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Pearson Education LimitedEdinburgh GateHarlowEssex CM20 2JEEnglandand Associated Companies throughout the world
Visit us on the World Wide Web at: www.pearsonglobaleditions.com
© Kenneth C. Laudon and Carol Guercio Traver, 2017, 2016, 2015, 2014, 2013, 2012
The rights of Kenneth C. Laudon and Carol Guercio Traver to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
Authorised adaptation from the United States edition, entitled E-commerce: business. technology. society. 2016 12th edition, ISBN 9780133938951 by Kenneth C. Laudon and Carol Guercio Traver, published by Pearson Education, Inc.
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Credits and acknowledgements borrowed from other sources and reproduced, with permission, in this textbook appear on page 909.
ISBN 13: 9781292109961ISBN 10: 1292109963
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E-Commerce 2016: Business, Technology,Society, Global Edition
Table of Contents
Cover
E-commerce: Business, Technology, Society - Global Edition Copyright
Preface
Brief Contents
Contents
1: Introduction to E-commerce Learning Objectives
The Uber-ization of Everything
E-Commerce: The Revolution is just BeginningThe First 30 Seconds
What Is E-Commerce?
The Difference Between E-Commerce and E-Business
Why Study E-Commerce?
Eight Unique Features of E-Commerce Technology
Ubiquity
Global Reach
Universal Standards
Richness
Interactivity
Information Density
Personalization/Customization
Social Technology: User-Generated Content and Social Networks
Types of E-Commerce
Business-to-Consumer (B2C) E-commerce
Business-to-Business (B2B) E-commerce
Consumer-to-Consumer (C2C) E-commerce
Mobile E-commerce (M-commerce)
Social E-commerce
Local E-commerce
Growth of the Internet, Web, and Mobile Platform
Insight on Technology: Will Apps Make the Web Irrelevant?
Origins and Growth of E-Commerce
E-Commerce: A Brief History E-Commerce 19952000: Invention
E-Commerce 20012006: Consolidation
E-Commerce 2007Present: Reinvention
Insight on Business: Rocket Internet
Assessing E-Commerce: Successes, Surprises, and Failures
Table of Contents
Understanding E-Commerce: Organizing ThemesTechnology: Infrastructure
Business: Basic Concepts
Society: Taming the Juggernaut
Academic Disciplines Concerned with E-Commerce
Technical Approaches
Behavioral Approaches
Insight on Society: Facebook and the Age of Privacy
Case Study: Puma Goes Omni
ReviewKey Concepts
Questions
Projects
References
2: E-commerce InfrastructureLearning Objectives
Wikitude, Layar, and Blippar: Augment My Reality
The Internet: Technology BackgroundThe Evolution of the Internet: 1961The Present
The Internet: Key Technology Concepts
Packet Switching
Transmission Control Protocol/Internet Protocol (TCP/IP)
IP Addresses
Domain Names, DNS, and URLs
Client/Server Computing
The New Client: The Mobile Platform
The Internet Cloud Computing Model: Hardware and Software as a Service
Other Internet Protocols and Utility Programs
The Internet TodayThe Internet Backbone
Internet Exchange Points
Campus Area Networks
Internet Service Providers
Intranets
Who Governs the Internet?
