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 Platforms ................................... 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) An e-commerce site talked about a great deal
contains supplementary material, which is available to since 2011 is Pinterest.
authorized users

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, charging for
(2013), and for statistics, see Smith (2014). premium services, creating an online retail shop,
using an affiliate program, and building a com-
prehensive 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
2013/12/a-pinterestguide-for-your-business. 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
able to generate significant revenue, it probably competitors are several Chinese companies that
will go to the IPO route, in which case the valua- operate 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, software
visitors tend to buy more from there, although the and server software, operating systems, hardware
latter companies drive more visitors to their sites. (Web servers), and hosting services need to be
It seems that Pinterest has some potential benefits established. Added to the above are the specific
for small businesses (e.g., designers). Many com- EC mechanisms presented in this chapter, such as
panies already use Pinterest to derive benefits electronic markets, shopping carts, e-catalogs,
(e.g., see the Etsy case in Chapter 3 and Volpe and support services such as payment and order
2012). However, these applications do not cur- fulfillment. In addition to of all of the above, there
rently provide any revenue to Pinterest. The suc- are different methods for executing EC, such as
cess of Pinterest will be determined by its revenue buying at a fixed price or at an auction, and each
model and the company’s profitability. method has a different support mechanism.
Finally, there are the Web 2.0-based collaboration
Sources: Based on Brave (2012), Carr (2012), and communication mechanisms (e.g., Twitter)
Hempel (2012), Jopson and Kuchler (2013), and special platforms such as the one used by
Loren and Swiderski (2012), Yang (2012), and Pinterest. In this chapter, we describe the major
Volpe (2012). EC mechanisms so that you will be able to under-
stand their uses in the forthcoming chapters.

LESSONS LEARNED FROM THE CASE

Pinterest is a social network that connects EC Activities and Support

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

engine may be useful. Buyers usually like to com-

pare prices; therefore, an online price comparison
service can be useful (now available on smart-
phones). Some sellers (e.g., American Airlines,
[Link]) provide price comparisons showing
competitors. If not satisfied, the buyer may aban-
don the seller’s site. If satisfied, the buyer will place
the chosen item in a virtual shopping cart (or bag).
The buyer may return to the seller’s catalog to
choose more items. Each selected item is placed in
the shopping cart. When the item selection is com-
pleted, the buyer goes to a checkout page, where a
shipment option is selected from a menu (e.g., stan-
dard, next day). Finally, a payment option is
selected. For example, [Link] allows you to
pay by credit card, PayPal, check after billing, in
installments, and so on. After checking all the
details for accuracy, the buyer submits the order.
This process is illustrated in Figure 2.2.
The major mechanisms that support this pro-
cess are described in Sections 2.3 and 2.4 of this
chapter. The place where buying and selling
occurs is called an e-marketplace, which we
introduce next.

SECTION 2.1 REVIEW QUESTIONS

1. List the major EC activities.
2. List the major EC mechanisms.
3. Describe the online purchasing process

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
• Lower the search time for information
The electronic market is the major venue for and cost to buyers
conducting EC transactions. An e-marketplace • Reduced information misunderstanding
(also called e-market, virtual market, or mar- between sellers and buyers
ketspace), is an electronic space where sellers • Possible reduction in the time gap
and buyers meet and conduct different types of between purchase and possession of
transactions. Customers receive goods and ser- physical products purchased online
vices for money (or for other goods and services, (especially if the product can be
if bartering is used). The functions of an e-market digitized)
are the same as those of a physical marketplace; • The ability of market participants to be in
however, computerized systems tend to make different locations while trading online
electronic markets much more efficient by pro- • The ability to conduct transactions at
viding more updated information and various any time (24/7) from any place.
support services, such as rapid and smooth exe-
cutions of transactions.
EC has increased market efficiency by expe-
diting and or improving the functions listed in Components of and the Participants
Table 2.1. Furthermore, EC has been able to sig- in E-Marketplaces
nificantly decrease the cost of executing these
functions. The major components and players in a mar-
The emergence of electronic marketplaces, ketspace are customers, sellers, products and ser-
especially Internet-enabled ones, has changed vices (physical or digital), infrastructure, a front
several of the processes used in trading and sup- end, a back end, intermediaries and other business
ply chains. In many cases, these changes, driven partners, and support services such as security and
by technology, have frequently resulted in: payments. A brief description of each follows:

• Customers. More than 2 billion Internet Sellers can sell directly from their web-
users worldwide are potential buyers of sites or from public e-marketplaces.
goods and services offered on the • Products and services. One of the
Internet. These consumers are looking major differences between the market-
for bargains, customized items, collec- place and the marketspace is the possi-
tors’ items, entertainment, socialization, ble digitization of products and services
and more. The social customers have in a marketspace. Although both types
more power than regular customers. of markets can sell physical products,
They can search for detailed informa- they can also sell digital products,
tion, compare prices, bid, and sometimes which are goods that can be transformed
negotiate. Buying organizations are also into a digital format. However, in mar-
customers, accounting for more than ketspaces, buyers can buy digitized
85% of EC volume and value activities. products online, anytime and from any
• Sellers. Millions of webstores are adver- place in seconds, and receive the pur-
tising and offering a huge variety of chased goods instantly. In addition to
items. These stores are owned by com- the digitization of software, music, and
panies, government agencies, or indi- airline tickets, it is possible to digitize
viduals. Every day it is possible to find dozens of other products and services,
new offerings of products and services. as shown in Online File W2.2. Digital
58 2 E-Commerce: Mechanisms, Platforms, and Tools

