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Electronic Commerce (Quick Review)

Chapter 1: Introduction to Electronic Commerce
E-Commerce is simply buying and selling of products and services by using computers. On
the other hands E-Business is broader concept that’s why E-Commerce is also called a
subset of E-Business.

Definitions of E-Commerce
Electronic Commerce (EC) is where business transactions take place via
telecommunications networks, especially the Internet.
OR
The use of electronic transmission media that engage in the exchange, including buying
and selling of product and services, requiring transportation, either physically or
digitally from location to location.
E-Commerce definition based on different perspective
Communications
EC is the delivery of information, product/services, or payments over telephone
lines, computer n/w or any other electronic means.

Business process
EC is the application of technology toward the automation of business transactions.

Service
EC is a tool that addresses the desire of firms, consumers, and management to cut
service costs while improving the quality of goods and increasing the speed of
service delivery.

Online
EC provides the capability of buying and selling products and information on the
internet and other online services

Definition of E-Business
According to IBM “The transformation of key business processes through the use of
internet technologies”

Business processes are the ways in which organizations coordinate and organize work
activities, information, and knowledge to produce their valuable products or services.

Business processes for the manufacturing and production area include product assembling,
quality checking, and producing bills of materials. For the sales and marketing area,
business processes include identifying customers, making customers aware of the product,
and selling the product. For finance and accounting, business processes includes paying
creditors, creating financial statements, and managing cash accounts. For human
resources, business processes include hiring employees, evaluating job performance of
employees, and enrolling employees in benefits plans.

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The Dimensions of Electronic Commerce
Based on the three dimensions we can decide the type of Commerce whether Pure E-
Commerce, Partial E-Commerce and Traditional Commerce. The decision is based on the
degree of digitization of three dimensions that is: Product, process, delivery agent
Traditional commerce:
In Traditional commerce all dimensions are physical that is product, Process and
Delivery agent. It is also called Brick-and-mortar organizations. They perform all
business off-line and Sell physical products by means of physical agents
Example: Purchasing a computer from a physical store in a Market (Physical Product:
Computer, Physical Process: Manual order placement, Physical delivery: By Road)
Partial E-Commerce:
It is a mix of digital and physical dimensions, also called Click-and-mortar
organizations. They Conduct E-Commerce activities and do their primary business in the
physical world. Example: Purchasing a computer from www.Dell.com (Physical Product:
Computer, Digital Process: Online order placement, Physical delivery: By Road)
Pure E-Commerce:
In Pure E-Commerce all dimensions are digital. They are pure online (virtual)
organizations and Sell products or services only online like www.amazon.com
Example: purchasing software from www.amazon.com (Digital Product: Software, Digital
Process: Online order placement, Digital delivery: Software download)

Buyer/Seller Transactions
Elements on Buyer’s Side
• Identify specific need
• Search for products or services that will satisfy the specific need
• Select a vendor
• Negotiate a purchase transaction
• Make payment and Perform regular maintenance and make warranty claims
Elements on Seller’s Side
• Conduct market research to identify customer needs
• Create product or service that will meet customers’ needs
• Advertise and promote product or service
• Negotiate a sale transaction
• Ship goods and invoice to customer
• Receive and process customer payments
• Provide after-sale support, maintenance, and warranty services

Explain the below diagram by yourself

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Classification of EC by the Nature of the Transaction
Note: Provide the examples by your self
1) Business-to-business (B2B) :
EC model in which all of the participants are businesses or other organizations
2) Business-to-consumer (B2C):
EC model in which businesses sell to individual shoppers
3) Business-to-business-to-consumer (B2B2C):
EC model in which a business provides some product or service to a client business;
the client business maintains its own customers, to whom the product or service is
provided
4) Consumer-to-business(C2B):
Individuals who use the Internet to sell products or services to organizations and or
seek sellers to bid on products or services they need
5) Consumer-to-consumer (C2C) :
Consumers sell directly to other consumers. Examples: auction sites allowing
individuals to put up items for auction
6) Mobile commerce (m-commerce)
EC transactions and activities conducted in a wireless environment
7) Location-commerce—(l-commerce)
M-commerce transactions targeted to individuals in specific locations, at specific
times
8) Collaborative commerce (c-commerce):
EC model in which individual or groups communicate or collaborate online
9) E-government: Government-to-citizens (G2C):
EC model in which a government entity buys or provides good, services, or information
to businesses or individual citizens

