) available at [Link]/
Several technologies are used as platforms that net-a- porter-augmented-reality-shopping-
enable innovative EC applications. Here we windows, customers at the company’s physical
present two. store can point the mobile device camera at a
clothing display (e.g., in the stores or store win-
dows), and see a 360 degree view of the clothes.
Augmented Reality They also can see presentations at fashion shows,
price, availability, and other relevant information.
An increasing number of business applications Furthermore, the window shoppers can immedi-
use the technology of augmented reality (AR). ately buy the clothing online using their mobile
See Marcom on a Dime (2010) for more details. device (for the download, see [Link]/
The term AR has several definitions depending ne/app/net-a-porter/id318597939?mt=8).
on its field of applications. According to
Wikipedia, augmented reality is “a live or indi- Example 2: IKEA
rect view of a physical, real-world environment IKEA uses AR to show how its furniture can
whose elements are augmented (or supple- fit in your house. For details on this mobile phone
mented) by computer-generated sensory input app, see Truong (2013) and watch the video
such as sound, video, graphics or GPS data” (see “Place IKEA Furniture in Your Home with
[Link]/wiki/Augmented_reality ). Augmented Reality” at [Link]/watch?
Such an arrangement helps people enhance the v=vDNzTasuYEw.
sensory perception of reality. The computerized
layer can be seen through an application on
mobile devices such as smartphones, webcams,
or 3D glasses (including 3D TV). Google devel- Crowdsourcing
oped Augmented Reality (AR) glasses called
‘Google Glass’ (see Chapter 6 and Bilton 2012). Another platform for e-commerce is crowdsourc-
For how AR works, see Bonsor (2001). Bonsor ing. Crowdsourcing is a platform for collective
also explains the relationship of AR to virtual intelligence in e-commerce and social commerce
reality. (see the industry website [Link]).
Here we present the essentials of the technology.
Applications in E-Commerce In Chapter 8 we present the applications that are
The major applications in e-commerce are in the based on this technology.
areas of advertising and marketing (for details,
see Rorick 2012), as will be described in Chapter 9. Definitions and Major Concepts
An application in real estate is described in Chapter The term crowd refers to any group of people
3. There are potentially many other areas of such as a group of consumers, employees of a
applications. For example, Hayes (2009) corporation, or members of a social network who
describes 16 business applications, while iPhone- offer expertise. A crowd is frequently referred to
ness (2010) and Elliott (2009) describe more a large group.
84 2 E-Commerce: Mechanisms, Platforms, and Tools

Figure 2.5 The elements

of crowdsourcing

Tasks
Psychology, Technology, Web
Sociology of 2.0
Crowd

Process,
Crowd Models
Implementations

Applications in Social Gaming mentation issues such as incentives paid to the

AR is already used in several applications. participants.
According to [Link]/augmented-
reality/use-cases/social-augmented-reality- The Process of Crowdsourcing
games, social AR gaming is a superb tool for Crowdsourcing can be viewed as a collective
generating marketing leads and brand recognition problem-solving or work sharing process, and
because of the huge number of players engaged usually is conducted as a Web-based activity. In a
in games connected with a product. typical use of crowdsourcing, problems are
Crowdsourcing utilizes crowds to collec- broadcast either to a known crowd (e.g., employ-
tively execute tasks such as solving problems, ees or business partners) or to an unknown group
innovating, or getting large projects completed of participants (e.g., expert problem solvers or
by dividing the work among many people. The consumers). The communication usually starts as
term was coined by Jeff Howe in June 2006 an open call for solutions (see first step in
(Howe 2008). In the crowdsourcing process, the Figure 2.6). The members of the crowd are orga-
initiator recruits a crowd (e.g., customers) to cre- nized as online communities, and members sub-
ate content, a cumbersome task (e.g., translating mit individual solutions. The crowd may also
Wikipedia articles), or in research and develop- discuss the solutions and may vote for a final
ment. This is based on the idea that two heads are short list. Alternatively, the short list is then pri-
better than one. The collective intelligence of oritized (e.g., ranked). The final selection can be
large groups is assumed to be able to solve com- made by the crowd or by management
plex problems at low cost (Sherman 2011; (Figure 2.6). The winning individuals in the
Brabham 2013). crowd are well compensated, either monetarily or
The basic elements of crowdsourcing are with special recognition. In other cases, the only
illustrated in Figure 2.5. Three elements are rewards may be the satisfaction with a job well
involved: the task(s) to be carried out, the crowd, done. The use of crowdsourcing can yield results
which is used to work on the task and the models from amateurs or unrecognized professionals.
and processes used by the crowd (to execute the
task). These elements are connected by features Example
related to the tasks and the crowd (such as the In 2008, Starbucks introduced My Starbucks Idea
psychology of the crowd), the technologies used ([Link]), a social media
(such as idea generation and voting), and imple- site designed to solicit ideas and feedback from
2.8 Emerging EC Platforms: Augmented Reality and Crowdsourcing 85