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

products have different cost curves than in what is termed the back end of the
those of physical products. In digitiza- business.
tion, most of the costs are fixed, and • Intermediaries. In marketing, an
variable costs are very low. Thus, profits intermediary is typically a third party
will increase rapidly as volume that operates between sellers and buy-
increases, once the fixed costs are paid. ers. Intermediaries of all kinds offer
• Infrastructure. The marketspace infra- their services on the Web. Some inter-
structure includes electronic networks, mediation is done manually; many are
databases, hardware, software, and more. done electronically. The role of these
• Front end. Customers interact with a electronic intermediaries is frequently
marketspace via a front end. The major different from that of regular intermedi-
components of the front end can include aries (such as wholesalers or retailers),
the seller’s portal, electronic catalogs, a as will be seen throughout the text,
shopping cart, a search engine, an auc- especially in Chapters 3 and 4. For exam-
tion engine, a payment gateway, and all ple, online intermediaries create and
other activities related to placing orders. manage the online markets. They help
• Back end. All the activities that are match buyers and sellers, provide
related to order aggregation and fulfill- escrow services, and help customers
ment, inventory management, purchas- and/or sellers complete transactions.
ing from suppliers, accounting and Physical intermediaries may be elimi-
finance, insurance, payment process- nated and their jobs be computerized
ing, packaging, and delivery are done (fully or partially) as described next.
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 ser- The Opportunity
vices such as transfer of products, escrow, pay-
ment arrangements, consulting, or assistance in Using the B2C EC model – eliminating the need
finding a business partner. In general, the first for physical stores – Blue Nile was able to offer
and second types of services can be fully auto- discounts of 35%, yet it became profitable in a
mated, and thus it is likely to be assumed by short time. (The cost of operating online stores is
e-marketplaces, infomediaries, and portals that very low.)
provide free or low-fee services. The third type What are the critical success factors of the
requires expertise, such as knowledge of the company? First, they offer large discounts. For
industry, the market, the products, and the tech- example, you can purchase a $6,000 diamond
nological trends, and therefore can only be par- for $4,000, which attracts more customers.
tially automated. Second, Blue Nile offers a huge selection of dia-
Intermediaries that provide only (or mainly) monds online and provides more information
the first two types of services may be eliminated; about diamonds than many physical jewelry
this phenomenon is called disintermediation. stores can offer. In May 2012, Blue Nile offered
An example is the airline industry and its push about 60,000 round diamonds that could be used
for selling electronic tickets directly by the air- to build a customized wedding ring. No physical
lines. Most airlines require customers to pay $25 store can offer so many diamonds. Third, the
or more per ticket processed by an employee via company provides educational guides as well as
telephone. This results in the disintermediation independent (and trusted) quality ratings for
of many travel agents from the purchasing every stone. A customer can look over a rating
process. In another example, discount stockbro- scale for cut, clarity, color, and so on, and then
kers that only execute trades manually are disap- compare prices using Bizrate ([Link]) and
pearing. However, brokers who manage electronic other online stores. Note that there usually is a
intermediation are not only surviving but may 30-day 100% money-back guarantee (now an
also be prospering (e.g., [Link] and expe- online industry standard). This provides cus-
[Link] in the travel industry and tdameritrade. tomers with a comfort level of trust against
com in stock trading). This phenomenon, in fraud and gives Blue Nile a competitive edge
which disintermediated entities or newcomers against stores that take the stones back but
take on new intermediary roles, is called reinter- charge a fee. The site provides live chat, pay-
mediation (see Chapter 3). ment options, build-your-own engagement ring,
Disintermediation is more likely to occur in gift ideas, and much more. The company has a
supply chains involving several intermediaries, mobile website for iPhone and Android users
as illustrated by Case 2.1. ([Link]). See ([Link]/dia-
mond_search_mobile.jsp).

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 refers to the
Thompson, a small jeweler in Lambertville, Web. It is sometimes refers to as e-marketplace or
New Jersey, who said, “Anyone with half a brain marketspace. We distinguish two types of
who wants a diamond engagement ring will go 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 company,
accessories), but also from general e-tailers such (e.g., [Link] or [Link]) will sell
as [Link] and [Link]. either standard or customized products to individu-
als (B2C) or to businesses (B2B); this type of sell-
Sources: Based on Rivlin (2007), Bloomberg ing is considered to be one-to-many. In a buy-side
(2004), BusinessWeek Online (2006), [Link]- e-marketplace, a company purchases from many
[Link]/wiki/Blue_Nile_Inc., and [Link]/ potential suppliers; this type of purchasing is con-
about-blue-nile (both accessed March 2014). sidered to be many-to-one, and it is a B2B activity.
2.3 Customer Shopping Mechanisms: Webstores, Malls, and Portals 61

For example, some hotels buy their supplies from Webstores may target an industry, a location, or
approved vendors that come to its e-market. a niche market (e.g., [Link]). The webstore
Walmart ([Link]) buys goods from thou- may belong to a manufacturer (e.g., geappliances.
sands of suppliers. Private marketplaces can be com and [Link]), to a retailer (e.g., amazon.
open only to selected members and are not publicly com and [Link]), to individuals selling
regulated. We will return to the topic of private from home, or to another type of business. Note
e-marketplaces in Chapters 3 (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 ment to a primary website, but is external to it. It
marketplace and an e-marketplace expands on the content by adding editorial, com-
(marketspace)? mercial, or educational material.
3. List the components of a marketspace.
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, E Mall of Maine
mechanisms are webstores (storefronts) and ([Link]) is an e-mall that aggregates
Internet malls. Let us elaborate on these, as well products, services, and providers in the state of
as on the gateways to e-marketplaces – portals. Maine. It contains a directory of vacation services
and product categories and the vendors in each
category. When a consumer indicates the category
Webstores he or she is interested in, the consumer is trans-
ferred to the appropriate independent webstore.
A webstore (or storefront) refers to a single This kind of mall does not provide any shared ser-
company’s (or individual seller’s) website where vices; it is merely a directory. Other malls, such as
products and services are sold. [Link], or [Link] (see Chapter 3) do
62 2 E-Commerce: Mechanisms, Platforms, and Tools

provide some shared services. Both [Link]