The Benefits of EC
Benefits to Organizations
1) It expands the marketplace to national and international markets
2) Decreases the cost of creating, processing, distributing, storing and retrieving
paper-based information
3) Allowing customization of products and services which provides competitive advantage
to its implementers
4) Reduces the time while distributing documents, information, receipt of products and
services
5) Based on technical infrastructure
6) Lowers telecommunications cost - the Internet is much cheaper than value added
networks (VANs)

Benefits to consumers
1) Enables consumers to shop or do other transactions 24 hours a day, all year round
from almost any location
2) Provides consumers with more choices
3) Provides consumers with less expensive products and services by allowing them to shop
in many places and conduct quick comparisons
4) Allows quick delivery of products especially with digitized products

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5) Consumers can receive relevant and detailed information in seconds, rather than in
days or weeks
6) Makes it possible to participate in virtual auctions
7) Facilitates competition, which results in substantial discounts
8) Allows consumers to interact with other consumers in electronic communities and
exchange ideas as well as compare experiences
9) Facilitates competition, which results in substantial discounts

Benefits to society
1) Enables more individuals to work at home, and to do less traveling for shopping,
resulting in less traffic on the roads, and lower air pollution
2) Allows some merchandise to be sold at lower prices, benefiting less affluent people
3) Enables people in Third World countries and rural areas to enjoy products and
services which otherwise are not available to them
4) Facilitates delivery of public services at a reduced cost, increases effectiveness,
and/or improves quality

The Limitations of EC
Technical limitations
1) There is a lack of universally accepted standards for quality, security, and
reliability
a) Cybersquatting: Registering a domain name that is the trademark of a person or
company and hoping to sell it to that person or company for money
b) Web Defamation: Statement that is false and injures the reputation of another
person or company
c) Masquerading: A fake domain with misguiding information in order to damage
organizational reputation in the market.
d) Privacy issues: Collection and misuse of visitor’s personal information.
2) The telecommunications bandwidth is insufficient
3) Software development tools are still evolving
4) There are difficulties in integrating the Internet and EC software with some existing
(especially legacy) applications and databases.
5) Special Web servers in addition to the network servers are needed (added cost).
6) Internet accessibility is still expensive and/or inconvenient

Legacy/Tradition economy vs internet economy

Legacy/Tradition economy Internet economy

Bricks and mortar economy
Limited geographical boundaries,
Localized market
People can own this market, owner exists
Do not based on technical infrastructure
Not real time based
Limited timing
Barriers to entry is high
Clicks and mortar economy
No geographical boundaries, globalize
market
No one owns the market, no owner, self
rating market
based on technical infrastructure
Real time based
24*7
Barrier to entry is low

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Chapter 2: Technology Infrastructure: The internet and the world wide web
The World Wide Web (www)

The terms Internet and World Wide Web are often used in every-day speech without much
distinction. However, the Internet and the World Wide Web are not one and the same. The
Internet is a global system of interconnected computer networks. In contrast, the Web is
one of the services that run on the Internet. It is a collection of interconnected
documents and other resources, linked by hyperlinks and URLs. In short, the Web is an
application running on the Internet.

Viewing a web page on the World Wide Web normally begins either by typing the URL of the
page into a web browser, or by following a hyperlink to that page or resource. The web
browser then initiates a series of communication messages, behind the scenes, in order
to fetch and display it.

The World-Wide Web was developed to be a pool of human knowledge, and human culture,
which would allow collaborators in remote sites to share their ideas and all aspects of
our life.

It’s software which allows us to view multimedia documents on the web. That is text,
videos, audio, animations, images etc. it’s a standard developed by Tim Berners Lee in
1990, which has two main parts means use HTML to design websites and use web browser to
view all the websites on the web.

Web Site
A web site is a collection of web pages or related web pages which are interlinked Web
Pages. Example www.Yahoo.com, where hundreds of web pages are interlinked together.