Crowd members Possible

Open call for
generate ideas discussions,
contributions
modifications

Final selection. Evolution by

Possible
By crowd crowd (voting), or
prioritizing of
(voting) or by by company
candidates
management elimination

Figure 2.6 A typical crowdsourcing process

its customers (see opening case in Chapter 1). The

site was built around four key themes: (1) ideas research project simultaneously. Also,
are user generated; (2) users can vote to short list designs of products may be expedited.
ideas, discussing them before and/or after the • The contributing crowd may reside
vote; and (3) company employees act as “idea within the organization; therefore,
partners,” providing answers to questions and talents may be discovered.
leading discussions. • By listening to the crowd, organizations
The process is visible to the entire Starbucks gain first hand insight into the desires of
community. The members can see the status of their customers (or employees). There is
each proposal. built-in market research when the crowd
Note that crowdsourcing focuses on innovation, is composed of customers.
creativity, and the problem-solving capabilities of a • Crowdsourcing can tap into the global
crowd organization. An overview of crowdsourcing world of ideas. The crowd may include
is provided in BrightSightGroup’s video titled “Jeff business partners, customers, academi-
Howe - Crowdsourcing” (3:20 minutes) at youtube. cians, etc., and the members of the
com/watch?v=F0-UtNg3ots, also see crowd- crowd can reside in different countries.
[Link], Sherman (2011) and Crowdsortium • Customers tend to be more loyal if they
([Link]). These specialists have devel- participate in a company’s problem
oped best practices for the industry. solving project (see the opening case in
Chapter 1).
Benefits of Crowdsourcing
The major perceived benefits of crowdsourcing
include the following:

For additional benefits to crowdsourcing, see

• Problems can be analyzed or solved at Sherman (2011).
comparative little cost. (Payment can be
determined by the results; however, Uses of Crowdsourcing
sometimes there is no monetary pay- in E-Commerce
ment, just praise or accolades). There are several EC applications of crowdsourc-
• Solutions can be reached quickly since ing – notable is the creation of Wikipedia. Sherman
many people work on the needed (2011) presents many successful applications; the
major ones are described in Chapter 8.
86 2 E-Commerce: Mechanisms, Platforms, and Tools

SECTION 2.8 REVIEW QUESTIONS

1. Define augmented reality. • Enable smarter machines (Gartner 2014)
2. Describe how AR can facilitate EC. • Enable much wider bandwidth
3. Define crowdsourcing. • Enable better visualization including
4. List the elements of crowdsourcing. 3-D tools
5. Describe the process of crowdsourcing. • Simplify the use of mobile computing
6. What are the major benefits of crowdsourcing? and mobile commerce
7. How is crowdsourcing used in EC?

For additional capabilities see Patel (2013).

2.9 THE FUTURE: WEB 3.0,
WEB 4.0 AND WEB 5.0 Web 3.0 and the Semantic Web
One of the major possible platforms of Web 3.0
Web 2.0 is here. What’s next? The answer is a technologies is the Semantic Web.. The term was
still-unknown entity referred to as Web 3.0, the presented by the inventor of the Web, Tim Berners-
future wave of Internet applications. Some of the Lee, who visualized the Semantic Web as the plat-
desired capabilities of Web 3.0 will be discussed form for making the Web smarter. There is no
later in this section. In general, there is optimism standard definition of Semantic Web. It is basi-
about the future of the use of the Web 3.0 to facil- cally a group of methods that focus on machines
itate EC (see [Link]/blog/2013/08/02/ (in contrast with Web 2.0 that focuses on people).
the-future-of-ecommerce-with-web-3-0). The technology attempts to enable computers to
understand the semantics (i.e., the meaning) of
information, by using natural language under-
Web 3.0: What Does the Future Hold? standing tools. For a video titled “Evolution Web
1.0, Web 2.0 to Web 3.0” (3.58 minutes) see you-
Web 3.0 is projected to deliver a new generation [Link]/watch?v=bsNcjya56v8.
of business applications that will see business A similar view regarding the role of the
and social computing converge. Web 3.0 could Semantic Web is expressed by Borland (2007),
change the manner in which people live and work who believes that new Web 3.0 tools (some of
as well as the organizations where they work, and which are already helping developers put together
it may even revolutionize social networking (see complex applications) will enhance and automate
Laurent 2010; Aghaei et al. 2012). database searches, assist people in choosing
According to several experts, Web 3.0 could vacation destinations, and make sorting through
have the following capabilities: complicated financial data more efficient.
An experimental Semantic Web browser has
been in use lately. This browser enables users to
• Make current applications smarter by display data, draw graphs, and make browsing
introducing new intelligent features more interactive. (e.g., see [Link]/standards/
• Provide easier and faster interaction, semanticweb). Another example would be
collaboration and user engagement “friend-of-a-friend” networks, where individuals
• Facilitate intelligent-based powerful in social networks provide data in the form of
search engines links between themselves and friends.
• Provide more user-friendly application- For a video titled “Web 3.0” (14:25 minutes)
creation and human-computer interac- see [Link]/watch?v=CG9cPtIYy8Y.
tion capabilities
• Increase the wisdom and creativity of Concerns
people The following are a few concerns regarding the
implementation of Web 3.0 and the future of EC.
2.9 The Future: Web 3.0, Web 4.0 and Web 5.0 87