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

Figure 2.3 How a portal works

and text-to-speech technologies. Products

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

One example of such software is osCom-

encourages user comments, and cus- merce, which is open-source software (see
tomer service at different stores (e.g., [Link]). Another example can be
Bizrate for a great diversity of products seen [Link]/ecommerce.
and 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 objec-
Distributors in B2B tive of e-catalogs is to advertise and promote
A special type of intermediary in e-commerce is products and services. For the customer, the pur-
the B2B e-distributor. These intermediaries con- pose of such catalogs is to locate information on
nect manufacturers with business buyers (cus- products and services. E-catalogs can be searched
tomers), such as retailers (or resellers in the quickly with the help of search engines. Some
computer industry). E-distributors aggregate offer tools for interactions. For an example, see
product information from many manufacturers, Infinisys ‘Change My Image’ for Microsoft
sometimes thousands of them, in the e-distributor’s Windows at [Link]/product/cmim-
catalog. An example is W.W. Grainger (grainger. age/[Link], and for Macintosh at [Link]-
com). The distributor buys the products and then [Link]/product/cmimage_mac/[Link].
sells them, as supermarkets do. This product permits a buyer to insert his/her
photo and then change the hairstyle and color in
SECTION 2.3 REVIEW QUESTIONS the photo, so the buyer can see his/her look with
1. Describe webstores and e-malls. a new hairstyle. E-catalogs can be very large; for
2. List the various types of webstores and example, [Link]’s catalog contains mil-
e-malls. lions of 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 (starbuckss-
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 c o m / e n c y c l o p e d i a / t e r m / 4 11 7 5 /
for EC search. For a video illustration, see desktop-search.
“Google Commerce Search” (2009) by Google+
Your Business (2:15 min) 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 on machine learning and computer vision that
more information about training in Oracle Endeca focuses on consumer products.
Commerce, see [Link]/pls/ The technology lets users see what terms like
web_prod-plq- dad/ou_product_category. “red high-heeled pumps” mean. It also created
getPage?p_cat_id=338. algorithms that evaluate how well red pumps
match specific clothing the consumer plans to
Voice-Powered Search buy. Visual search is popular when conducted on
To ease searching, especially when using a smart- mobile devices.
phone, Google introduced a voice-powered tool
(Google Voice Search; [Link]/insides- Social Network Search Engines
earch/features/voicesearch/index-chrome. Social network search, also known as social
html) that allows you to skip the keyboard alto- search is a class of online search engines that
gether. The first product was included as part of help people find material about social networking
iPhone’s mobile search application. It allows you activities, such as in user generated content, dis-
to talk into your phone, ask any question, and the cussion groups, or recommendations. Like all
results of your query are provided on your search engines, these organize, prioritize, and fil-
iPhone. In addition to asking questions by talking ter search results. Examples of such search
into your iPhone, you can also listen to search engines are: [Link] – ‘real time
engine results. For an example of Apple’s intelli- social media search and analysis,’ [Link] –
gent personal assistant, “Siri, see [Link]/ios/ ‘people search across social networks, blogs, and
siri and [Link]/siri. For another example, more,’ [Link]/social. For an overview, see the
the search engine Bing has a search feature that blog “Social is the Next Search” available at info.
allows you to listen to more than 5 million full- [Link]/rs/gigya/images/Gigya-Social-The-
length songs. [Link]. For a discussion of the benefits
and concerns, see [Link]/wiki/
Video and Mobile Search Social_search.
There are dozens of dedicated search tools and
sites that will search for videos and other images.
Some of them, such as [Link]/videos will
search across multiple sites; others, such as Shopping Carts
YouTube will search only for their own content.
For a list of over 40 sites (compiled in 2010) see An electronic shopping cart (also known as
[Link]/video-search. shopping bag or shopping basket) is software that
allows customers to accumulate items they wish
Mobile Search to buy before they arrange payment and check
Several search engines are adapted to mobile out, much like a shopping cart in a supermarket.
search. Notable are Google, Clusty, and Yahoo! The electronic shopping cart software program
automatically calculates the total cost, and adds
Visual Shopping Search Engine tax and shipping charges when applicable.
Visual search means looking for information that Customers can review and revise their shopping
is presented visually (photos, images, etc.) For an list before finalizing their purchase by clicking
overview, see [Link]/article/Visual_ on the “submit” button.
search. This technology can be used to support Shopping carts for B2C are fairly simple (visit
e-commerce. For example, [Link] (acquired [Link] to see an example), but for B2B, a
by Google in 2010, and is now [Link]/ shopping cart may be more complex. Shopping
shopping) provides a visual search engine based cart software is sold or provided free to store
2.5 Auctions, Bartering, and Negotiating Online 67