Web Page
The basic unit of information displayed over the net is a web page. Various web pages
are prepared independently and in the end they are linked in the required sequence.
Link for a web page is basically URL(Uniform Resource Locater)

Home page
It is the front end of the web site. First user access point to the user of the web
site. Welcoming the reader who has logged on the site. Home page provides labeled
links to the main web pages Home page can have access to online forms for ordering
items, online product catalogs, have a chat page where the customer can chat with
supplier.

The Internet and Services

The Internet is a worldwide network of computers connected through phone lines and
cables. Unlike an ordinary network, which is controlled by one central computer
called a server, the Internet is decentralized so that it can keep functioning even
when part of the network is knocked out of service. To connect to the Internet from
home, your modem dials into an Internet computer (called an Internet Service
Provider), then a program on your computer called a web browser displays web pages for
you to view.
The Internet is a worldwide collection of networks used to provide services such as…
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– World Wide Web (WWW) – Websites

– Email, Instant Messaging (IM)
– Telephony – Voice over IP (VoIP)
– Social network, newsgroups, discussion boards
– File Transfer Protocol (FTP)
– E-commerce – business transactions

What is an Intranet?
When internet technology is used to create a private network within a company. It Uses
Internet tools, such as Websites, Web browsers, and Internet protocols. Employee
within organization may use web pages in order to share information among each other.
Example: Kabul Bank might have a network design using internet technology within their
building and each employee share information by having their login web page, messenger
etc.

What is an Extranet?
A network that uses the Internet to link multiple intranets. Extranets allow selected
customers and suppliers to have access to a company’s intranet. For example EDI
(Electronic Data Exchange) which is a standard format to exchange data. Example: Kabul
Bank connect each of their intranets which are in different provinces through internet
and allowing their selected customers who is having Credit card and are able to access
their account and can withdraw money from any part of the country.
Types of website
As we know, on the internet million of websites are hosted. Some are special purpose
websites and some are general purpose websites. There are two types of websites,
Commercial website and Non-commercial website
– Commercial websites
Any website that offers products or services for sale. An example of commercial
website is www.amazon.com, www.yahoo.com. Both are specifically designed for the
purpose of business.

– Non-commercial website
Any website that offers products or services not for sale. These websites are not
designed for business. An example for non-commercial websites are Academic
institution (www.kardan.edu.af), NGO, Religious organization, Social Organization,
Gov agencies

Elements for making a good commercial website

For making a good commercial website, not just only attractive homepages are required
but there must be some more elements which must be taken under considerations in order
to design a very good commercial website.
Following are the seven elements that must exists in any commercial website

1. A well organized collection of products or services

A website should contain organized collection of products in terms of Directories so
that the customer can easily find the required product without wasting too much time.
Website should have Search engines, Complete information about products, some way of
Comparing products and Update website by removing products and change prices
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2. A convenient way for a customer to select products

A website must provide an easy to select products by mean of different technologies like
Shopping cart, Shopping basket so that Customer must be able to select and delete the
product

3. Convenient order form

On the website the order form must be having few fields, customer should be provided
default information so that not to type it every time. Example: City Kabul and also some
Gift message must appear on the screen when the order submitted.

4. Convenient way of payment

While paying for goods and services the merchant must provide more than one payment
options like Credit card, Debit card, Cash, Check and ofcourse E-payment system where
customer feel relax while sending credit card number

5. Secure communication system

Not only protect transmission of a credit card number but guarantee privacy of
customer. For making communication system much secure the website must provide User
registration system with password to prevent unauthorized access

6. Some way of storing information about customers

As we know customer is the main Entity in any business so there must be some way to
store information about customers by means of Cookies which allows user not to reenter
their information. This will also allow user to have a customize website with ads of his
own choice For Example…..yahoo inbox
7. Customer support and feed back
For customer convenience there must be FAQs on the websites so that any question if the
customer wants to ask can be answered.

Connecting to the Internet

Internet Service Provider (ISP)
These are companies that provide internet services. People normally connect to Internet
through phone lines. Analog modem is used to Converts digital signals into analog
signals.

Types of Internet connections

1. Digital Subscriber Lines (DSL)

High-bandwidth Internet access over telephone lines normally up to Up to 55
Mbps. The Speed of DSL decreases rapidly over distance. Only available up to
20,000 feet from central office.

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DSL is the specific technology for making high speed transmissions on the
existing telephone networks. DSL requires Digital phone to be install at the
customer side and need DSL modem.