ogy advances (e.g., see Gartner 2014). Of the

• Future Threats. According to Stafford many predictions, we cite two here.
(2006), Laurent (2010), and the authors’
experiences, the following trends may McKinsey & Company’s Prediction
slow the growth of EC and Web 3.0, and According to this prediction (Bughin et al.
may even cripple the Internet. 2010), there are 10 tech-enabled business
• Security concerns. Shoppers, as trends to watch. These include the developments
users of e-banking and other ser- in the global information grid, new collabora-
vices, and members of social net- tion technologies, and pervasive computing
works, worry about online security. (Chapter 6).
The Web needs to be made safer. Definitions, details, and discussions are pro-
• Lack of Net neutrality. If the big vided by Bughin et al. (2010). Also, see Gartner’s
telecommunications companies are annual reports about Strategic Technology Trends
allowed to charge companies for a at [Link]/technology/research.
guarantee of faster access, critics
fear that small innovative Web com- Nicholas Carr’s Predictions
panies could be demolished by the In his free e-book, Nicholas Carr (2008) dis-
big companies that can afford to pay cusses the following trends:
more for efficient Internet usage. 1. More intelligent computers
(see Chapter 15). 2. Larger and more efficient data centers based
• Copyright complaints. The legal on cloud computing
problems of YouTube, Craigslist, 3. Use of virtualization in computing infrastruc-
Wikipedia, and others may result ture that will enable the running of any appli-
in a loss of originality, dedication, and cation on an external computing grid
creativity of user-generated content. 4. Parallel processing grids that will cut process-
• Insufficient connectivity. Upstream ing costs by 90%
bandwidths are still constraining 5. Utility and cloud computing will become the
applications, making uploading of norm
video files a time-consuming task.
• Language Fitness. There will be a need Web 4.0
to reconsider the existing spoken lan- Web 4.0 is the Web generation after Web 3.0. It is
guages with Web 3.0 taxonomies and still an unknown entity. It is known as Symbiotic
schemes. Web (see Aghaei et al. 2012 for a description).
• Standards. There will be a need for However, Coleman and Levine (2008) envision it
architectural standards for Web 3.0. as being based on islands of intelligence and on
being ubiquitous. For the evolution from Web 1.0
to Web 4.0 see Aghaei et al. (2012). For a discus-
Therefore, some believe that the Semantic sion, see Koren (2013).
Web will never work (see the 91 minute video at
[Link]/watch?v=oKiXpO2rbJM). Web 5.0
Despite these concerns, Web 3.0 and According to Patel (2013), “Web 5.0 is still an
e-commerce could thrive due to several innova- underground idea in progress and there is no exact
tions in the technological environment. definition of how it would be. Web 5.0 can be con-
sidered as a Symbionet Web, decentralized.” Patel
provides some technical information.
The Technological Environment
SECTION 2.9 REVIEW QUESTIONS
The future of EC and the Semantic Web is depen- 1. What is Web 3.0, and how will it differ from
dent on how far the relevant information technol- Web 2.0?
88 2 E-Commerce: Mechanisms, Platforms, and Tools

2. Define Semantic Web. 5. Shall we take part in virtual worlds? For

3. List the major potential inhibitors and con- many companies and applications, the tech-
cerns of e-commerce and Web 3.0. nology is still immature and cumbersome. A
4. What are the major influencing computing good strategy is observing what other compa-
and IT trends? nies, especially in the same industry, are doing
5. What are Web 4.0 and Web 5.0? in Second Life.