builders as an independent component outside a

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

bargaining, which have been practiced for many auction industry sales is expected to increase to
generations in open-air markets. The most popu- 10% to $278 billion in the U.S. in 2013 (from
lar today are online auctions. $219 billion in 2011). The annual growth rate of
the industry is expected to increase at a rate of
11.6% in the 5 years to 2013 (between 2007 and
Traditional Auctions Versus 2012 was 10.4%) (IBISWorld 2012, 2013).
E-Auctions Electronic auctions (e-auctions) are similar
to offline auctions except that they are conducted
Traditional, physical auctions are still very popu- online. E-auctions (or online auctions) have been
lar. However, the volume traded on e-auctions is in existence since the 1980s over LANs (e.g., for
significantly larger and continues to increase. In flowers; see Saarinen et al. 2006). Host sites on
addition, person-to-person auctions are done the Internet, which were started in 1995, serve as
mostly online. brokers, offering services for sellers to post their
goods for sale and enabling buyers to bid on
Limitations of Traditional Offline Auctions those items.
Traditional offline auctions, regardless of their Major online auction sites, such as eBay (see
type, have several limitations. They usually last Online File W2.3), offer consumer products,
only a few minutes, or even seconds, for each electronic parts, artwork, vacation packages, air-
item sold. This rapid process may give potential line tickets, and collectibles, as well as excess
buyers little time to make a decision, so they may supplies and inventories that are being auctioned
decide not to bid. Therefore, sellers may not get off by businesses. Another type of B2B online
the highest possible price; bidders may not get auction is used to trade special types of commod-
what they really want, or they may pay too much ities, such as electricity transmission capacities
for the items. Additionally, in many cases, the and gas and energy options (e.g., see energyauc-
bidders do not have much time to examine the [Link]). Furthermore, conventional
goods before placing a bid. Bidders have diffi- business practices that traditionally have relied
culty learning about auctions and cannot com- on contracts and fixed prices increasingly are
pare what is offered at each location. Bidders converted into auctions with bidding for online
must usually be physically present at auctions; procurements. .
thus, many potential bidders are excluded. To see a comparison of 10 online auction
Similarly, it may be difficult for sellers to sites (2014), see [Link]-
move goods to an auction site. Commissions are [Link].
fairly high because a physical location must be
rented, the auction needs to be advertised, and an
auctioneer and other employees need to be paid. Types of Auctions
Electronic auctioning removes these drawbacks.
It is customary to classify auctions into the fol-
Electronic Auctions lowing major types based on how many buyers
The Internet provides an infrastructure for execut- and sellers are involved.
ing auctions electronically at lower cost, with a
wide array of support services, and with many One Buyer, One Seller
more participating sellers and buyers than physical In this configuration, one can use negotiation,
auctions. Individual consumers and corporations bargaining, or bartering. The resulting price will
both can participate in this rapidly growing and be determined by each party’s bargaining power,
very convenient form of e-commerce. According supply and demand in the item’s market, and
to an IBISWorld report, e-commerce and Internet (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,[Link], 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 its equivalent to a lottery or wager. The auctioneer
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 mad-
price model. In this model, a would-be buyer [Link] and [Link]. At 100auctionsites.
specifies the price (and other terms) that he or she com, you can find a list of several penny auction
is willing to pay to any willing and able seller. companies. Some companies allow the auction’s
For example, [Link] ([Link]) unsuccessful bidders to use all their bidding fees
presents consumers’ requests to sellers, who fill toward a purchase of items at regular or slightly
as much of the guaranteed demand as they wish discounted prices. Users need to be careful of
at prices and terms requested by buyers. The sell- scams. For additional information, see en.
ers may come up with counter offers managed by [Link]/wiki/Penny_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.
Penny Auctions A listing of the benefits of e-auctions to sellers,
A bidding fee auction, also called a penny auc- buyers, and e-auctioneers is provided in Table 2.2.
tion, is a new type of online forward auction in
which participants must pay a small nonrefund- Limitations of E-Auctions
able fee each time they place a bid (usually in E-auctions have several limitations. The most
small increments above the previous bid). When significant limitations are minimal security, the
the time expires, the last participant to have possibility of fraud, and limited participation.
placed a bid wins the item and also pays the final
bid price, which is usually significantly lower Minimal Security
than the retail price of the item. For a tutorial, see Some of the C2C auctions conducted on the
the video titled “BidBidSold Penny Auction Internet are not secure because they are done in
Site Tutorial” (2:23 minutes) at [Link]/ an unencrypted (or poorly protected) environ-
watch?v=ngr2kJcnAr4. ment. This means that credit card numbers 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)

stolen during the payment process. Payment internet-fraud/online-auctions. For information

methods such as PayPal ([Link]) can be on internet fraud in general, see [Link]/learn/
used to solve the problem (see Chapter 10). In internet-fraud and for information for sellers,
addition, some B2B auctions are conducted over see [Link]/component/content/article/2-
highly secure private lines. uncategorised/62-seller-beware. Lately, several
people have warned about fraud on penny auctions
Possibility of Fraud sites. For examples of scams, see [Link]/
In many cases, auction items are unique, used, or penny-auction-fraud-scam-cheat-bidders.
antique. Because the buyer cannot see and touch
the items, the buyer may receive something differ- Limited Participation
ent than she (or he) had in mind. In addition, prod- Some auctions are by invitation only; others are
ucts may be defective. Buyers may also commit open only to dealers. Limited participation may
fraud (e.g., by receiving goods or services without be a disadvantage to sellers, who usually benefit
paying for them). Thus, the fraud rate in e-auctions from as large a pool of buyers as possible. Buyers
is relatively high. For a discussion of e-auction also may be unhappy if they are excluded from
fraud and fraud prevention, see [Link]/scams/ 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
[Link], horseracegame.
com
Social networks Members communicate, collaborate,
Characteristics of Traditional create, share, form groups, entertain,
Online Communities and Their and more. Facebook is the leader
Classification Virtual worlds Members use avatars to represent
themselves in a simulated 3-D
environment where they can play
Most virtual communities are Internet-based, games, conduct business, socialize,
known also as Internet communities. and fantasize about whatever they like
Hundreds of thousands of communities exist
on the Internet, and the number is growing rap-
idly. Pure-play Internet communities may have Classifications of Virtual
thousands, or even hundreds of millions of mem- Communities
bers. By early 2014 (its 10th anniversary), Virtual communities can be classified in several
Facebook had grown to about 1.23 billion mem- ways.
bers around the world (see [Link]/
articles/2014-01-30/facebook-turns-10-the- Public Versus Private Communities
mark-zuckerberg-interview). This is one major Communities can be designated as public, mean-
difference from traditional purely physical com- ing that their membership is open to anyone. The
munities, which usually are smaller. Another dif- owner of the community may be a privately held
ference is that offline communities frequently are corporation (e.g., Twitter), public for profit, or
confined to one geographic location, whereas non-profit organizations. Many of the large social
only a few online communities are geographi- networks, including Facebook, belong to the
cally confined. For images of virtual communi- public for profit category.
ties, do a Google search for images of virtual In contrast, private communities belong to a
communities. 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 game network (now part of
social network site as a company, such as Tagged) has been popular in Latin America, the
Facebook, that provides free Web space and U.S., South America, and Europe. Migente.
tools for its community members to build pro- com is an English language site geared toward
files, interact, share, connect, and create and the Hispanic community. Additionally, previ-
publish content. ously popular communication and community
A list of the characteristics and capabilities of services have begun implementing social net-
social networks was provided in Section 1.3 of working features. For example, the Chinese
Chapter 1. instant messaging service [Link] became one
of the largest social networking services in the
world once it added profiles and made friends
Social Network Services visible to one another. Finally, Cyworld con-
quered the Korean market by adding ‘buddies.’
Social network services (or sites) are companies Note that, international entrepreneurs, inspired
that host social communities. They are also by the success of the largest social network sites
known as social networks. and their capabilities, have created their own
Social networks appear in a variety of forms; local clones of successful U.S. companies.
the most well-known, mostly social-oriented net- Information about the magnitude of social networks
2.6 Virtual Communities and Social Networks 75