The Future Internet InfrastructureLimitations of the Current Internet
Insight on Society: Government Regulation and Surveillance of the Internet
The Internet2® Project
The First Mile and the Last Mile
Fiber Optics and the Bandwidth Explosion in the First Mile
The Last Mile: Mobile Internet Access
Table of Contents
Telephone-based versus Computer Network-based Wireless Internet Access
Internet Access Drones
The Future Internet
Latency Solutions
Guaranteed Service Levels and Lower Error Rates
Declining Costs
The Internet of Things
The WebHypertext
Markup Languages
HyperText Markup Language (HTML)
eXtensible Markup Language (XML)
Insight on Technology: The Rise of HTML5
Web Servers and Clients
Web Browsers
The Internet and the Web: Features and ServicesE-Mail
Instant Messaging
Search Engines
Online Forums
Streaming Media
Cookies
Web 2.0 Features and Services
Online Social Networks
Blogs
Really Simple Syndication (RSS)
Podcasting
Wikis
Music and Video Services
Internet Telephony
Video Conferencing, Video Chatting, and Telepresence
Intelligent Personal Assistants
Mobile Apps: The Next Big Thing is HerePlatforms for Mobile Application Development
App Marketplaces
Insight on Business: Apps for Everything: The App Ecosystem
Case Study: Akamai Technologies: Attempting to Keep Supply Ahead of Demand
ReviewKey Concepts
Questions
Projects
References
3: Building an E-commerce Presence
Table of Contents
Learning Objectives
The Financial Times : A Remodel for 21st Century Publishing Profitability
Imagine Your E-Commerce PresenceWhats the idea? (The Visioning Process)
Wheres The Money: Business and Revenue Model
Who and where is the Target Audience
What is the Ballpark? Characterize the Marketplace
Wheres the Content Coming From?
Know Yourself: Conduct a Swot Analysis
Develop an E-Commerce Presence Map
Develop a Timeline: Milestones
How much will this Cost?
Building an E-Commerce Presence: A Systematic ApproachPlanning: The Systems Development Life Cycle
Systems Analysis/Planning: Identify Business Objectives, System Functionality,
and Information Requirements
System Design: Hardware and Software Platforms
Building the System: In-House Versus Outsourcing
Build your Own versus Outsourcing
Host your Own versus Outsourcing
Testing the System
Implementation and Maintenance
Factors in Optimizing Web Site Performance
Choosing SoftwareSimple Versus Multi-Tiered Web Site Architecture
Web Server Software
Site Management Tools
Dynamic Page Generation Tools
Application Servers
E-Commerce Merchant Server Software Functionality
Online Catalog
Shopping Cart
Credit Card Processing
Merchant Server Software Packages (E-Commerce Software Platforms)
Choosing an E-commerce Software Platform
Choosing HardwareRight-Sizing your Hardware Platform: The Demand Side
Right-Sizing your Hardware Platform: The Supply Side
Other E-Commerce Site Tools Web Site Design: Basic Business Considerations
Tools for Search Engine Optimization
Tools for Interactivity and Active Content
Table of Contents
Common Gateway Interface (CGI)
Active Server Pages (ASP) and ASP.NET
Java, Java Server Pages (JSP), and JavaScript
ActiveX and VBScript
ColdFusion
PHP, Ruby on Rails (RoR), and Django
Other Design Elements
Personalization Tools
The Information Policy Set
Developing a Mobile Web Site and Building Mobile ApplicationsInsight on Society: Designing for Accessibility
Planning and Building a Mobile Presence
Mobile Presence: Design Considerations
Cross-Platform Mobile App Development Tools
Mobile Presence: Performance and Cost Considerations
Insight on Technology: Building a Mobile Presence
Case Study: Orbitz Worldwide Charts Its Mobile Trajectory
ReviewKey Concepts
Questions
Projects
References
4: E-commerce Security and Payment SystemsLearning Objectives
Europol: Takes on Cybercrime with EC3
The E-Commerce Security EnvironmentThe Scope Of The Problem
The Underground Economy Marketplace: The Value of Stolen Information
What Is Good E-Commerce Security?
Dimensions Of E-Commerce Security
The Tension Between Security And Other Values
Ease of Use
Public Safety and the Criminal Uses of the Internet
Security Threats In The E-Commerce EnvironmentMalicious Code
Potentially Unwanted Programs (Pups)
Phishing
Hacking, Cybervandalism, and Hacktivism
Insight on Society: The Ashley Madison Data Breach
Data Breaches
Credit Card Fraud/Theft
Identity Fraud
Table of Contents
Spoofing, Pharming, and Spam (Junk) Web Sites
Sniffing and Man-in-the-Middle Attacks
Denial of Service (Dos) and Distributed Denial of Service (Ddos) Attacks
Insider Attacks
Poorly Designed Software
Social Network Security Issues
Mobile Platform Security Issues
Cloud Security Issues
Insight on Technology: Think Your Smartphone Is Secure?