MANAGERIAL ISSUES SUMMARY

Some managerial issues related to this chapter In this chapter, you learned about the following
are as follows. EC issues as they relate to the chapter’s learning
1. Should we use auctions for selling? A major objectives.
strategic issue is whether to use auctions as 1. Activities and mechanisms. The major
sales channels. Auctions do have some activities are information dissemination and
limitations, and forward auctions may create presence, online trading, collaboration,
conflicts with other distribution channels. If a entertainment, and search. The major mech-
company decides to use auctions, it needs to anisms are marketplaces, webstores, shop-
select auction mechanisms and determine a ping carts, catalogs, search engines, Web 2.0
pricing strategy. These decisions determine tools, and virtual worlds.
the success of the auctions and the ability to Most of the activities are between sellers
attract and retain visitors on the selling site. and buyers. However, there also are collabo-
Auctions also require support services. ration activities among supply chain mem-
Decisions about how to provide these ser- bers as well as among people within
vices and to what extent to use business part- organizations. EC attempts to automate the
ners are critical to the success of high-volume interaction process for the above activities.
auctions. 2. E-marketplaces and their components. An
2. Should we barter? Bartering can be an inter- e-marketplace or marketspace, is a virtual
esting strategy, especially for companies that market that does not suffer from limitations
lack cash, need special material or machinery, of space, time, or borders. As such, it can be
and have surplus resources. However, the val- very efficient and effective. Its major compo-
uation of what is bought or sold may be hard nents include customers, sellers, products
to determine, and the tax implications in some (some digital), infrastructure, front-end pro-
countries are not clear. cesses, back-end activities, electronic inter-
3. How do we select merchant software? There mediaries, other business partners, and
are many products and vendors on the market. support services.
Small businesses should consider offers from The role of intermediaries will change as
Yahoo! or eBay since the software is com- e-markets develop: Some will be eliminated
bined with hosting and offers exposure to the (disintermediation); others will change their
vendor-managed e-market. The functional- roles and prosper (reintermediation). In the
ities of the software as well as the ease of B2B area, for example, e-distributors con-
building webstores need to be examined (see nect manufacturers with buyers by aggregat-
discussion in Chapter 13). ing e-catalogs of many suppliers. New
4. How can we use Facebook and other social value-added services that range from content
networks in our business? There are many creation to syndication are mushrooming.
possibilities that are presented in Chapter 7, 3. The major types of e-marketplaces. In the
mostly in marketing and advertising. Any pro- B2C area, there are webstores and e-malls.
gressive organization should examine and In the B2B area, there are private and public
experiment with social networking. e-marketplaces, which may be vertical
Summary 89

(within one industry) or horizontal (across ers and marketers.) Using chat rooms, dis-
different industries). Exchanges are the plat- cussion spaces, and so forth, members can
form for many buyers and sellers to meet and exchange opinions about certain products
trade. Different types of portals provide and services. Of special interest are commu-
access to e-marketplaces. nities of transactions, whose interest is the
4. Electronic catalogs, search engines, and promotion of commercial buying and selling.
shopping carts. The major mechanisms in Virtual communities can foster customer
e-markets are e-catalogs, search engines, loyalty. This may increase sales of products
software (intelligent) agents, and electronic made by vendors that sponsor communities,
shopping carts. These mechanisms, which and facilitate customer feedback for improv-
are known as merchant suites, facilitate EC ing service and business operations.
by providing a user-friendly and efficient 9. Social networks as EC mechanisms. These
shopping environment. are very large Internet communities that
5. Types of auctions and their characteris- enable the sharing of content, including text,
tics. In forward auctions, bids from buyers videos, and photos, and promote online
are placed sequentially, either in increasing socialization and interaction. Hundreds of
mode or in decreasing mode. In reverse auc- social networks, are emerging around the
tions, buyers place an RFQ and suppliers world, competing for advertising money.
submit offers in one or several rounds. In Millions of corporations advertise, entertain,
name-your-own-price auctions, buyers spec- and even sell on social networks.
ify how much they are willing to pay for a Business-oriented communities concen-
product or service, and an intermediary tries trate on business issues, both in one country
to find a supplier to fulfill the request. Penny and around the world (e.g., recruiting, find-
auctions are forward auctions where a small ing business partners). Social marketplaces
fee is paid each time a bid is made. The final meld social networks and some aspects of
member to bid wins the auction when the business. Notable business-oriented social
designated time is up. networks are LinkedIn and XING. Some
6. The benefits and limitations of auctions. companies are active in public social net-
The major benefits for sellers are the ability works such as Facebook. Other companies
to reach many buyers, sell quickly, and save own and operate their own social networks
on intermediary commissions. Buyers have within the company, which are known as
excellent access to auctions, and a chance to enterprise social networks. Their members
obtain bargains and collectibles while shop- are usually employees and retirees. They are
ping from their homes. The major limitation used mainly for collaboration, knowledge
is the possibility of fraud. creation and preservation, training, and
7. Bartering and negotiating. Electronic bar- socialization. Many large companies have
tering can greatly facilitate the swapping of such networks (e.g., IBM, Wells Fargo,
goods and services among organizations, Northwestern Mutual).
thanks to improved search and matching 10. Virtual worlds. These environments pro-
capabilities, which is managed by bartering vide entertainment, trading of virtual prop-
exchanges. Software agents can facilitate erty, discussion groups, learning, training,
online negotiation. and much more. Everything is simulated,
8. The structure and role of virtual commu- animated, and supported by avatars. Many
nities. Virtual communities create new types companies have established presences in vir-
of business opportunities. They bring people tual worlds, especially in Second Life,
with similar interests together at one website. mainly offering dissemination of informa-
(Such groups are a natural target for advertis- tion and advertising.
90 2 E-Commerce: Mechanisms, Platforms, and Tools