is changing rapidly; therefore, to get the most Business-Oriented Public Social

up-to-date data, go to [Link], and com- Networks
[Link].
Business-oriented social networks, also known
Representative Capabilities and Services as professional social networks, are social networks
Provided by Social Network Sites whose primary objective is to facilitate business.
Social network sites provide many capabilities The prime example here is [Link], which
and services such as: 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
member opinions.
• The site may provide an e-newsletter.
• The site supports conference (group)
chatting, combined with document and • Establish new business contacts and find
image sharing. sales trends.
• Message and bulletin board services are • Promote themselves professionally to
available for posting information to employers.
groups and individuals on the website. • Identify experts that can give their
• The site provides storage for content, advice on problems and opportunities
including photos, videos, and music. (for a fee or for free).
• Users can bookmark self-created • Participate in or organize meetings and
content. events.
• Users can find other networks, friends, • Develop and grow a network of
or topics of interest. contacts.
• Control the level of privacy and ensure
that their personal data are protected.
These capabilities can make social networks • Keep up-to-date with industry groups.
user-friendly.
76 2 E-Commerce: Mechanisms, Platforms, and Tools

Some Capabilities of Business-Oriented every month. Each month there are more than 60
Networks million visitors to the site in the United States
With Web 2.0 tools, companies can engage users alone (see [Link]/about/factsheet).
in new innovative ways (for an example, see Finally, there are over 50 billion page views per
Online File W2.4). More direct communication month. For more statistics, see [Link]/
is achieved by offering additional ways for con- siteinfo/[Link] and [Link]-
sumers to engage and interact among them- [Link]/[Link]/#.Uw27nfmICm4 .
selves and with organizations. For example, a According to [Link], Craigslist is the elev-
company can: enth most visited site in the United States.
In addition, Craigslist features over 100
topical discussion forums with more than 200
• Encourage consumers to rate and million user postings. Every day, people from
comment on products and services. 700 local sites in 70 countries worldwide check
• Allow consumers to create their own classified ads and interact on forums. Craigslist
topic areas and build communities is considered by many as one of the few web-
(forums) around shared interests possi- sites that could change the world because it is
bly related to a company’s products. simply a free social-oriented, popular, and use-
• Hire bloggers or staff editors who can lead ful notice site. Although many other sites offer
discussions about customer feedback. free classifieds, no other site comes close to
• Provide incentives such as sweepstakes Craigslist.
and contests for customers to get
involved in new product (service) design
and marketing campaigns.
• Encourage user-made videos about • It gives people a voice.
products/services and offer prizes for • It is consistent and champions down-to-
winning video ads. earth values.
• Provide interesting stories in • It illustrates simplicity.
e-newsletters. • It has social-networking capabilities.
• It can be used for free in most cases (you
can post free ads, except for business;
An interesting business-oriented company for rent, or for sale ads in a few large
that uses classified ads is [Link], which is cities; some employment ads; and for
described in Case 2.2. adult and therapeutic services).
• 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
Case 2.2: EC Application: Craigslist: The Ultimate Online Classified Community 77

less than a week at no cost. As more people dis- 4. Why is Craigslist considered by some as a site
cover Craigslist, the traditional newspaper-based that “could change the world”
classified ad industry will probably be the loser; 5. What are some of the risks and limitations of
ad rates may become lower, and fewer ads will be using this site?
printed.
In some cities, Craigslist charges for “help
wanted” ads and apartments listed by brokers. In Private (or Enterprise)
addition, Craigslist may charge for ads with rich Social Networks
media features.
In addition to public-oriented business social net-
works such as LinkedIn and Craigslist, there are
Concerns About Craigslist many private social networks (also called enter-
prise networks) within an organization. An exam-
Critics charge that some users post illegitimate or ple is the opening case in Chapter 1 (Starbucks).
false ads on the site and the Craigslist staff are Other companies with notable internal networks
unable to effectively monitor this practice. Some for employees only include Northwestern
users have complained about questionable ads and Mutual. According to the company, they have an
scams being posted. Craigslist also attracts crimi- internal blog (“Mutualblog”) and a Yammer
nals seeking to commit fraud by paying with bad account internally, which is used by over 1,000
checks. The anonymity of Craigslist’s users as well employees to dialog and make connections on
as the lack of ratings encourages unlawful acts. non-proprietary topics. Private networks are for
Another concern is that adult services make employees, business partners, and customers.
up a significant portion of the total traffic on the
site and may involve illegal activities, especially
concerning minors. With the sheer volume of Business Models and Services
users and ads posted per day, such monitoring is Related to Social Networking
not possible given the modest workforce of only
40 plus that the site employs (data of 2014). (As Social networking sites provide innovative busi-
of September 8, 2010, Craigslist has been trying ness models, ranging from customer reviews of
to control such activities.) food and night life in India ([Link].
On the other side, many supporters contend com), to users who dress up paper dolls that look
that attempts to control Craigslist may simply like celebrities ([Link]). New revenue
cause users to use other, less-regulated sites. models are being created almost daily. Although
In China, a company called [Link] Inc. (58. some generate limited revenue, others succeed.
com) is modeled after Craigslist and provides Lately, the Pinterest model has become popular,
similar information and generates sizeable reve- as described in Chapter 7.
nue and profits. The company is listed in the Many communities attract advertisers. For
NYSE under the symbol WUBA. example, [Link] attracts pet lovers with
wiki contributions in its attempt to catalog all pet
Sources: Based on Clark (2008), Liedtke (2009), breeds. The site attracts hundreds of thousands of
and [Link] (accessed May 2014). unique visitors per month. Obviously, pet food-
related vendors are interested in placing ads
Questions there.
1. Identify the business model used by Craigslist. Some of the popular social-oriented
2. Visit [Link] and identify the social net- services are:
work and business network elements. 1. [Link] hosts blogs, photoblogs, and
3. What do you like about the site? What do you social networking profiles. Users of Xanga are
dislike about it? referred to as “Xangans.” Xanga was originally
78 2 E-Commerce: Mechanisms, Platforms, and Tools