Internet of Things Security Issues
Technology SolutionsProtecting Internet Communications
Encryption
Symmetric Key Cryptography
Public Key Cryptography
Public Key Cryptography Using Digital Signatures and Hash Digests
Digital Envelopes
Digital Certificates and Public Key Infrastructure (PKI)
Limitations of PKI
Securing Channels Of Communication
Secure Sockets Layer (SSL) and Transport Layer Security (TLS)
Virtual Private Networks (VPNs)
Wireless (Wi-Fi) Networks
Protecting Networks
Firewalls
Proxy Servers
Intrusion Detection and Prevention Systems
Protecting Servers and Clients
Operating System Security Enhancements
Anti-Virus Software
Management Policies, Business Procedures, And Public LawsA Security Plan: Management Policies
The Role Of Laws And Public Policy
Private and Private-Public Cooperation Efforts
Government Policies and Controls on Encryption Software
E-Commerce Payment SystemsOnline Credit Card Transactions
Credit Card E-commerce Enablers
PCI-DSS Compliance
Limitations of Online Credit Card Payment Systems
Alternative Online Payment Systems
Mobile Payment Systems: Your Smartphone Wallet
Social/Mobile Peer-To-Peer Payment Systems
Digital Cash And Virtual Currencies
Table of Contents
Electronic Billing Presentment And PaymentInsight on Business: Bitcoin
Market Size And Growth
EBPP Business Models
Case Study: The Mobile Payment Marketplace: Goat Rodeo
ReviewKey Concepts
Questions
Projects
References
5: E-commerce Business StrategiesLearning Objectives
Ace & Tate: Disrupting the European Eyewear Industry
E-Commerce Business ModelsIntroduction
Eight Key Elements Of A Business Model
Value Proposition
Revenue Model
Insight on Society: Foursquare: Check Your Privacy at the Door
Market Opportunity
Competitive Environment
Competitive Advantage
Market Strategy
Organizational Development
Management Team
Raising Capital
Categorizing E-Commerce Business Models: Some Difficulties
Insight on Business: Crowdfunding Takes Off
Major Business-To-Consumer (B2C) Business ModelsE-Tailer
Community Provider
Content Provider
Portal
Insight on Technology: Online Music: Battle of the Titans and Lilliputians
Transaction Broker
Market Creator
Service Provider
Major Business-To-Business (B2B) Business ModelsE-Distributor
E-Procurement
Exchanges
Industry Consortia
Private Industrial Networks
Table of Contents
How E-Commerce Changes Business: Strategy, Structure, And ProcessIndustry Structure
Industry Value Chains
Firm Value Chains
Firm Value Webs
Business Strategy
E-Commerce Technology And Business Model Disruption
Case Study: Freemium Takes Pandora Public
ReviewKey Concepts
Questions
Projects
References
6: E-commerce Marketing and AdvertisingLearning Objectives
In Mobis Global Mobile Ad Network
Consumers Online: The Internet Audience and Consumer BehaviorInternet Traffic Patterns: The Online Consumer Profile
Intensity and Scope of Usage
Demographics and Access
Type of Internet Connection: Broadband and Mobile Impacts
Community Effects: Social Contagion in Social Networks
Consumer Behavior Models
Profiles Of Online Consumers
The Online Purchasing Decision
Shoppers: Browsers and Buyers
What Consumers Shop for and Buy Online
Intentional Acts: How Shoppers Find Vendors Online
Why Some People DonT Shop Online
Trust, Utility, And Opportunism In Online Markets
Digital Commerce Marketing and Advertising Strategies and ToolsStrategic Issues And Questions
The Web Site As A Marketing Platform: Establishing The Customer Relationship
Traditional Online Marketing And Advertising Tools
Search Engine Marketing and Advertising
Display Ad Marketing
E-mail Marketing
Affiliate Marketing
Viral Marketing
Lead Generation Marketing
SOCIAL, MOBILE, AND LOCAL MARKETING AND ADVERTISING
Social Marketing and Advertising
Table of Contents
Mobile Marketing and Advertising
Local Marketing: The Social-Mobile-Local Nexus
MULTI-CHANNEL MARKETING: INTEGRATING ONLINE AND OFFLINE MARKETING
OTHER ONLINE MARKETING STRATEGIES
Customer Retention Strategies
Insight on Business: Are the Very Rich Different from You and Me?