11. Augmented Reality (AR) and crowdsourc- Dynamic pricing

ing. These emerging technologies facilitate E-bartering (electronic bartering)
two types of EC activities. AR blends visual E-distributor
aspects of computer and physical worlds. Electronic auction (e-auction)
Thus, it can facilitate advertisement and pre- Electronic catalog (e-catalog)
sentation of information. It works by point- Electronic shopping cart
ing a mobile device (e.g., smartphone) to a E-mall (online mall)
product or building and adds information to E-marketplace
what you see (e.g., 360 degree view, price Enterprise search
tag). Crowdsourcing solicits the wisdom of Forward auction
the crowd for idea-generation or problem Front end
solving. It also is used to divide a large task Intermediary
among many people, each of whom is exe- Mobile portal
cuting a different, small subtask. Mobile social network
12. Web 3.0 and Web 4.0. Web 3.0, the next Name-your-own-price model
generation of the Web, will combine social Penny auction
and business computing. It will be more Reverse auction (bidding or tendering system)
portable and personal, with powerful search Search engine
engines, increased clout, and greater con- Sell-side e-marketplace
nectivity with the wireless environment and Semantic Web
on-demand applications. Knowledge man- Virtual community
agement will be one of its main pillars. The Virtual world
Semantic Web will play a major role in Web Voice portal
3.0 applications. Web 3.0 and its applications Web 3.0
will depend on IT trends such as the develop- Web 4.0
ments in cloud computing, utility computing, Web (information) portal
parallel processing, and machine intelli- Webstore (storefront)
gence. Web 4.0 is a futuristic Web that will
be built on ubiquitous and intelligent sys-
tems. It will connect “islands” of intelligence DISCUSSION QUESTIONS
from different sources.
1. Compare physical marketplaces with mar-
ketspaces. What are the advantages and limi-
KEY TERMS tations of each?
2. Discuss the competitive advantage Craigslist
Augmented reality has using classified ads.
Avatar 3. Discuss the value of a virtual world as an EC
Back end environment. Why does it attract users? Why
Bartering does it attract companies? How can it pro-
Bartering exchange vide a competitive advantage to a company
Business-oriented social network that has a presence there? What are its
Buy-side e-marketplace limitations?
Crowdsourcing 4. Discuss the need for portals in EC.
Desktop search 5. How do business-oriented networks differ from
Digital products regular social networks such as Facebook?
Disintermediation 6. Why are social marketplaces considered to be
Double auction a Web 2.0 application?
Internet Exercises 91

7. Discuss the following statement: “Technically, increases productivity and innovation.

you can put together a portal in a weekend, but Others say it is a waste of time and ban the
culturally there are a slew of things to con- use of Facebook, YouTube, and other such
sider; therefore it takes much longer.” sites at work.
8. Discuss the pros and cons of selling cars via 10. Debate the business value of social network-
auctions. ing. To start, read Tom Davenport’s blog of
9. Discuss the pros and cons of using avatars in October 2007 titled “Where’s the ‘Working’
help desks. What are the benefits? The in Social Networking?” at [Link].
limitations? org/2007/10/wheres-the-working-in-
social-n.
11. Debate: Facebook and Twitter compete for
TOPICS FOR CLASS DISCUSSION advertisers’ money. Which one has a better
AND DEBATES chance to get more ad money and why?
(Consult Mangalindan 2010.)
1. Compare and contrast the efficiency of tradi- 12. Some of the largest social media networks
tional markets with that of digital markets. exist in China ([Link], [Link], us.
2. Some claim that social networking, espe- [Link], [Link] and renren.
cially microbloging and social network sites, com). Find information about these networks
displace the traditional electronic bulletin and list their properties. How do they differ
board systems. Discuss. from U.S. social networks?
3. Discuss the advantages of dynamic pricing
strategy over fixed pricing. What are the
potential disadvantages of dynamic pricing? INTERNET EXERCISES
4. Enter Facebook and search for companies
that do auctions on the site. Identify the dif- 1. Enter [Link]
ferent types of auctions on the site. and [Link] and compare their
5. What is the advantage of a business using translation capabilities.
eBay instead of conducting auctions from its 2. Examine how bartering is conducted online
own site? Distinguish between C2C and B2B at [Link], [Link], and
cases. [Link]. Compare and contrast
6. Debate: Should companies build in-house the functionalities and ease of use of these
social networks for external activities or use sites.
existing public social networks? (e.g., see 3. Enter [Link] and identify all specific
Roberts 2008). e-commerce mechanisms (or solutions) pro-
7. Debate: Should Craigslist and YouTube vided by the company.
monitor and control what users publish 4. Enter [Link] and request a product or
there? Who will pay the cost? a service. Once you receive replies, select the
8. Debate: Social network services can provide best deal. You have no obligation to buy.
good security to enterprise social networks. Write a short report based on your
However, security may limit users’ creativity experience.
and disrupt the business. Should a company 5. Enter [Link] and find its capabilities.
use such a service? What type(s) of search does it conduct (e.g.,
9. Debate: Some research suggests that the use desktop, enterprise, general)?
of public social networks by employees 6. Enter [Link]. List all services available to
during work hours can be good for a busi- both sellers and buyers of cars. Compare it to
ness because employees develop relation- [Link]. Finally, identify the revenue
ships and share information, which sources of both sites.
92 2 E-Commerce: Mechanisms, Platforms, and Tools