launched as a site for sharing book and music Some social networking sites offer mobile-
reviews. Today it is one of the most popular only services (e.g., [Link] and [Link]).
blogging and networking services, with an Mobile social networking is especially popular
estimated 10,000,000–100,000,000 million in Japan, South Korea, and China, generally due
users worldwide. Xanga is a very popular to better data pricing (flat rates are widespread in
blogring in Hong Kong, Macao, and Japan). In Japan and South Korea, where 4G net-
Singapore. (A blogring links together a num- works offer more bandwidth, the leaders in social
ber of blogs that share mutual interests and networking are [Link] and Mobage by Dena
can be searched by subject matter). In 2013 ([Link]). Numerous other mobile social net-
the company was planning to get involved in working sites have been launched in Japan. For
online gambling. statistics on the exponential growth of mobile
2. [Link] is a community-based website that social networks, see [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 can only be accessed by mobile devices. There
other type of EC computing. According to Bent Coca-Cola employees attempt to influence young
(2014), mobile data traffic grew 81% in (from people to buy its products.
820 petabytes per month in 2012 to 1.5 exabytes
per month in 2013). This clearly boosts mobile Examples of Social Mobile
commerce. According to The Retail Bulletin Commerce Applications
(2012), 64% smartphone consumers used them to There are several types of social mobile applica-
shop online. In subsequent chapters, we will dis- tions. Illustrative examples are provided next.
cuss many mobile applications. Here we present
the basic definitions, technologies, and a few Example 1
examples. Coca-Cola created a social network under its
Sprite brand (Sprite Yard), which is only accessi-
ble via cellphones. The network is aimed at the
Mobile Social Networking youth market, and members can set profiles, meet
friends, share photos and so on. The idea is to use
Mobile social networking refers to social net- the site mainly for promoting the brand. To attract
working where members chat and connect with visitors, the company offers free content (music
one another using any mobile device. Most major and video clips). However, the free access requires
social networking websites now offer mobile ser- a PIN code found under Coca-Cola bottle lids.
vices. According to Protalinski (2012), in July This service was discontinued in 2013.
2012 the number of mobile subscribers accessing
Facebook was 543 million out of total member- Example 2
ship of 955 million. By Q4 2013, Facebook had IBM is a leader in social commerce adoption on
945 million mobile users out of a total 1.23 mobile devices. Following are some examples of
billion million monthly active users (see IBM’s initiatives according to Taft (2011).
[Link]/2014/01/29/facebook-is-a-mobile- • IBM Mobile Connect (formerly IBM Lotus
ad-company and [Link]/Key-Facts). Mobile Connect) (social media and social net-
Case 2.2: EC Application: Craigslist: The Ultimate Online Classified Community 79

works 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
eos, and files on major mobile devices (e.g., media messages. The company was
Android, BlackBerry, Apple). acquired by Facebook in 2014 for
• IBM Connections allows people to generate around $19 billion.
and vote on ideas at work (see [Link]/con- • [Link] − Enabler of real-time con-
nections/blogs/SametimeBlog/?lang=en). versational translation mainly in social
• The capabilities in IBM Connections 4.0, such media.
as Moderations, or Ideation Blogs, enabled • Droid Translator (droid-translator.
workers to embrace networks of engaged [Link]) – Translates
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 com-
bined with photo sharing, is a new technological
80 2 E-Commerce: Mechanisms, Platforms, and Tools

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

SECTION 2.6 REVIEW QUESTIONS

1. Define virtual communities and describe their Major Features
characteristics.
2. List the major types of virtual communities. There are several different types and purposes
3. Define social network. of virtual worlds; however all share the
4. Describe mobile social commerce. following features (compiled from The Virtual
5. List some major social network sites. Policy Network’s ‘A Virtual Worlds Primer’ at
6. Describe the global nature of social networks. [Link]/resources/virtual-worlds-
7. Define social network analysis. primer), and the authors’ experiences:
8. Describe social networking.
9. 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.
PLATFORMS • 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 Platforms 81

(characters) that are graphical images designed to ers a conversational interface to web visitors
look like humans and are programmed to exhibit which stimulates human conversation. Nuance’s
people’s behavior. Avatars have unique names Natural Language Understanding (NLU) technol-
and can move around. Advanced avatars can ogy allows applications like Ask Jess to under-
“speak” and display behaviors such as emotions, stand a customer’s intent through an interactive,
gestures, and facial expressions. They can be text-based chat experience. By understanding
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 Airline 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 (see
virtual assistant that leverages innovative technol- Terdiman 2008 for guidelines on how to do
ogy for natural language understanding and deliv- 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]/special_ help-visitors).
[Link]?specialID=21.
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, copy, Example 2: IKEA
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 machine (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 sorting through com-
have the following capabilities: plicated financial data more efficiently.
An experimental Semantic Web browser has
been in use lately. This browser enables users to
display data, draw graphs, and make browsing
• Make current applications smarter by
more interactive. (e.g., see [Link]/standards/
introducing new intelligent features
semanticweb). Another example would be
• Provide easier and faster interaction,
“friend-of-a-friend” networks, where individuals
collaboration and user engagement
in social networks provide data in the form of
• Facilitate intelligent-based powerful
links between themselves and friends.
search engines
For a video titled “Web 3.0” (14:25 minutes)
• Provide more user-friendly application-
see [Link]/watch?v=CG9cPtIYy8Y.
creation and human-computer interac-
tion capabilities
Concerns
• Increase the wisdom and creativity of
The following are a few concerns regarding the
people
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

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

• Future Threats. According to Stafford 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 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
tions in the technological environment. exact definition of how it would be. Web 5.0 can
be considered as Symbionet Web, decentralized.”
Patel provides some technical information.
The Technological Environment
SECTION 2.9 REVIEW QUESTIONS
The future of EC and Semantic Web is dependent 1. What is Web 3.0, and how will it differ from
on how far the relevant information technology Web 2.0?
88 2 E-Commerce: Mechanisms, Platforms, and Tools

2. Define Semantic Web. gressive organization should examine and

3. List the major potential inhibitors and con- experiment with social networking.
cerns of e-commerce and Web 3.0. 5. Shall we take part in virtual worlds? For
4. What are the major influencing computing many companies and applications, the tech-
and IT trends? nology is still immature and cumbersome. A
5. What are Web 4.0 and Web 5.0? good strategy is observing what other compa-
nies, especially in the same industry, are doing
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.
Managerial Issues 89