Pricing Strategies
Long Tail Marketing
Internet Marketing TechnologiesInsight on Technology: The Long Tail: Big Hits and Big Misses
The Revolution In Internet Marketing Technologies
Web Transaction Logs
Supplementing The Logs: Cookies And Other Tracking Files
Databases, Data Warehouses, Data Mining, And Big Data
Databases
Data Warehouses and Data Mining
Insight on Society: Every Move You Take, Every Click You Make, Well Be
Tracking You
Hadoop and the Challenge of Big Data
Marketing Automation And Customer Relationship Management (Crm) Systems
Understanding the Costs and Benefits Of Online Marketing CommunicationsOnline Marketing Metrics: Lexicon
How Well Does Online Advertising Work?
The Costs Of Online Advertising
Marketing Analytics: Software For Measuring Online Marketing Results
Case Study: Programmatic Advertising: Real-Time Marketing
ReviewKey Concepts
Questions
Projects
References
7: Social, Mobile, and Local MarketingLearning Objectives
Just Falafel Soarswith Social Media
Introduction To Social, Mobile, And Local MarketingFrom Eyeballs to Conversations
From the Desktop to the Smartphone and Tablet
The Social, Mobile, Local Nexus
Social MarketingSocial Marketing Players
The Social Marketing Process
Facebook Marketing
Table of Contents
Basic Facebook Features
Facebook Marketing Tools
Starting a Facebook Marketing Campaign
Measuring Facebook Marketing Results
Twitter Marketing
Basic Twitter Features
Twitter Marketing Tools
Insight on Technology: Optimizing Social Marketing with Simply Measured
Starting a Twitter Marketing Campaign
Measuring Twitter Marketing Results
Pinterest Marketing
Basic Pinterest Features
Pinterest Marketing Tools
Starting a Pinterest Marketing Campaign
Measuring Pinterest Marketing Results
Marketing on other Social Networks
The Downside of Social Marketing
Mobile MarketingOverview: M-Commerce Today
Insight on Society: Marketing to Children of the Web in the Age of
SocialNetworks
How People Actually Use Mobile Devices
In-App Experiences and In-App Ads
How the Multi-Screen Environment Changes the Marketing Funnel
BASIC MOBILE MARKETING FEATURES
The Technology: Basic Mobile Device Features
MOBILE MARKETING TOOLS: AD FORMATS
STARTING A MOBILE MARKETING CAMPAIGN
Insight on Business: Mobile Marketing: Ford Goes 3-D
MEASURING MOBILE MARKETING RESULTS
Local And Location-Based Mobile MarketingThe Growth of Local Marketing
The Growth of Location-Based (Local) Mobile Marketing
Location-Based Marketing Platforms
Location-Based Mobile Marketing: The Technologies
Why is Local Mobile Attractive to Marketers?
Location-Based Marketing Tools
A New Lexicon: Location-Based Digital Marketing Features
Proximity Marketing with Beacons
STARTING A LOCATION-BASED MARKETING CAMPAIGN
MEASURING LOCATION-BASED MARKETING RESULTS
Case Study: ExchangeHunterJumper.com: Building a Brand with Social Marketing
ReviewKey Concepts
Table of Contents
Questions
Projects
References
8: Ethics, Law, and E-commerceLearning Objectives
The Right to Be Forgotten: Europe Leads on Internet Privacy
Understanding Ethical, Social, And Political Issues In E-CommerceA Model for Organizing the Issues
Basic Ethical Concepts: Responsibility, Accountability, and Liability
Analyzing Ethical Dilemmas
Candidate Ethical Principles
Privacy And Information RightsInformation Collected at E-Commerce Sites
Social Networks and Privacy
Mobile and Location-Based Privacy Issues
Profiling and Behavioral Targeting
Insight on Technology: Apple: Champion of Privacy?
