Chapter 10: E-Commerce: Digital Markets, Digital Goods

Question 1

Advertising Revenue Model

Answer 1

Web site generating revenue by attracting a large audience.

Question 2

Affiliate Revenue Model

Answer 2

An e-commerce revenue model in which Web sites are paid as “affiliates” for sending their visitors to other sites in return for a referral fee.

Question 3

Behavioral Targeting

Answer 3

Tracking the click-streams (history of clicking behavior) of individuals across multiple Web sites for the purpose of understanding their interests and intentions, and exposing them to advertisements which are uniquely suited to their interests.

Question 4

Business-To-Business (B2B)

Answer 4

Electronic sales of goods and services among businesses.

Question 5

Business-To-Consumer (B2C)

Answer 5

Electronic retailing of products and services directly to individual consumers.

Question 6

Co-Location

Answer 6

A kind of Web site hosting in which firm purchase or rent a physical server computer at a hosting company’s location in order to operate a Web site.

Question 7

Community Providers

Answer 7

A Web site business model that creates a digital online environment where people with similar interests can transact (buy and sell goods); share interests, photos, videos; communicate with like-minded people; receive interest-related information; and even play out fantasies by adopting online personalities called avatars.

Question 8

Consumer-To-Consumer (C2C)

Answer 8

Electronic commerce; consumers selling goods and services electronically to other consumers.

Question 9

Cost Transparency

Answer 9

The ability of consumers to discover the actual costs merchants pay products.

Question 10

Crowdsourcing

Answer 10

Using large Internet audiences for advice, market feedback, new ideas and solutions to business problems. Related to the ‘wisdom of crowds’ theory.

Question 11

Customization

Answer 11

The modification of a software package to meet an organization’s unique requirements without destroying the package software’s integrity.

Question 12

Digital Goods

Answer 12

Goods that can be delivered over a digital network.

Question 13

Direct Goods

Answer 13

Goods used in a production process, such as sheet steel for auto body production.

Question 14

Disintermedation

Answer 14

The removal of organizations or business process layers responsible for certain intermediary steps in a value chain.

Question 15

Dynamic Pricing

Answer 15

Pricing of items based on real-time interactions between buyers and sellers that determine what an item is worth at any particular moment.

Question 16

Electronic Data Interchange (EDI)

Answer 16

The direct computer-to-computer exchange between two organizations of standard business transactions, such as orders, shipment instructions, or payments.

Question 17

E-Tailer

Answer 17

Online retail stores from the giant Amazon to tiny local stores that have Web sites where retail goods are sold.

Question 18

Exchanges

Answer 18

Third-party Net marketplace that is primarily transaction oriented and that connects many buyers and suppliers for spot purchasing.

Question 19

Free/Freemium Revenue Model

Answer 19

Am e-commerce revenue model in which a firm offers basic services or content for free, while charging a premium for advanced or high value features.

Question 20

Geoadvertising

Answer 20

Delivering ads to users based on their GPS location.

Question 21

Geoinformation Services

Answer 21

Information on local places and things based on the GPS position of the user.

Question 22

Geosocial Services

Answer 22

Social networking based on the GPS location of users.

Question 23

Indirect Goods

Answer 23

All other goods not directly involved in the production process, such as office suppliers or products for maintenance and repair.

Question 24

Information Asymmetry

Answer 24

Situation where the relative bargaining power of two parties in a transaction is determined by one party in the transaction possessing more information essential to the transaction than the other party.

Question 25

Informational Density

Answer 25

The total amount and quality of information available to all market participants, consumers, and merchants.

Question 26

Intellectual Property

Answer 26

Intangible property created by individuals or corporations that is subject to protections under trade secret, copyright, and patent law.

Question 27

Location-Based Services

Answer 27

GPS map services available on smartphones.

Question 28

Long Tail Marketing

Answer 28

Refers to the ability of firms to profitably market goods to very small online audiences, largely because of the lower costs of reaching very small market segments (people who fall into the long tail ends of a Bell curve).

Question 29

Market Creator

Answer 29

An e-commerce business model in which firms provide a digital online environment where buyers and sellers can meet, search for products, and engage in transactions.

Question 30

Market Entry Costs

Answer 30

The cost merchants must pay to bring their goods to market.

Question 31

Marketspace

Answer 31

A marketplace extended beyond traditional boundaries and removed from from a temporal and geographic location.

Question 32

Menu Costs

Answer 32

Merchants’ costs of changing prices.

Question 33

Micropayment Systems

Answer 33

Payment for a very small sum of money, often less than $10.

Question 34

Mobile Commerce (M-Commerce)

Answer 34

The use of wireless devices, such as cell phones or handheld digital information appliances, to conduct both business-to-consumer and business-to-business e-commerce transactions over the Internet.

Question 35

Net Marketplaces

Answer 35

A single digital marketplace based on Internet technology linking many buyers to many sellers.