In the B2B area, there are private and public with similar interests together at one website.
e-marketplaces, which may be vertical (Such groups are a natural target for advertis-
(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,
90 2 E-Commerce: Mechanisms, Platforms, and Tools

mainly offering dissemination of informa- Digital products

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

6. Why are social marketplaces considered to be increases productivity and innovation.

a Web 2.0 application? Others say it is a waste of time and ban the
7. Discuss the following statement: “Technically, use of Facebook, YouTube, and other such
you can put together a portal in a weekend, but sites at work.
culturally there are a slew of things to con- 10. Debate the business value of social network-
sider; therefore it takes much longer.” ing. To start, read Tom Davenport’s blog of
8. Discuss the pros and cons of selling cars via October 2007 titled “Where’s the ‘Working’
auctions. in Social Networking?” at [Link].
9. Discuss the pros and cons of using avatars in org/2007/10/wheres-the-working-in-
help desks. What are the benefits? The social-n.
limitations? 11. Debate: Facebook and Twitter compete for
advertiser’s money. Which one has a better
Topics for Class Discussion and Debates chance to get more ad money and why?
1. Compare and contrast the efficiency of tradi- (Consult Mangalindan 2010.)
tional markets with that of digital markets. 12. Some of the largest social media networks
2. Some claim that social networking, espe- exist in China ([Link], [Link], us.
cially microbloging and social network sites, [Link], [Link] and renren.
displace the traditional electronic bulletin com). Find information about these networks
board systems. Discuss. and list their properties. How do they differ
3. Discuss the advantages of dynamic pricing from U.S. social networks?
strategy over fixed pricing. What are the
potential disadvantages of dynamic pricing? Internet Exercises
4. Enter Facebook and search for companies 1. Enter [Link]
that do auctions on the site. Identify the dif- and [Link] and compare their transla-
ferent types of auctions on the site. tion capabilities.
5. What is the advantage of a business using 2. Examine how bartering is conducted online
eBay instead of conducting auctions from its at [Link], [Link], and
own site? Distinguish between C2C and B2B [Link]. Compare and contrast
cases. the functionalities and ease of use of these
6. Debate: Should companies build in-house sites.
social networks for external activities or use 3. Enter [Link] and identify all specific
existing public social networks? (e.g., see e-commerce mechanisms (or solutions) pro-
Roberts 2008). vided by the company.
7. Debate: Should Craigslist and YouTube 4. Enter [Link] and request a product or
monitor and control what users publish a service. Once you receive replies, select the
there? Who will pay the cost? best deal. You have no obligation to buy.
8. Debate: Social network services can provide Write a short report based on your
good security to enterprise social networks. experience.
However, security may limit users’ creativity 5. Enter [Link] and find its capabilities.
and disrupt the business. Should a company What type(s) of search does it conduct (e.g.,
use such a service? desktop, enterprise, general)?
9. Debate: Some research suggests that the use 6. Enter [Link]. List all services available to
of public social networks by employees both sellers and buyers of cars. Compare it to
during work hours can be good for a busi- [Link]. Finally, identify the revenue
ness because employees develop relation- sources of both sites.
ships and share information, which 7. Enter [Link].
92 2 E-Commerce: Mechanisms, Platforms, and Tools

(a) Find out what information is available to 16. Enter [Link] and find the commer-
customers before they send a package. cial activities of the following avatars: Fizik
(b) Find out about the “package tracking” Baskerville, Craig Altman, Shaun Altman,
system; be specific. FlipperPA Peregrine, and Anshe Chung.
(c) Compute the cost of delivering a Describe briefly what they represent.
10″ × 20″ × 15″ box, weighing 40 17. Enter [Link] and read the article
pounds, from your hometown to Long “13 Ecommerce Link Building Tactics for
Beach, California. Compare the cost for Your Online Store” at [Link]/
the fastest delivery option with to the ecommerce-news/1430-13-ways-to-gain-
lowest possible delivery cost. [Link].
(d) Prepare a spreadsheet using Excel for Write a brief summary.
two different types of calculations avail-
able on the UPS site. Enter data to solve Team Assignments and Projects
for two different calculations. 1. Assignments Related to the Opening Case
8. Register at Second Life, and enter the site. (a) Why is Pinterest considered a social
(a) Find what three corporations are doing network?
on the site. (b) What are the company’s business and rev-
(b) Find out what three universities are enue models?
doing on the site. (c) How can manufacturers advertise on
(c) Write a report on your findings. Pinterest?
9. Create an avatar on Second Life. Let your (d) Compare Pinterest and We Heart It. Pay
avatar interact with avatars of some compa- attention to the business models.
nies. Why do we consider an avatar a mecha- (e) Pinterest has a large amount of money.
nism for EC? Write a report. How does it use this money on its
10. Enter [Link] and [Link]. Prepare a website to increase its competitive
list of the major products available for build- advantage?
ing corporate portals. 2. Assign each group a large e-tailer (e.g.,
11. Enter [Link] and find the key capabilities [Link], [Link], [Link],
of its enterprise portals. List the benefits [Link], [Link], and [Link]). Trace the
of using five of the capabilities of SAP’s purchasing process. Look at the catalogs,
portals. search engines, shopping carts, Web 2.0 fea-
12. Enter [Link]. View the tures, and any other mechanisms that improve
shopping cart demo. What features impress e-shopping. Prepare a presentation that
you the most and why? What related services includes recommendations for improving the
does it provide? Compare it to storefront. existing process.
net, [Link] and [Link]. 3. Build your own business in Second Life (SL).
13. Enter the website of a social network service This can be done by each member or each
of your choice. Build a homepage. Add a group. Using the company cited in question 3,
chat room and a message board to your site determine what business you want to build.
using the free tools provided. Describe the Then read Terdiman’s book (2008), Mahar
other capabilities available. Make at least and Mahar’s book (2009), or a similar book.
five new friends. Register at SL and begin to work. In your
14. Enter [Link] and [Link] and 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 them to Pinterest. Do the same for weheartit.
establish a business. Explain your choice. com in Brazil. Look at another country of
(d) Conduct a budget and cash flow analysis your choice. Comment on the cultural differ-
(see Appendix B in Terdiman 2008). ences. Write a report.
(e) Buy virtual land and other virtual
properties.
(f) Develop marketing and advertising plans
(examine the competition). CLOSING CASE: MADAGASCAR’S
(g) Look for any possible revenues; make a PORT MODERNIZES CUSTOMS
pricing decision. WITH TRADENET
(h) Plan all support services using the SL
tools. Madagascar is an island-state in Africa whose
(i) Watch for legal issues and other risks; port is critical to its trade activities and the over-
plan their mitigation. all economy. The country’s customs operations
(j) Build the business (using the SL tools). play an essential part in the port operations.
(k) Build a supporting blog. How would you
use it for viral marketing?
4. Watch the O’Reilly Media video titled “Online The Problem
Communities: The Tribalization of Business”
(Part 1 is 6:15 minutes; Parts 2 and 3 are The trade administration process in this underde-
optional) at [Link]/watch?v=qQJ veloped country used to be cumbersome and
vKyytMXU and answer the following slow. This limited the trade volume and the cus-
questions: toms revenue. Madagascar’s ‘Trading Across
(a) Why is the term tribalization used in the Borders’ indicator position was one of the
video? world’s lowest (143rd ranking). The country’s
(b) What are virtual communities? Logistics Performance Index was also low
(c) How can traditional businesses benefit (120th place).
from online communities?
(d) What is the value of communities for the The Business Process
customers? According to CrimsonLogic (2014), “Everyone
(e) Compare social vs. marketing exporting to Madagascar must first register and
frameworks. fill in an electronic form, called Advance Cargo
(f) How are virtual communities aligned with Information – ACI…, for each consignment. The
the businesses? exporter attaches copies of the trade documents,
(g) Discuss the issues of measurements, met- such as the commercial invoice, bill of lading and
rics, and CSFs. certificate of origin to the BSC and these are then
(h) Optional: View Part 2 ([Link]/ transmitted electronically to the Customs in
watch?v=U0JsT8mfZHc#t=15) and Part Madagascar to be verified for consistency and
3 ([Link]/watch?v=AeE9VWQY risk profiling.”
9Tc) (6:50 and 10:24 minutes respec- Once completed, the importer or customs
tively), and summarize the major topics broker can submit the customs declaration
discussed. electronically.
5. The team’s mission is to analyze Pinterest’s Once submitted, the approval process begins.
U.S. and global competition, including similar It may involve several government agencies, port
companies in China and Brazil. Start by read- container terminal management, commercial
ing McKenzie (2012) about the Chinese social banks, and the country’s Central Bank and
sites Meilishuo and Mogujie and compare Treasury. While the submission portion was
94 2 E-Commerce: Mechanisms, Platforms, and Tools