Some 40 times faster than 56k modems. With the internet, there will be no need
to log on and off, download times will be lightning fast and fears over the cost
of the call will be removed.

DSL is dedicated line and is remain the same as in peak or off time. Two reasons
makes the DSL speed slows down, one is the quality of phone line is not good and
second when DSL office is far.

Types of DSL
Asymmetric DSL
Sending data upstream (3-9 Mbps) slower than receiving downstream (16-55
Mbps)
Symmetric DSL
Same upstream and downstream (upto 3 Mbps)

2. Broadband
It is the name given to systems designed for high-speed transmission of huge
amounts of electronic data.

Broadband benefits
24-hour internet connection
Video on demand
Fast interactive digital television
Fast interactive home shopping
Video e-mail
Video conferencing
Fast downloading of games, music and software
High-bandwidth always connected no need to dial. Can handle voice, data and
video information

3. Cable modem
Translates digital signals for transmission over television cables. Bandwidth
shared among many users. Downstream up to 1.5 Mbps, upstream of 128 Kbps

4. ISDN
Speed up to 128 Kbps. Bandwidth divided into three channels
• Basic Rate Interface (BRI)
• Two bearer (B) channels

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Chapter 3: Selling on the web: Revenue Models and Building a Web Presence

Revenue Model
Describes how the firm will earn revenue, generate profits, and produce a superior
return from invested money. Revenue model is one of business model components where
Business Model can defined as
“An Activities which planed and designed to produce the profits in market space.

Five Primary Revenue Model

1) Advertising Revenue Model
Web site that offers content, services and/or products also provides a forum for
advertisements and receives fees from advertisers
Example: www.Yahoo.com portal provides useful information and a search engine free of
cost, but earns revenue through advertisements on its portal web site to bear the
operational cost.

2) Subscription Revenue Model

Web site that offers users content or services charges a subscription fee for
access to some or all of its offerings
Examples: www.CNN.com
3) Transaction Fee Revenue Model
Company that receives a fee for enabling or executing a transaction. Businesses
offering services and charge a fee based on the number or size of transactions they
process. They provide information to the customers required to complete a transaction
and revenue is purely earned on that basis.
For example, online travel agents facilitating a transaction that includes the making
of travel arrangement for their clients, as well as, advising them about lodging,
transportation etc.
Examples: www.eBay.com
4) Sales Revenue Model
Company derives revenue by selling goods, information, or services to customers
Examples: www.Amazon.com
5) Affiliate Revenue Model
Sites that steer business to an “affiliate” receive a referral fee or percentage of
the revenue from any resulting sales
Example: www.vrdevelopers.net

Other Revenue Model

1) The Web Catalog Revenue Model
Use electronic catalogue and shopping cart providing access to customers throughout
the world. This include online sellers of computers, electronic items, books,
music, videos, toys, flowers, gifts, clothes etc.
Payment received from customers is the source of earning revenue and Customers can
usually place orders through the Web site

Examples: (a) Computer manufacturers i.e. www.Dell.com

Dell has been a leader, allowing customers to specify the configuration of
their computer

(b) Books, Music, and Videos i.e. www.Amazon.com

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2) Digital Content Revenue Models
Web serves as a very efficient distribution mechanism of content
Such as legal information, corporate information, government information, news and
resources for libraries etc. Online journals, newspapers, libraries fall under this
category. Note that E-publishing eliminates high costs of paper printing and delivery
of digital content is much quicker.

Examples: (A) www.LexisNexis.com is an online service that offers a variety of legal,

corporate, government, etc. information.
(B) The ACM Digital Library offers subscriptions to electronic versions of
its journals to its members and to libraries.
3) Advertising-Subscription Mixed Model
Subscribers pay a fee and accept some level of advertising. Thus an e-business can
earn its revenue from both the sources, that is, through subscription and
advertisements
For Example: The New York Times and The Wall Street Journal use a mixed advertising-
subscription model.
ESPN sells advertising and offers a vast amount of free information, but fans can
subscribe to its Insider service.
4) Fee-for-Services Models
Fees based on the value of the service provided - neither broker services nor based
on the number or size of transactions processed. These Models range from games and
entertainment to financial advice and the professional services of accountants,
lawyers, and physicians.
Example: (A) Online games - pay to play (www.zone.com, www.realarcade.com)
(B) Concerts and films - As more households obtain broadband access to the
Internet, companies will provide streaming video of concerts and films
to paying customers. (www.movielink.com)
(C) Professional services
www.Mydoconline.com (allows patient to make appointments)
www.WebMD.com (general health information)

