History and Evolution of E-Commerce

The origin of commerce by exchanging goods occurred before recorded history, barter system, as you all know are one of the traditional ways where goods are traded in everyday life. Now, entering into the electronic era, the way individuals and organizations do business and undertake commercial transactions have been changed. This indicates the movement towards electronic commerce. This means there is no paper work and physical interaction is limited, if at all.

E-commerce has grown; it's estimated that 72 million users shopped online on "CyberMonday," on November 26, 2007.


Amazon and eBay are the main pioneers when it comes to selling online. The history of e-commerce owes a great debt to Amazon and eBay. These companies revolutionized the face of the Internet, as well as the way we buy things. Today, the history of ecommerce moves forward. There are a number of payment options and abilities, from PayPal to e-Checks to credit cards as well.

Amazon provided one of the first full-scale e-commerce business models.


Now, lets have a deeper insight on the evolution of e-commerce.

As far back as the 1960s, businesses were using primitive computer networks to conduct electronic transactions. Using something called Electronic Data Interchange (EDI), it helps to extend interbusiness transactions such as order forms, invoices from financial institution to other types of business and also provides transactions and information exchange from suppliers to end customers. This type of exchange became increasingly important as credit cards became a part of the commerce landscape.

Eventually, EDI was replaced by ASC X12 due to limitation to special networks where EDI are costly and complex to administer for small businesses. ASC X12 is a universal protocol developed by the American National Standards Institute in 1979, designed for sharing business documents and information electronically.

Prior to that, in the late 1960s, ARPAnet was being developed by the military for communications purposes. Back then, ARPAnet was the source of the “dial up” mode of accessing a computer system.

The greatest networking evolution came in 1982, when ARPAnet switched over to Transmission Control Protocol and Internet Protocol (TCP/IP), the same packet-switched technology that powers the modern Internet. Instead of sending signals individually along one route, TCP/IP uses packets, sending information along different routes.

During the 1990s, the internet was open for commercial use; it was also the period that users started to participate in World Wide Web (WWW). Due to rapid expansion of the WWW network, e-commerce software; and the peer business competitions, large number of dot-coms and Internet start-ups appeared.

One of the first examples of e-commerce is Compuserve, providing tools such as e-mail, message boards, chat rooms and an added service call Electronic Mall, where users could purchase items directly from 110 online merchants.

Here is a chart of e-commerce growth from 1999-2006(in billions)


And here's a video about the evolution of e-commerce




(Sources:
www.wikipedia.org
www.howstuffworks.com
www.bestshoppingcartsreview.com
www.youtube.com)

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E-Commerce Success & Its Causes

Nowadays, the usage of technology have been adapt into human's life. Mostly, computer user will search information through the internet to increase their knowledge and awareness as well as fulfill their personal requirement. Besides that, the "money-creater" such as business man will involve in e-commerce [ the marketing, buying and selling of products and services on the internet.(Awars,2004)] as a short path to expand their business to gain profit and increase its organization reputation. One of the E-Commerce success is "GOOGLE".

Google was founded by Larry Page and Sergey Brin while they were students at Stanford University and the company was first incorporated as a privately held company on September 4, 1998. Google Inc. is an American public corporation and involve in internet and computer software industry. It earning revenue from advertising related to its Internet search, e-mail, online mapping, office productivity, social networking, and video sharing services as well as selling advertising-free versions of the same technologies. The Google Inc. gain net income , US$4.227 billion and its total capital is US$31.768 billion in year 2008.
(Retrieved from http://en.wikipedia.org/wiki/Google)

David Drummond, Google's General Counsel pointed to 4 factors as the key to Google's success:

1. 
   
   Technology. Along with its innovative approach to page ranking, Google is a purpose-built hardware company, building all its own servers from components it buys directly for their manufacturers. According to Drummond, Google now operates the world's largest distributed computer system.


2. 
   
   Business Model Innovation. By perfecting the nature of targeted ads, Google not only has created a highly effective revenue generator, it has produced what it hopes to be a better experience for its users. It is Google's goal to make their targeted ads at least as relevant and useful to users as the search results themselves.


3. 
   
   Brand. According to Drummond, a European study recently determined Google to be the number one most recognized worldwide brand. Indeed, Google has become a verb ("I can't wait to get home and Google him") which poses real challenges to a company seeking to protect the strength of its mark.


4. 
   
   Focus On The User Experience. Product decisions at Google are driven by optimizing for the user experience first and for revenue second. The folks at Google firmly believe that the better the user experience, the more easily money will follow.

Retrieved from:http://ventureblog.com/articles/2003/05/4_keys_to_googl.php

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Revenue model and comparison of Google, Ebay and Amazon

Revenue model outlines how the organizations or e-commerce companies will generate profits. 5 major revenue models nowadays are sales, transaction fees, subscription fees, advertising fees, affiliate fees, and other revenue sources.

Sales revenue model: A company gets the revenue by selling goods, information or services.

Transaction fee revenue model: A company receives a commission for enabling or executing a transaction. It is based on the volume of transactions made.

Subscription revenue model: A company charges a subscription fee for the users that access to the content and services offered.

Advertising revenue model: A company provides a forum for advertisements and receives fees from the companies that advertise their products.

Affiliate revenue model: A company receives commissions for referring customers to others web sites.

Google offers targeted advertising solutions and global Internet search solutions. Its principal products and services include:

Google AdWords: Google AdWords is a pay per click advertising program of Google designed to allow the advertisers to present advertisements to people at the instant the people are looking for information related to what the advertiser has to offer. When a user searches Google's search engine, ads for relevant words are shown as "sponsored link" on the right side of the screen, and sometimes above the main search results.