computerized and fairly efficient, the approval TradeNet system was integrated with
process was not. Overall, the cargo clearance ASYCUDA++. The importers input their custom
took over 15 days. declarations data into GasyNet, which in turn
transmits the data to TradeNet, which enables all
involved partners to share data and transmit
The Solution results. The results that are returned to TradeNet
are transferred to GasyNet and then to the import-
Originally, Customs had been using ers. To use TradeNet, users need to buy special
ASYCUDA++ (a legacy computerized system software from TradeNet Frontend Solution. The
designed by the United Nations Conference on software enables data entry by the users (e.g., the
Trade and Development). This system helped customs declarations) from PC’s or mobile
with the submission, but the overall process was devices. The system provides permit status infor-
still slow due to lack of integration of all partici- mation, company billing inquiries, ability to
pants’ subsystems. The port had difficulties com- retrieve lost permits, acknowledgement notifica-
peting with other ports in the area that offered tion, an audit trail, permit listings and more.
faster and more efficient customs management The system links the multiple partners in the
systems. Therefore, the Medagasy Community trade by creating a single point of transaction for
Network Services (“GasyNet”) saw the need to all the standard documents involved.
create a single online platform to connect the
entities in the trade community. They relied on a
new system, which is an integration of TradeNet,
an electronic data exchange, and ASYCUDA++. The Results

What Is Tradenet? The system is an efficient platform for the B2B

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

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

Enterprise search The search for informa- focuses on people), trying to enable machines
tion within the files and databases of an to understand the semantics (i.e., the meaning)
organization. of information using natural language under-
Forward auction An auction where a seller standing tools.
entertains bids from multiple buyers. Virtual community A community where the
Front end The place where customers interact interaction takes place over a computer net-
with a marketspace. The major components of work, mainly the Internet.
the front end can include the seller’s portal, Virtual world A site for online communities
electronic catalogs, a shopping cart, a search in a computer-generated setting where users
engine, an auction engine, a payment gate- socialize and work with one another through
way and all other activities related to placing the use of avatars. The creation of objects,
orders. jobs, homes, and businesses in the 3D envi-
Intermediary A third party that operates ronment is the foundation of these worlds and
between sellers and buyers. is fun and satisfying.
Mobile portal A portal accessible via a mobile Voice portal A portal with audio interfaces that
device. can be accessed by telephone or cell phone.
Mobile social networking Social networking Web 3.0 A term used to describe the future of
where members converse and connect with the World Wide Web. It is projected to deliver
one another using any mobile device. a new generation of business applications
Name-your-own-price model Auction model that will see business and social computing
in which a would-be buyer specifies the price converge.
(and other terms) he or she is willing to pay to Web 4.0 The Web generation after Web 3.0. It
any willing and able seller. It is a C2B model is still an unknown entity. However, it is envi-
that was pioneered by [Link]. sioned as being based on islands of intelli-
Penny auction A new type of forward auction gence and as being ubiquitous.
in which participants must pay a small nonre- Web (information) portal A single point of
fundable fee each time they place a bid (usu- access, through a Web browser, to critical
ally in small increments above the previous business information located inside and out-
bid). When time expires, the last participant to side organizations.
have placed a bid wins the item and also pays Webstore (storefront) A single company’s (or
the final bid price. individual seller’s) website where products or
Reverse auction (bidding or tendering services are sold.
system) Auction in which the buyer places
an item for bid (tender) on a request for quote
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