Market Characteristics of E-commerce
As mentioned earlier, electronic commerce today consists of two interrelated strands of network computing: 1) an expanded use of open networks by traditional EDIs to interconnect private networks with the Internet; and 2) an entirely new marketplace on the Internet using the World Wide Web technology. While large businesses and information management professionals are familiar with EDIs, the public and consumers, unaware of existing electronic business transactions, see electronic commerce on the Internet as a completely new market. The status of this new market is reviewed, detailing the pattern of usage, the characteristics of its users and market institutions, as well as the relevant legal environment. The size of the market, judged by the number of agents or domain names, is growing rapidly on the Internet. The growth rate in the number of Internet hosts is exponential; it grew from about 300,000 in 1990 to over 12 million by the end of 1996. Admittedly, most of these Internet sites are only potentially commercial. But the awareness of its commercial use among businesses is growing. Medium-size companies show a weaker presence at 35 percent. Although the relatively lower cost and larger reach of Internet-based marketing and commerce is very well suited to small and medium companies, large companies seem to have more experience from EDIs and better recognize the need for establishing their presence. The same survey reports that many of these companies are not entirely convinced that the Internet has improved the business environment significantly. At present, most Internet-savvy companies are content to provide company and product information for public access, and to augment electronic messaging capabilities for intra business communications by adding intranets into their corporate networks. While the interest for commercial use of the Internet is growing, there seems to be a widespread skepticism and uncertainty about the potential of Internet commerce. A more willing acceptance for doing business online depends on these companies gaining a better understanding of how electronic commerce applies to their line of business as well as learning business and marketing strategies appropriate for the Internet. The first step toward this is to define clearly how and what kinds of commercial activities are being conducted electronically. Primary commercial uses on the Internet are advertising and customer services. Online advertising has generated about $150-$200 million dollars, up significantly from $10-$15 million in 1995. This advertising revenue is the amount Internet marketers received for their services, such as Internet billboards now common in search sites, targeted emailing, and customized web advertising. However, establishing a web storefront accounts for a significant portion of Internet advertising activities, which is not fully reflected when we calculate advertising revenues in a traditional way. Secure and reliable online payment systems must be effective and widespread. With developments in these areas, all aspects of business transactions may be conducted electronically. More importantly, solving these problems will enable the trading of digital products, making the Internet a true electronic market.