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Chapter 10 E-commerce: Digital Markets, Digital Goods 415

any ties to physical locations. Amazon, BlueNile.com, and Drugstore.com are
examples of this type of e-tailer. Several other variations of e-tailers—such as
online versions of direct mail catalogs, online malls, and manufacturer-direct
online sales—also exist.
Content Provider
While e-commerce began as a retail product channel, it has increasingly turned
into a global content channel. “Content” is defined broadly to include all forms
of intellectual property. Intellectual property refers to all forms of human
expression that can be put into a tangible medium such as text, CDs, or DVDs,
or stored on any digital (or other) media, including the Web. Content providers
distribute information content, such as digital video, music, photos, text, and
artwork, over the Web. The value proposition of online content providers is that
consumers can find a wide range of content online, conveniently, and purchase
this content inexpensively, to be played, or viewed, on multiple computer
devices or smartphones.
Providers do not have to be the creators of the content (although sometimes
they are, like Disney.com), and are more likely to be Internet-based distribu-
tors of content produced and created by others. For example, Apple sells music
tracks at its iTunes Store, but it does not create or commission new music.
The phenomenal popularity of the iTunes Store, and Apple’s Internet-
connected devices like the iPhone, iPod, and iPad, have enabled new forms
of digital content delivery from podcasting to mobile streaming. Podcasting
is a method of publishing audio or video broadcasts via the Internet, allowing
subscribing users to download audio or video files onto their personal computers
or portable music players. Streaming is 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.
Estimates vary, but total download, streaming, and subscription media revenues
for 2012 are estimated at $19 billion annually. They are the fastest growing segment
within e-commerce, growing at an estimated 20 percent annual rate.

Transaction Broker
Sites that process transactions for consumers normally handled in person, by
phone, or by mail are transaction brokers. The largest industries using this
model are financial services and travel services. The online transaction broker’s
primary value propositions are savings of money and time, as well as providing
an extraordinary inventory of financial products and travel packages, in a single
location. Online stock brokers and travel booking services charge fees that are
considerably less than traditional versions of these services.
Market Creator
Market creators build a digital environment in which buyers and sellers can
meet, display products, search for products, and establish prices. The value
proposition of online market creators is that they provide a platform where
sellers can easily display their wares and where purchasers can buy directly
from sellers. Online auction markets like eBay and Priceline are good examples
of the market creator business model. Another example is Amazon’s Merchants
platform (and similar programs at eBay) where merchants are allowed to set up
stores on Amazon’s Web site and sell goods at fixed prices to consumers. This is
reminiscent of open air markets where the market creator operates a facility (a
town square) where merchants and consumers meet. Online market creators
will generate about $18 billion in revenues for 2012.

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