Creating an Effective Web Presence

Businesses always create a presence in the physical world by building stores and
office buildings.
Achieving Web Presence Goals
An effective site is one that creates an attractive presence that meets the
objectives of the business or other organization.
Possible objectives include:
Attracting visitors to the Web site, making the site interesting enough that visitors
stay and explore, convincing visitors to follow the site’s links, creating an
impression of corporate image, building a trusting relationship with visitors,
encouraging visitors to return to the site
Guidelines for creating an effective web presence
1) Allow visitors to access information quickly.
2) Avoid using business jargon that visitors might not understand.
3) Build the site for visitors who are using the oldest browser on the oldest computer
connected through the lowest bandwidth connection
4) Be consistent in use of design features and colors.
5) Make sure that navigation controls are clearly labeled
6) Test text visibility on smaller monitors.
7) Conduct usability tests by having potential site users navigate through

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Chapter 4: Marketing on the web
Definition of Web Advertising
Advertising is an attempt to disseminate information in order to affect a buyer-seller
transaction. Advertising is all about communication
– Communication between a company and its current customers
– Communication between a company and potential customers
– Communication between a company and its former customers
Online advertising should always be coordinated with existing advertising efforts. For
example, print ads should include the company’s URL

Advantages of internet advertisement

1) Accessed on demand 24 hours a day, 365 days a year, and costs are the same regardless
of audience location
2) Accessed primarily because of interest in the content
3) Opportunity to create one-to-one direct marketing relationship with the consumer
4) Multimedia will increasingly make Web sites more attractive and compelling
5) Distribution costs are low (just technology cost), so millions of consumers are
reached at the same cost as that of reaching one
6) Advertising and content can be updated, or changed at any time, and are therefore
always up-to-date
7) Ease of logical navigation — you click when and where you want, and spend as much
time as you desire there
Advertising methods
1. Banners
Located on Web pages, act like small billboards, usually contain graphics and an
advertising message. The file size of the banners should be about 7 to 10kb and placed
in various positions on a Web site. Must have flashing, scrolling text, pop-up boxes and
color changes. Its always recommended to determine the best position on sites for a
banner
Benefits of Banners
Banners can be customized to the target audience. It can be customized to one-to-
one targeted advertisement and can be utilize “force advertising” marketing
strategy
Banner ad placement
-Free banner exchange
-Banner swapping
-Banner exchange network

-Paid banner advertising

-banner advertising network
-banner on search engine and directories
-banners on high traffic website

Banner Swapping
Creates direct link between one’s sites to the other site. In Banner Swapping,
Websites holder barters Ad space. you can either trade banners with another
webmaster, or you can use a banner swap service. Trading banners is simple. You
post a webmasters banner to your site, and he will post yours. Usually, there are
no traffic minimums, and as long as you continue to send some traffic to the other
site, they will send some to you. Obviously, if you site is receiving 100 hits a
day through the banner, and you are only sending 2-3 visitors to their site, the
webmaster may cancel the swap.
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A banner exchange network

Coordinates ad-sharing so that other sites run your ad while your site runs other
exchange members’ ads
Banner Exchanges (Banner advertising Network)
Banner exchange organizations are normally providing the services of Banner
Exchange. A firm submits a banner to those organizations. These organizations then
receives credit when shows others banners. They can also specify what type of site
the banner can be displayed on, Example: bcentral.com
Help in banner design, provides membership in newsgroups, Delivers HTML contents.
It acts as a banner-ad clearing house for more than 200,000 small Web sites. It
also monitors the content of the ads of all its members.
Banners on Search Engines and Directories:
You can advertise your site on search engines and directories which allow you to
target specific segments of their large audiences. You can specify that your banner
comes up in specific categories, such as Business, Marketing, Travel, Sports,
Broadcasting, Manufacturing, Computers, etc. Popular search engines like Yahoo! can
cost you $20 - $50 on a cost per thousand (CPM) to purchase a minimum number of
impressions, usually 100,000.