Question 36

Personalization

Answer 36

Ability of merchants to target marketing messages to specific individuals by adjusting the message for a person’s name, interests, and past purchases.

Question 37

Podcasting

Answer 37

Publishing audio broadcasts via the Internet so that subscribing users can download audio files onto their personal computers or portable music players.

Question 38

Prediction Market

Answer 38

An analysis of the portfolio of potential applications within a firm to determine the risks and benefits, and to select among alternatives for information systems.

Question 39

Price Discrimination

Answer 39

Selling the same goods, or nearly the same goods, to different targeted groups at different prices.

Question 40

Price Transparency

Answer 40

The ease with which consumers can find out the variety of prices in a market.

Question 41

Private Exchange

Answer 41

Another term for a private industrial network.

Question 42

Private Industrial Networks

Answer 42

Web-enabled networks linking systems of multiple firms in an industry for the coordination of trans-organizational business processes.

Question 43

Revenue Model

Answer 43

A description of how a firm will earn revenue, generate profits, and produce a return on investment.

Question 44

Richness

Answer 44

Measurement of the depth and detail of information that a business can supply to the customer as well as information the business collects about the customer.

Question 45

Sales Revenue Model

Answer 45

Selling goods, information, or services to customers as the main source of revenue for a company.

Question 46

Search Costs

Answer 46

The time and money spent locating a suitable product and determining the best price for that product.

Question 47

Social Graph

Answer 47

Map of all significant online social relationships, comparable to a social networking describing offline relationships.

Question 48

Social Shopping

Answer 48

Use of Web sites featuring user-created Web pages to share knowledge about items of interest to other shoppers.

Question 49

Streaming

Answer 49

A publishing method for music and video files that flows a continuous stream of content to a user’s device without being stored locally on the device.

Question 50

Subscription Revenue Model

Answer 50

Web site charging a subscription fee for access to some or all of its content or services on an ongoing basis.

Question 51

Transaction Costs

Answer 51

Costs incurred when a firm buys on the marketplace what it cannot make itself.

Question 52

Transaction Fee Revenue Model

Answer 52

An online e-commerce revenue model where the firm receives a fee for enabling or executing transaction.

Question 53

Wisdom of Crowds

Answer 53

The belief that large numbers of people can make better decisions about a wide range of topics or products than a single person or even a small committee of experts (first proposed in a book by James Surowiecki).

Question 54

What are the unique features of e-commerce, digital markets, and digital goods?

Answer 54

E-commerce involves digitally enabled commercial transactions between and among organizations and individuals. Unique features of e-commerce technology include ubiquity, global reach, universal technology standards, richness, interactivity, information density, capabilities for personalization and customization, and social technology.
Digital markets are said to be more “transparent” than traditional markets, with reduced information asymmetry, search costs, transaction costs, and menu costs, along with the ability to change prices dynamically based on market conditions. Digital goods, such as music, video, software, and books, can be delivered over a digital network. Once a digital product has been produced, the cost of delivering that product digitally is extremely low.

Question 55

What are the principal e-commerce business and revenue models?

Answer 55

E-commerce business models are e-tailers, transaction brokers, market creators, content providers, community providers, service providers, and portals. The principal e-commerce revenue models are advertising, sales, subscription, free/freemium, transaction fee, and affiliate.

Question 56

How has e-commerce transformed marketing?

Answer 56

The Internet provides marketers with new ways of identifying and communicating with millions of potential customers at costs far lower than traditional media. Crowdsourcing utilizing the “wisdom of crowds” helps companies learn from customers in order to improve product offerings and increase customer value. Behavioral targeting techniques increase the effectiveness of banner, rich media, and video ads. Social commerce uses social networks and social network sites to improve targeting of products and services.

Question 57

How has e-commerce affected business-to-business transactions?

Answer 57

B2B e-commerce generates efficiencies by enabling companies to locate suppliers, solicit bids, place orders, and track shipments in transit electronically. Net marketplaces provide a single, digital marketplace for many buyers and sellers. Private industrial networks link a firm with its suppliers and other strategic business partners to develop highly efficient and responsive supply chains.

Question 58

What is the role of m-commerce in business, and what are the most important m-commerce applications?

Answer 58

M-commerce is especially well-suited for location-based applications, such as finding local hotels and restaurants, monitoring local traffic and weather, and providing personalized location-based marketing. Mobile phones and handhelds are being used for mobile bill payment, banking, securities trading, transportation schedule updates, and downloads of digital content, such as music, games, and video clips. M-commerce requires wireless portals and special digital payment systems that can handle micropayments. The GPS capabilities of smartphones make possible geoadvertising, geosocial, and geoinformation services.

Question 59

What issues must be addressed when building an e-commerce presence?

Answer 59

Building a successful e-commerce site requires a clear understanding of the business objectives to be achieved by the site and selection of the right technology to achieve those objectives. E-commerce sites can be built and hosted in-house or partially or fully outsourced to external service providers.