The Internet and Government Invasions of Privacy: E-Commerce Surveillance
Legal Protections
Informed Consent and Notice
The Federal Trade Commissions Fair Information Practices Principles
Measuring Privacy Policies Over Time
The European Data Protection Directive
Private Industry Self-Regulation
Privacy Advocacy Groups
The Privacy Protection Business
Technological Solutions
Intellectual Property RightsTypes of Intellectual Property Protection
Copyright: The Problem of Perfect Copies and Encryption
Look and Feel
Fair Use Doctrine
The Digital Millennium Copyright Act of 1998
Patents: Business Methods and Processes
E-commerce Patents
Trademarks: Online Infringement and Dilution
Trademarks and the Internet
Cybersquatting and Brandjacking
Cyberpiracy
Metatagging
Keywording
Linking
Framing
Table of Contents
Challenge: Balancing the Protection of Property with other Values
GovernanceCan the Internet be Controlled?
Taxation
Net Neutrality
Insight on Business: New Rules Extend EU Taxation of E-commerce
Public Safety and WelfareProtecting Children
Cigarettes, Gambling, and Drugs: Is the Web Really Borderless?
Insight on Society: The Internet Drug Bazaar Operates Around the Globe
Case Study: The Pirate Bay: Searching for a Safe Haven
ReviewKey Concepts
Questions
Projects
References
9: Online MediaLearning Objectives
Spotify and Deezer: European Streaming Music Services Spread Around the Globe
Online ContentContent Audience and Market: Where are the Eyeballs and the Money?
Insight on Society: Are Millennials Really All That Different?
Media Utilization: A Converging Digital Stream
Internet and Traditional Media: Cannibalization versus Complementarity
Media Revenues
Three Revenue Models for Digital Content Delivery: Subscription, A La Carte, and
Advertising-Supported (Free and Freemium)
Online Content Consumption
Free or Fee: Attitudes About Paying for Content and the Tolerance for
Advertising
Digital Rights Management (DRM) and Walled Gardens
Media Industry Structure
Media Convergence: Technology, Content, and Industry Structure
Technological Convergence
Content Convergence
Industry Structure Convergence
The Online Publishing IndustryOnline Newspapers
From Print-centric to Digital First: The Evolution of Newspaper Online Business
Models, 19952015
Online Newspaper Industry: Strengths and Challenges
Insight on Business: Vox: Native Digital News
Magazines Rebound on the Tablet Platform
E-Books and Online Book Publishing
Table of Contents
Amazon and Apple: The New Digital Media Ecosystems
E-Book Business Models
The Challenges of the Digital E-Book Platform
Interactive Books: Converging Technologies
The Online Entertainment IndustryOnline Entertainment Audience Size and Growth
Television and Premium Video
Feature-Length Movies
Music
Insight on Technology: Hollywood and the Internet: Lets Cut a Deal
GAMES
Case Study: Netflix: How does this Movie End?
ReviewKey Concepts
Questions
Projects
References
10: Online CommunitiesLearning Objectives
Viadeo Challenges LinkedIn witha Multi-Local Approach
Social Networks And Online CommunitiesWhat is an Online Social Network?
The Growth of Social Networks and Online Communities
Insight on Technology: The Appification of Facebook
Turning Social Networks into Businesses
Types of Social Networks and their Business Models
Insight on Society: The Dark Side of Social Networks
Social Network Features and Technologies
Online AuctionsBenefits and Costs of Auctions
Benefits of Auctions
Risks and Costs of Auctions
Auctions as an E-Commerce Business Model
Types and Examples of Auctions
When to Use Auctions (And For What) in Business
Auction Prices: Are they the Lowest?