If you advertise on sites for specific audiences, you will pay $35 - $85 CPM. For
example if you are a Travel Company you might consider advertising on
www.amazon.com (a successful online book store) on their Travel Books pages.

Using High Traffic Web Sites or Specific Audience Web Sites:

If you run your banner on a high traffic commercial web site like cable televisions
CNN web site, you will pay $15 - $35 CPM. With CNN, you'll get a broader, but not
targeted audience.

2) Article Marketing. This method has long term results since your articles stay in
the articles directories for years. When you write an article about something that
relates to your business you can put a link to your website in the resource box at
the end. Use keywords in the title and throughout the article, submit it to article
directories and you create a back link to your business website.
3) Blogging. Creating a blog is one of the easiest things to do with free services that
you can use. Sign up, pick a template and write. If you have a business, write about
things that are relevant to that business. Use keywords so your posts will be found
in the search engines. Add fresh content to your blog at least once a week,
preferably more, especially in the beginning.
4) SEO-Search Engine Optimization. This method of advertising, or rather, marketing
is subtle but powerful. Choose less competitive keywords and place them in the title
of your website. Include them in the h1 and h2 tags and also the meta tags. Sprinkle
them throughout your website content and at the beginning and end of your website.
This will help you site rank higher in the search engines and be found easier with
those keywords you chose. Optimizing your website is one of the first things you need
to do when it is used for promoting your business.
[

5) Link Building. Creating quality links back to your website will help improve your
ranking in the search engines and raise your Google page rank. This advertising
method includes placing your link on as many highly ranked sites as possible. This
can include article directories, link directories and other people’s blog. Linking
all your sites to one another helps too. Get your link out there to as many places as
you can to help your site move up the search engine ranks.

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6) Forum Posting. Posting in forums helps to sell you and your name. When you post in
forums and give quality advice to people who need help you are creating a reputation
for yourself. People will begin to trust you and recognize your name, therefore they
may be willing to buy from you. Try to answer questions and give advice about things
that you are knowledgeable about so you do not sound fake or that you are making it
up. If you need some help do a little research first. Also the good thing about
posting in forums as an advertising method is that you can include a link to your
business website in the signature of your posts. See number four for how this can
help you.

7) Splash Screen
Capture the user’s attention. Used by especially large applications to notify the user
that the program is in the process of loading. Disappears when the application's main
window appears. Visually appealing, and may also have animations, graphics and sound.

8) Pop-up and Pop-behind Ads

Pop-Up
A pop-up ad is an ad that appears in its own window when the user opens or closes a
Web page
Pop-Behind
A pop-behind ad is a popular ad that is followed very quickly by a command that
returns focus to the original window
9) Email
Many businesses like to send e-mail messages to their Customers and Potential
customers about new or existing products. These business purchase e-mail addresses
which provides a wide variety of audiences; that is a complete customer database
Example: Yahoo.com sell email addresses to the companies for the purpose of
advertisements
Industry analysts have severely criticized this practice. Some companies have faced
legal action after sending out mass e-mailings.
The solution is to obtain customers approval before sending them any e-mail that
includes a marketing or promotional message
E-mail (Advantages)
a) Fast, cheap, Several million users can be reached directly
b) Can arrive if recipients are busy or away
c) Receivers can read e-mails at their convenience
d) Target a group of people that you know something about

10) Chat Rooms

Chat Rooms are best way for making Virtual meeting ground. It can be added to a business
site for free. It also allows advertisers to cycle through messages and target the
chatter again and again. Advertising can become more thematic and thus more effective
than banners. Chat Rooms are also used in one-to-one connection

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Advertising Terminologies
1) Ad views
The number of times users call up a page that has a banner on it during a
specific time period; known as impressions or page views
2) Click (click-through or ad click)
A count made each time a visitor clicks on an advertising banner to access
the advertiser’s Web site
3) CPM (cost per thousand impressions)
The fee an advertiser pays for each 1,000 times a page with a banner ad is
shown
4) Conversion rate
The percentage of visitors who actually make a purchase or perform other
desirable activities
5) Click-through rate (or ratio)
The percentage of visitors that are exposed to a banner ad and click on it
6) Hit
A request for data from a Web page or file
7) Unique visit
A count of the number of visitors to a site, regardless of how many pages
are viewed per visit

Advertising payment options

Pay-per-click
Rewards an affiliate for each click-through that is generated from a banner ad
hosted by the affiliate and is taken to the merchant site

Pay-per-sale
Also known as the commission-based model. Merchant pays affiliate a fee or
commission on a sale that results from a click-through. Example www.express.com
provides such services.

