Chapter 10: E-commerce: Digital markets, Digital goods

Question 1

What are the three key concepts in E-commerce?

Answer 1

1. Local
2. Social
3. Mobile

Question 2

What sets E-commerce apart?

Answer 2

1. Ubiquitous access
2. Global reach
3. Universal (technical) standards
4. Richness
5. Interactivity
6. Information density
7. Personalization/ customization
8. Social technology

Question 3

Why is E-commerce ubiquitous?

Answer 3

E-commerce can be accessed from anywhere because:
1. Creation of a marketspace
3. Reduced transaction costs

Question 4

What is a marketspace?

Answer 4

This is a marketplace not limited by physical boundaries

Question 6

What is meant by E-commerce having lower universal standards?

Answer 6

1. Lower market entry costs: costs to enter the market
2. Lower search costs: effort to find suitable products

Question 6

What is meant with the Richness of E-commerce?

Answer 6

There is no trade-off required anymore between richness and reach. E-commerce has both

Question 7

What is information density?

Answer 7

This is the amount and quality of available information.

Question 7

What is price transparency?

Answer 7

Ease of finding out market prices

Question 8

What is cost transparency?

Answer 8

Ability to find out a merchant’s actual costs

Question 9

What is price discrimination?

Answer 9

The ability to charge different classes of people different prices for the same product.

Question 10

What is information asymmetry?

Answer 10

One party has more information than another in a transaction. In the past, retailers had a big advantage with this, but through the internet it has reduced

Question 11

What are menu costs?

Answer 11

These are the costs for a merchant to change its prices

Question 12

What is dynamic pricing?

Answer 12

This is a technique where the price depends on a customer’s demand characteristics or a seller’s supply chain situation.

Question 13

What is disintermediation?

Answer 13

This means that a company removes organizations for intermediary steps from its supply chain

Question 14

What is m-commerce?

Answer 14

This refers to the use of mobile devices to purchase products online

Question 14

What are digital goods?

Answer 14

Goods that can be delivered over a digital network

Question 15

What are transaction brokers?

Answer 15

These are organizations that process online transaction. Their value proposition is to save money

Question 15

What are content providers?

Answer 15

Organizations or people that create content and spread it online

Question 16

What are market creators?

Answer 16

These organizations build a digital environment to create markets for goods and services

Question 17

What does it mean to download something?

Answer 17

This means transferring a file to user’s device

Question 18

What does streaming mean?

Answer 18

This is a flow of continuous content without being stored on a user’s device

Question 19

Name the different E-commerce revenue models

Answer 19

1. Ads (Google, facebook)
2. Sales based (AMZN)
3. Subscription (Netflix , PSplus)
4. Transaction fee (eBay)
5. Affiliate marketing

Question 20

Name three things online marketing is affected by

Answer 20

1. Native advertising
2. Long-tail marketing
3. Behavioral targeting

Question 21

What is long-tail marketing?

Answer 21

Internet enables companies to string together sales in distant places as long as the price is high enough

Question 22

What is behavioral targeting?

Answer 22

Following clicksteams to discover interests and match ads to them. Can be done from websites/apps (first-party) or advertising networks (third-party)

Question 23

What is native advertising?

Answer 23

placing ads in a social network newsfeed.

Question 24

What is social e-commerce?

Answer 24

This is a version of e-commerce based on social relationships through social graphs,which map all significant online social relationships

Question 25

What is social listening?

Answer 25

understanding what peole say about your brand and from those from your competitor

Question 25

What is the wisdom of crowds?

Answer 25

This refers to the principle that a large number of people can make better decisions than a single person

Question 26

What are direct goods?

Answer 26

These are goods used in the production process

Question 28

What are B2B e-commerce marketplaces?

Answer 28

These provide marketplaces on the Internet for many buyers and sellers and are industry-owned or independent intermediaries

Question 28

What are private B2B networks?

Answer 28

Networks that consist of large firms using secure websites to link to key business partners

Question 28

What is EDI?

Answer 28

Electronic data exchange (EDI) enables electronic transactions

Question 29

What are indirect goods?

Answer 29

Goods not directly involved in production

Question 30

What are exchanges?

Answer 30

These are third-party e-commerce marketplaces connection suppliers and buyers for spot purchasing

Question 31

What are location-based services?

Answer 31

These are services that are enable through GPS-enabled maps on devices. Includes geosocial, - information and -advertising services

Question 32

Name three mobile app payment systems

Answer 32

1. QR code 2. Near Field Communications (NFC) 3. Peer-to-peer payment systems (through a payment platform like Venmo)

Question 33

What makes platforms so disruptive?

Answer 33

1. Advancement in information and communications technology improving scalability 2. Leveraging communities vs features of a product. Community=primary asset 3. Power of network effects

Question 34

What are network effects?

Answer 34

This is the effect that the more people are using a social netwom, the more valuable it is to its users with this mathematical equation: n^2

Question 35

What is Metcalf's Law?

Answer 35

1. Network value: n^2 2. Number of possible connections: n(n-1)/2

Question 36

What are the network externalities types?

Answer 36

1. Positive: additional user increases value for all other users 2. Negative: additional user decreases value for all other users

Question 37

What is a one-sided market?

Answer 37

Large share of value is from a single class of users

Question 38

What is a two-sided market?

Answer 38

The value comes from two classes of users. Firms in these markets must consider interaction between sides.

Question 39

What are same-sided network effects?

Answer 39

Increasing the value for one class of users by increasing the number of users in that class

Question 40

What are cross-sided network effects?

Answer 40

The value for one class of users can be increased by increasing the number of people in a different class.