Consumer Trust in Auctions
When Auction Markets Fail: Fraud and Abuse in Auctions
E-Commerce PortalsThe Growth and Evolution of Portals
Types of Portals: General-Purpose and Vertical Market
Insight on Business: The Transformation of AOL
Table of Contents
Portal Business Models
Case Study: eBay Evolves
ReviewKey Concepts
Questions
Projects
References
11: E-commerce Retailing and ServicesLearning Objectives
Souq.com: The Amazon of the Middle East
Analyzing The Viability Of Online FirmsStrategic Analysis
Financial Analysis
E-Commerce In Action: E-Tailing Business ModelsVirtual Merchants
11.1 THE ONLINE RETAIL SECTOR
THE RETAIL INDUSTRY
ONLINE RETAILING
E-commerce Retail: The Vision
The Online Retail Sector Today
The Vision
Business Model
Financial Analysis
Strategic AnalysisBusiness Strategy
Strategic AnalysisCompetition
Strategic AnalysisTechnology
Strategic AnalysisSocial and Legal Challenges
Future Prospects
Omni-Channel Merchants: Bricks-and-Clicks
Catalog Merchants
Manufacturer-Direct
Common Themes in Online Retailing
The Service Sector: Offline And OnlineInsight on Technology: Big Data and Predictive Marketing
Online Financial ServicesOnline Financial Consumer Behavior
Online Banking and Brokerage
Multi-Channel vs. Pure Online Financial Services Firms
Financial Portals and Account Aggregators
Online Mortgage and Lending Services
Online Insurance Services
Online Real Estate Services
Online Travel Services
Table of Contents
Why Are Online Travel Services So Popular?
The Online Travel Market
Online Travel Industry Dynamics
Insight on Society: Phony Reviews
Online Career ServicesIts Just Information: The Ideal Web Business?
Online Recruitment Industry Trends
On-Demand Service CompaniesInsight on Business: Airbnb Takes Off
Case Study: OpenTable: Your Reservation is Waiting
ReviewKey Concepts
Questions
Projects
References
12: B2B E-commerceLearning Objectives
Alibaba: Chinas E-commerce King
An Overview of B2B E-CommerceSOME BASIC DEFINITIONS
THE EVOLUTION OF B2B E-COMMERCE
THE GROWTH OF B2B E-COMMERCE
POTENTIAL BENEFITS AND CHALLENGES OF B2B E-COMMERCE
The Procurement Process and Supply ChainsSTEPS IN THE PROCUREMENT PROCESS
Insight on Society: Wheres My iPad? Global Supply Chain Risk and Vulnerability
TYPES OF PROCUREMENT
MULTI-TIER SUPPLY CHAINS
VISIBILITY AND OTHER CONCEPTS IN SUPPLY CHAIN MANAGEMENT
THE ROLE OF EXISTING LEGACY COMPUTER SYSTEMS AND ENTERPRISE SYSTEMS IN SUPPLY
CHAINS
Trends in Supply Chain Management and Collaborative CommerceJUST-IN-TIME AND LEAN PRODUCTION
SUPPLY CHAIN SIMPLIFICATION
SUPPLY CHAIN BLACK SWANS: ADAPTIVE SUPPLY CHAINS
ACCOUNTABLE SUPPLY CHAINS: LABOR STANDARDS
SUSTAINABLE SUPPLY CHAINS: LEAN, MEAN, AND GREEN
ELECTRONIC DATA INTERCHANGE (EDI)
MOBILE B2B
B2B IN THE CLOUD
SUPPLY CHAIN MANAGEMENT SYSTEMS
Table of Contents
Insight on Technology: Your Shoes Are in the Cloud
COLLABORATIVE COMMERCE
Collaboration 2.0: Cloud, Web, Social, and Mobile
SOCIAL NETWORKS AND B2B: THE EXTENDED SOCIAL ENTERPRISE
Net MarketplacesCHARACTERISTICS OF NET MARKETPLACES
TYPES OF NET MARKETPLACES
E-distributors
E-procurement
Exchanges
Industry Consortia
Private Industrial NetworksOBJECTIVES OF PRIVATE INDUSTRIAL NETWORKS
PRIVATE INDUSTRIAL NETWORKS AND COLLABORATIVE COMMERCE
Insight on Business: Walmart Develops a Private Industrial Network
IMPLEMENTATION BARRIERS
Case Study: Elemica: Cooperation, Collaboration, and Community
ReviewQuestions
Projects
References
Index
Credits