Pay-per-lead
Merchant pays affiliate a set fee for each click-through that results in action
Like make a purchase, Complete a form or take a survey

CPM (cost-per-thousand)
Requires the merchant to pay the affiliate a fee for every 1000 visitors that simply
view the merchant’s banner on the affiliate site. Its now Not used as often as the
other models because merchants prefer to pay for actions.

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Affiliate Programs
Affiliate Program? (Affiliate marketing program or associate Program)
A form of partnership in which a company pays affiliates (other companies or
individuals) for pre-specified actions taken by visitors who click-through from an
affiliate site to a merchant site.
The Merchant is the company that advertises on another company’s site. Merchant or
advertiser operates the program. It is a very good marketing tool for merchant.
The Affiliate the company hosting the advertising in return for a reward based on
predetermined terms. Affiliate or publisher participates in the program
Affiliates act as an extended sales force and it is a revenue source for affiliate

Advantages of Affiliate Program

The best advantages to merchant using affiliate program is to tie marketing effort
directly to sales and they Pay only for results that is when sales complete through
their affiliates. Similarly advantages to affiliate is additional source of revenue for
affiliate who also sells products/services

How an Affiliate Program Works?

Merchant places banner on affiliate’s Web site. When a person clicks through to the
merchant’s site via the advertisement on the affiliate’s site and makes a purchase, a
commission on the sale is typically awarded to the affiliate. A “Win-win" situation for
both merchant and their affiliates.

Examples of Affiliate programs

Online Affiliate Marketing Programs, thousands of diverse e-businesses operate affiliate
programs like Amazon.com, Dell, Barnes and Nobles, 1-800-FLOWERS.COM

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Chapter 6: Online Auctions, Virtual Communities, and Web Portals

Online Auction
The online auction business model is one in which participants bid for products and
services over the Internet
OR
A market mechanism in which an object, service, or set of objects, is exchanged on
the basis of bids submitted by participants. Auctions provide a specific set of rules
that will govern the sale or purchase of an object to the submitter of the most
favorable bid

Origins of Auctions
In an auction the Seller offers an item for sale, but does not establish price
 Bidders:
o The Potential buyers who participate in auction
 Bids:
o The Prices bidders are willing to pay for an item
 Shill bidders:
o A shill is a person who is paid to help another person or organization to
sell goods or services
o It is the act of bidding on your own auction against other bidders in
order to raise the price at which your item will eventually sell

Single Unit vs. multiple Unit

Single Unit
Only one item is offered for sale, Can be one item or can be similar items as whole
for bidding. For example: A seller is auctioning a coffee mug.
Bid Bidder Time
$3 Mr. Ali 8:30 AM
$5 Mr. Asad 9:45 AM
$10 Mrs. Sahil 11:59 AM  (winner and pay $10)

Multiple Unit
More than one of an item is offered for sale, Out of the whole similar items, you can
bid on individual item. For example: A seller is auctioning five identical coffee
mugs
Bid Bidder Time Quantity
$3 Mr. Ali 8:30 AM 4
$5 Mr. Asad 9:45 AM 1
$10 Mrs. Sahil 9:59 AM 3
$12 Mr. Wasim 10:30 AM 1  winner & pay $12
$14 Mr. Ali 11:59 AM 4  winner & pay $14

Types of Auction:
1) English Auctions
Usually an item is offered for sale. Bidding starts with a low price, and is raised
incrementally as progressively higher bids are solicited, until either the auction is
closed or no higher bids are received. Usually an Open auction because all Bids are
publicly announced. The price at which an auction begins is term as Minimum bid and
Minimum acceptable price is called Reserve price.