7. Enter [Link]. 16. Enter [Link] and find the commer-

(a) Find out what information is available to cial activities of the following avatars: Fizik
customers before they send a package. Baskerville, Craig Altman, Shaun Altman,
(b) Find out about the “package tracking” FlipperPA Peregrine, and Anshe Chung.
system; be specific. Briefly describe what they represent.
(c) Compute the cost of delivering a 17. Enter [Link] and read the article “13
10″ × 20″ × 15″ box, weighing 40 pounds, Ecommerce Link Building Tactics for Your
from your hometown to Long Beach, Online Store” at [Link]/ecommerce-
California. Compare the cost for the news/1430-13-ways-to-gain- inbound-
fastest delivery option with to the lowest [Link]. Write a
possible delivery cost. brief summary.
(d) Prepare a spreadsheet using Excel for
two different types of calculations avail-
able on the UPS site. Enter data to solve TEAM ASSIGNMENTS
for two different calculations. AND PROJECTS
8. Register at Second Life, and enter the site.
(a) Find what three corporations are doing 1. Assignments Related to the Opening Case
on the site. (a) Why is Pinterest considered a social
(b) Find out what three universities are network?
doing on the site. (b) What are the company’s business and rev-
(c) Write a report on your findings. enue models?
9. Create an avatar on Second Life. Let your (c) How can manufacturers advertise on
avatar interact with avatars of some compa- Pinterest?
nies. Why do we consider an avatar a mecha- (d) Compare Pinterest and We Heart It. Pay
nism for EC? Write a report. attention to the business models.
10. Enter [Link] and [Link]. Prepare a (e) Pinterest has a large amount of money.
list of the major products available for build- How does it use this money on its website
ing corporate portals. to increase its competitive advantage?
11. Enter [Link]/[Link] and find the 2. Assign each group a large e-tailer (e.g.,
key capabilities of its enterprise portals. List [Link], [Link], [Link],
the benefits of using five of the capabilities [Link], [Link], and [Link]). Trace the
of SAP’s portals. purchasing process. Look at the catalogs,
12. Enter [Link]. View the search engines, shopping carts, Web 2.0 fea-
shopping cart demo. What features impress tures, and any other mechanisms that improve
you the most and why? What related services e-shopping. Prepare a presentation that
does it provide? Compare it to storefront. includes recommendations for improving the
net, [Link] and [Link]. existing process.
13. Enter the website of a social network service 3. Build your own business in Second Life (SL).
of your choice. Build a homepage. Add a This can be done by each member or each
chat room and a message board to your site group. Determine what business you want to
using the free tools provided. Describe the build. Then read Terdiman’s book (2008),
other capabilities available. Make at least Mahar and Mahar’s book (2009), or a similar
five new friends. book. Register at SL and begin to work. In
14. Enter [Link] and [Link] and your project, do the following:
compare their offerings. (a) Select a business category and develop a
15. Enter [Link]. Find material about Semantic business strategy.
Web (SW); check their RDF/FAQ and search (b) Develop a business plan and model for
for some applications. Write a report. your virtual enterprise.
Closing Case: Madagascar’s Port Modernizes Customs with TradeNet 93

(c) Choose where (island or property) to com. Look at another country of your choice.
establish a business. Explain your choice. Comment on the cultural differences. Write a
(d) Conduct a budget and cash flow analysis report.
(see Appendix B in Terdiman 2008).
(e) Buy virtual land and other virtual
properties.
(f) Develop marketing and advertising plans CLOSING CASE: MADAGASCAR’S
(examine the competition). PORT MODERNIZES CUSTOMS
(g) Look for any possible revenues; make a WITH TRADENET
pricing decision.
(h) Plan all support services using the SL Madagascar is an island-state in Africa whose
tools. port is critical to its trade activities and the over-
(i) Watch for legal issues and other risks; all economy. The country’s customs operations
plan their mitigation. play an essential part in the port operations.
(j) Build the business (using the SL tools).
(k) Build a supporting blog. How would you
use it for viral marketing? The Problem
4. Watch the O’Reilly Media video titled “Online
Communities: The Tribalization of Business” The trade administration process in this underde-
(Part 1 is 6:15 minutes; Parts 2 and 3 are veloped country used to be cumbersome and
optional) at [Link]/watch?v=qQJ slow. This limited the trade volume and the cus-
vKyytMXU and answer the following toms revenue. Madagascar’s ‘Trading Across
questions: Borders’ indicator position was one of the world’s
(a) Why is the term tribalization used in the lowest (143rd ranking). The country’s Logistics
video? Performance Index was also low (120th place).
(b) What are virtual communities?
(c) How can traditional businesses benefit The Business Process
from online communities? According to CrimsonLogic (2014), “Everyone
(d) What is the value of communities for the exporting to Madagascar must first register and
customers? fill in an electronic form, called Advance Cargo
(e) Compare social vs. marketing frameworks. Information – ACI…, for each consignment. The
(f) How are virtual communities aligned with exporter attaches copies of the trade documents,
the businesses? such as the commercial invoice, bill of lading and
(g) Discuss the issues of measurements, met- certificate of origin to the BSC and these are then
rics, and CSFs. transmitted electronically to the Customs in
(h) Optional: View Part 2 ([Link]/ Madagascar to be verified for consistency and
watch?v=U0JsT8mfZHc#t=15) and Part risk profiling.”
3 ([Link]/watch?v=AeE9VWQY Once completed, the importer or customs broker
9Tc) (6:50 and 10:24 minutes respec- can submit the customs declaration electronically.
tively), and summarize the major topics Once submitted, the approval process begins.
discussed. It may involve several government agencies, port
5. The team’s mission is to analyze Pinterest’s container terminal management, commercial
U.S. and global competition, including similar banks, and the country’s Central Bank and
companies in China and Brazil. Start by read- Treasury. While the submission portion was
ing McKenzie (2012) about the Chinese social computerized and fairly efficient, the approval
sites Meilishuo and Mogujie and compare process was not. Overall, the cargo clearance
them to Pinterest. Do the same for weheartit. took over 15 days.
94 2 E-Commerce: Mechanisms, Platforms, and Tools