Pay per Click Advertising: Pay-Per-Click (PPC) is the best way to send immediate, targeted traffic to your website. It is an online advertising payment model in which payment is based onqualifying click-throughs. An advertiser has to pay every time his ad receives a click.

Google AdSense: AdSense is an ad serving program run by Google. Website owners can enroll in this program to enable text, image and, video advertisements on their sites. Revenue is generated on a per-click or per-thousand-ads-displayed basis and the ads are administered by Google. AdSense program includes AdSense for search and AdSense for content.

Google’s new revenue model:Google is currently testing a new advertising program that pays site owners based on a Cost-Per-Click model. The program, called Cost-Per-Action, was revealed via an invitation e-mail from the Google AdSense team to Web site owners.

EBay is an online auction and shopping website in which people buy and sell goods and services worldwide. Buyers are allowed to browsing and bidding on items which free of charge, but the sellers will be charged. The charges are based on promotional fees, insertion fees and final value fees which are the main revenue of eBay.

Insertion fees : A nonrefundable fee which will be charged when an item listed on eBay. Where promotional fee will be charged for additional listing options that help attract attention for an item, such as bold listings or highlighted. Final value fee is a commission that charged to the seller at the end of the auction.

Promotional fees: Fees that charged for additional listing options that help attract attention for an item, such as highlighted or bold listings.

Final value fees: Commission that charged to the seller at the end of the auction.

Furthermore, Ebay generate revenue by sales revenue model through its subsidiary, Half.com, offers fixed price, person-to-person selling of goods, including books, CDs, videos and games, charging a 15% commission on completed sales.

Additionally, a portion of Ebay’s revenue also comes from direct advertising on the site, as well as end to end service providers whose services increase the speed of transactions. The acquisition of PayPal, whose products allow the exchange of money over the Internet, brings additional transaction based fee revenue.

Amazon was one of the first major companies to sell goods by Internet. Amazon generates revenue primarily by selling books, videos, electronics, and kitchen equipment on domestic and international Web sites, such as Amazon Marketplace.

Amazon Marketplace is Amazon.com’s fixed price online marketplace that allows sellers to offer their goods alongside Amazon’s offerings. Buyers can buy new and used items sold directly by a third party through Amazon.com using Amazon Marketplace. This sales strategy and program has been very profitable for Amazon.com.

Amazon charges a commission rate based on the sale price, a transaction fee, and a variable closing fee. Which are sales revenue model and transaction fee revenue model.Moreover, Amazon.com also generates revenue by Affiliate revenue model. Amazon was one of the first online businesses to set up an affiliate marketing program. AStore is an Amazon.com affiliate product which website owners can use to create an online store on their site. The store does not allow website owners to sell their own products directly. Website owners pick products from Amazon’s store and earn referral fees on the products purchased by their readers. The fee structure is currently the same as for the other affiliate links and ranges from 4% to 10% of the product price.

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An example of E-commerce failure and its causes.

In 1963, MCI was founded as Microwave Communications, Inc. by John Goeken to offer long-distance telephone service for businesses between Chicago, Illinois and St. Louis, Missouri. When it ran into problems competing with AT&T, which at the time had a government-supported monopoly in telephone service, it moved to Washington, D.C. to be close to federal regulators and lawmakers. The joke is that in its early years, MCI had more lawyers than land lines. The antitrust lawsuit that it filed against AT&T eventually led to the company's breakup by regulators, reshaping the nation's telecommunications.

It grew to be the second largest long-distance provider in the U.S. It was purchased by WorldCom in 1998 and became MCI WorldCom, and afterwards being shortened to WorldCom in 2000. WorldCom's financial scandals and bankruptcy led that company to change its name in 2003 to MCI. The MCI name disappeared in January 2006 after the company was bought by Verizon.

While all this was happening, in 1995, MCI introduced one of the first ever serious attempt at an e-commerce music store by launching the 1-800 MUSIC NOW. It operated through automated telephone prompts. The service allowed United States users who dialed the toll-free number 1-800-687-4266 to enter the name of a performing artist by touch-tone, then select one of that artist's albums from the catalog and hear clips from that album before buying by credit card.

Once users made selections on the automated service, they were transferred to a call center where an operator established an account, collected payment and shipping information, assisted in ordering, and completed the order. Subsequent ordering could be accomplished through the automated system without human assistance.

The online service was located at http://www.1800musicnow.mci.com. It was the first to offer free music sampling for most of its catalog—initially in RealAudio 1.0 and eventually in RealAudio 2.0. Despite heavy investment in its USD$ 40 million promotion (including advertisements in MTV and Simpsons Hamerpalooza episode) and administrative system, top-selling CD stands at a poor 400 copies. After a year, the online store shut down in December 1996.

An obvious symptom of the downfall of MCI's 1-800 MUSIC NOW was the poor development of the music industry on that year. It subsequently led to music retailers into deep discounting that year. Besides that, the site wasn't user friendly enough. It is difficult to use, rendering consumers to purchase rather through traditional stores. To add up to that, the most visible and sensitive disadvantage was the prices were relatively higher than traditional stores.

Furthermore, consumers had to go through cumbersome sequences of registering themselves, choosing the right song, giving shipping information and lastly verifying their credit card. A survey noted that many of them did not make purchases, is not because of the extra shipping fees, but because they doesn't have a credit card.

(Sources:
http://wikipedia.org
http://www.absoluteastronomy.com
http://www.thefreelibrary.com
http://images.google.com)

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