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406 Part Three Key System Applications for the Digital Age

TABLE 10.1 THE GROWTH OF E-COMMERCE

BUSINESS TRANSFORMATION
• E-commerce remains the fastest growing form of commerce when compared to physical retail stores,
services, and entertainment.

• Social, mobile, and local commerce have become the fastest growing forms of e-commerce.
• The first wave of e-commerce transformed the business world of books, music, and air travel. In the
second wave, nine new industries are facing a similar transformation scenario: marketing and
advertising, telecommunications, movies, television, jewelry and luxury goods, real estate, online
travel, bill payments, and software.
• The breadth of e-commerce offerings grows, especially in the services economy of social
networking, travel, information clearinghouses, entertainment, retail apparel, appliances, and
home furnishings.

• The online demographics of shoppers broaden to match that of ordinary shoppers.
• Pure e-commerce business models are refined further to achieve higher levels of profitability,
whereas traditional retail brands, such as Sears, JCPenney, L.L.Bean, and Walmart, use e-commerce to
retain their dominant retail positions.
• Small businesses and entrepreneurs continue to flood the e-commerce marketplace, often riding on
the infrastructures created by industry giants, such as Amazon, Apple, and Google, and increasingly
taking advantage of cloud-based computing resources.
• Mobile e-commerce begins to take off in the United States with location-based services and
entertainment downloads including e-books, movies, and television shows.
TECHNOLOGY FOUNDATIONS

• Wireless Internet connections (Wi-Fi, WiMax, and 3G/4G smartphones) grow rapidly.
• Powerful smartphones, tablet computers, and mobile devices support music, Web surfing, and
entertainment as well as voice communication. Podcasting and streaming take off as mediums for
distribution of video, radio, and user-generated content.
• The Internet broadband foundation becomes stronger in households and businesses as
transmission prices fall. More than 82 million households had broadband cable or DSL access
to the Internet in 2012, about 69 percent of all households in the United States (eMarketer,
2012a).
• Social networking software and sites such as Facebook, MySpace, Twitter, LinkedIn, and thousands of
others become a major new platform for e-commerce, marketing, and advertising. Facebook hits 1
billion users worldwide, and 160 million in the United States (comScore, 2012).
• New Internet-based models of computing, such as smartphone apps, cloud computing, software as a
service (SaaS), and Web 2.0 software greatly reduce the cost of e-commerce Web sites.

NEW BUSINESS MODELS EMERGE

• More than half the Internet user population have joined an online social network, contribute to
social bookmarking sites, create blogs, and share photos. Together these sites create a massive online
audience as large as television that is attractive to marketers. In 2012, social networking accounts for
an estimated 20 percent of online time.
• The traditional advertising industry is disrupted as online advertising grows twice as fast as TV and
print advertising; Google, Yahoo, and Facebook display nearly 1 trillion ads a year.

• Newspapers and other traditional media adopt online, interactive models but are losing advertising
revenues to the online players despite gaining online readers. The New York Times adopts a paywall
for its online edition and succeeds in capturing 500,000 subscribers.
• Online entertainment business models offering television, movies, music, sports, and e-books surge,
with cooperation among the major copyright owners in Hollywood and New York and with Internet
distributors like Apple, Amazon, Google, YouTube, and Facebook.

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