The Solution customs declarations data into GasyNet, which

in turn transmits the data to TradeNet, which
Originally, Customs had been using enables all involved partners to share data and
ASYCUDA++ (a legacy computerized system transmit results. The results that are returned to
designed by the United Nations Conference on TradeNet are transferred to GasyNet and then to
Trade and Development). This system helped the importers. To use TradeNet, users need to
with the submission, but the overall process was buy special software from TradeNet Frontend
still slow due to lack of integration of all partici- Solution. The software enables data entry by the
pants’ subsystems. The port had difficulties users (e.g., the customs declarations) from PC’s
competing with other ports in the area that or mobile devices. The system provides permit
offered faster and more efficient customs man- status information, company billing inquiries,
agement systems. Therefore, the Medagasy ability to retrieve lost permits, acknowledge-
Community Network Services (“GasyNet”) saw ment notification, an audit trail, permit listings
the need to create a single online platform to and more.
connect the entities in the trade community. The system links the multiple partners in the
They relied on a new system, which is an inte- trade by creating a single point of transaction for
gration of TradeNet, an electronic data exchange, all the standard documents involved.
and ASYCUDA++.

What Is TradeNet?
TradeNet is an electronic data interchange (EDI) The Results
system (see Online Tutorial T2) developed in
Singapore in 1989. It is now administered, oper- The system is an efficient platform for the B2B
ated, and maintained by CrimsonLogic of customs-related transactions. It reduced the cargo
Singapore. TradeNet, which initially operated clearance time from more than 15 days to less
only in Singapore, is used today in several ports than five days for sea shipments, which resulted
around the world, including Madagascar. The in increased trade volume. In addition, customs
current system also includes Windows-based revenue more than doubled in 5 years (account-
and Web-based portions. Using the TradeNet- ing for around half of Madagascar’s total income).
based system the trading community can submit Other recorded benefits include: elimination of
electronically all the forms needed by the unnecessary bureaucracy and cost reduction due
Customs administration. The system then routes to paperless processes.
the applications for processing. Approved per- Finally, Madagascar’s ‘Trading Across
mits are then returned electronically to the send- Borders’ indicator improved from 143rd to 109th
ers via ASYCUDA++. The process starts before place, and their Logistics Performance Index
ships even enter the port. For an overview of ranking improved from 120th to 84th.
TradeNet, see [Link]/leftNav/trad/ Sources: Based on Fjeldsted (2009), Crimson
TradeNet/An+Overview+of+[Link], Logic (2014), and Singapore Customs (2014).
and the United Nations Economic Commission
for Europe ([Link]/[Link]). Questions
1. Describe the role of GasyNet in the process.
The Integrated System 2. Describe the contribution of TradeNet.
In order to improve the flow of information 3. What is the role of EDI in this system?
and provide an efficient trade environment, 4. The TradeNet system is a typical B2B
the TradeNet system was integrated with platform. Explain why.
ASYCUDA++. The importers input their 5. Relate the content of this chapter to the case.
Glossary 95

sound, video, graphics, or GPS data” (see en.

ONLINE FILES [Link]/wiki/Augmented_reality).
available at affordable-ecommerce- Avatar Interactive, animated, computerized
characters designed to look like humans and
[Link]/turban
are programmed to exhibit people’s behavior.
Back end Where activities that are related to
W2.1 Social Software Tools: From Blogs to
order aggregation and fulfillment, inventory
Wikis to Twitter
management, purchasing from suppliers,
W2.2 Examples of Digital Products
accounting and finance, insurance, payment
W2.3 Application Case: eBay: The World’s Largest processing, packaging, and delivery.
Auction Site Bartering The exchange of goods and services.
W2.4 Application Case: Social Media at Eastern Bartering exchange A marketplace where an
Mountain Sports intermediary arranges barter transactions.
Business-oriented social network A social net-
work whose primary objective is to facilitate
business.
COMPREHENSIVE EDUCATIONAL Buy-side e-marketplace Where a company
WEBSITES purchases from many potential suppliers; this
type of purchasing is considered to be many-
[Link]: Learn SL in a fun, easy to-one, and it is a B2B activity.
way. Look for videos and tutorials. Crowdsourcing Utilizing crowds to collec-
[Link]/resources: The Virginia Electronic tively execute tasks such as solving problems,
Commerce Technology Center offers special innovating, or getting large projects done by
reports, e-business news, and statistics. dividing the work among many people.
[Link]: Reference for locating the Desktop search The search of a user’s own
top social marketing sites. computer files. The search is done by looking
[Link]: Large collection of through all the information that is available on
EC-related material. the user’s PC.
[Link]: A comprehensive collection of Digital products Goods that can be transformed
all type of resources. to digital format.
[Link]: A compre- Disintermediation Elimination of interme-
hensive Marketing Blog. diaries between sellers and buyers because
[Link]/blog/hinchcliffe: Dion Hinchcliffe’s they offer only services that can be fully
compendium of articles, reviews, galleries, automated.
Double auction An auction in which multiple
videos, podcasts, and downloads about
buyers and their bidding prices are matched
Enterprise 2.0.
with multiple sellers and their asking prices,
[Link]: A collection of
considering the quantities on both sides.
webinars on social media, Web 2.0, ROI, and
Dynamic pricing Prices that are not fixed but
marketing. that are allowed to fluctuate, and are deter-
mined by supply and demand.
E-bartering (electronic bartering) Bartering
GLOSSARY conducted online, usually in a bartering
exchange.
Augmented reality “A live, copy, view of a E-distributor An entity that basically
physical, real-world environment whose ele- aggregates product information from many
ments are augmented (or supplemented) by manufacturers, sometimes thousands of them,
computer-generated sensory input such as in the e-distributor’s catalog.
96 2 E-Commerce: Mechanisms, Platforms, and Tools

E-mall (online mall) An online shopping cen- Search engine A computer program that can
ter where many online stores present their access databases of Internet resources, search
catalogs. for specific information or keywords, and
E-marketplace An electronic space where sell- report the results.
ers and buyers meet and conduct different Sell-side e-marketplace A place where a com-
types of transactions. pany sells either standard or customized prod-
Electronic auction (e-auction) An auction con- ucts to individuals (B2C) or to businesses
ducted online. (B2B); this type of selling is considered to be
Electronic catalog (e-catalog) The presentation one-to-many.
of product information in electronic form; the Semantic Web A group of methods that focuses
backbone of most e-selling sites. on machines (in contrast with Web 2.0 that
Electronic shopping cart Software that allows focuses on people), trying to enable machines
customers to accumulate items they wish to buy to understand the semantics (i.e., the meaning)
before they arrange payment and check out. of information using natural language under-
Enterprise search The search for informa- standing tools.
tion within the files and databases of an Virtual community A community where the
organization. interaction takes place over a computer net-
Forward auction An auction where a seller work, mainly the Internet.
entertains bids from multiple buyers. Virtual world A site for online communities
Front end The place where customers interact in a computer-generated setting where users
with a marketspace. The major components socialize and work with one another through
of the front end can include the seller’s portal, the use of avatars. The creation of objects,
electronic catalogs, a shopping cart, a search jobs, homes, and businesses in the 3D envi-
engine, an auction engine, a payment gateway ronment is the foundation of these worlds and
and all other activities related to placing orders. is fun and satisfying.
Intermediary A third party that operates Voice portal A portal with audio interfaces
between sellers and buyers. that can be accessed by telephone or cell
Mobile portal A portal accessible via a mobile phone.
device. Web 3.0 A term used to describe the future of the
Mobile social networking Social networking World Wide Web. It is projected to deliver a new
where members converse and connect with generation of business applications that will see
one another using any mobile device. business and social computing converge.
Name-your-own-price model Auction model Web 4.0 The Web generation after Web 3.0. It
in which a would-be buyer specifies the price is still an unknown entity. However, it is envi-
(and other terms) he or she is willing to pay to sioned as being based on islands of intelli-
any willing and able seller. It is a C2B model gence and as being ubiquitous.
that was pioneered by [Link]. Web (information) portal A single point of
Penny auction A new type of forward auction access, through a Web browser, to critical
in which participants must pay a small nonre- business information located inside and out-
fundable fee each time they place a bid (usu- side organizations.
ally in small increments above the previous Webstore (storefront) A single company’s (or
bid). When time expires, the last participant to individual seller’s) website where products or
have placed a bid wins the item and also pays services are sold.
the final bid price.
Reverse auction (bidding or tendering
system) Auction in which the buyer places
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