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Example of English Auction

A seller may have a used computer up for auction. He may set the reserve price at
$100 and may start bidding at $50. He decided to raise bids in $5 increments and to
allow the auction to go on for 14 days. Bidder A bids $100, Bidder B bids $105, and
Bidder C bids $150. Bidder A then places a second bid for $160 followed by a second
bid from Bidder B for $175. When the bidding ends fourteen days later, Bidder B is
the winner and he pays $175 for the used computer.

2) Yankee auctions
An English auction of multiple identical items in which the winning bidders pay the
prices that they have bid. This means more than one of an item is offered for sale.
Yankee auction example
Write same example as above (See Multiple Unit Example)

3) Dutch Auctions
Also called descending-price auctions. Form of open auction in which bidding starts
at a high price and drops until bidder accepts price. A seller offers up an item for
bid at a very high price. The initial price is much higher than the item's value
usually and no seller expects to get that price for the item
Often better for the seller. Good for moving large numbers of commodity items quickly
Example of Dutch auction
If a business is auctioning off a used company car, the bidding may start at
$15,000. The bidders will wait as the price is lowered to $14,000 to $13,000 to
$12,000 to $11,000 and to $10,000. When the bidding reaches $10,000, Bidder A
decided to accept that price and because he is the first bidder to do so, he is
considered the winner and has to pay $10,000 for the automobile.

4) Sealed-bid auctions
All bidders submit their sealed (secret) bids. When the bidding period is over, all
the bids are opened. The high bidder wins and pays what he bid. Example
Bid Bidder Time
$3 Mr. Ali 8:30 AM
$5 Mr. Asad 9:45 AM
$10 Mrs. Sahil 11:59 AM  (winner and pay $10)

5) Second-price sealed-bid auction

Highest bidder is awarded the item at the price bid by the second-highest bidder
Example
Bid Bidder Time
$3 Mr. Ali 8:30 AM
$5 Mr. Asad 9:45 AM
$10 Mrs. Sahil 11:59 AM  (winner and pay $5)

Note: in case of multiple unit, each winners all pay the highest losing bid or lowest
winning bid

6) Double auction
Buyers and sellers each submit combined price-quantity bids to an auctioneer.
A double auction is a process of buying and selling goods when potential buyers
submit their bids and potential sellers simultaneously submit their ask prices to an
auctioneer, and then an auctioneer chooses some price p that clears the market: all

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the sellers who asked less than p sell and all buyers who bid more than p buy at this
price p.

7) Reverse (Seller-Bid) Auctions

Multiple sellers submit price bids to an auctioneer who represents a single buyer.
Bids are for a given amount of a specific item that the buyer wants to purchase.
Buyer can accept lowest offer or the offer that best matches buyer’s criteria. This
refers to a one-buyer, many-seller auction.
Example: Construction related projects by the Ministries in Afghanistan

Three categories of auction Web sites

a) General consumer auctions
Largest number of transactions in this category. Mostly occurs on general
consumer auction sites. Most common format used on www.eBay.com, a computerized
version of an English auction.

b) Specialty consumer auctions

Specialized Web auction sites that meet the need of special interest market
segments. Specialty consumer auction sites are www.GolfClubExchange.com,
www.Cigarbid.com, and www.Winebid.com

c) Business-to-business auctions
Reverse bid where Buyer can accept lowest offer or the offer that best matches
buyer’s criteria. This refers to a one-buyer, many-seller auction. For example
www.Priceline.com

Virtual Communities
Gathering place for people and businesses that does not have physical existence
Exist on the Internet in various forms like Usenet newsgroups, Chat rooms (Yahoo),
Web sites (facebook, myspace). Offer people a way to connect with each other and
discuss common issues and interests.

Virtual learning community

One form of virtual community. Can help companies, their customers, and their
suppliers plan, collaborate, and transact business. For example Google Answers, Yahoo
Answers, Ask.com which gives people a place to ask questions then answered by an
expert for a fee and sometimes free as well.

Web Portal
A web portal or links page is a web site that functions as a point of access to
information in the World Wide Web. Can offer services such as e-mail, news, stock
prices, information, databases and entertainment.
Advertising supported Revenue Model is mostly used in web portals; High visitor
counts can yield high advertising rates. They also add sticky features such as chat
rooms, e-mail, and calendar functions.

Web Portal Classification

Horizontal portal cover many areas and is used as a platform to several companies
or manufacturers or distributors. Example: www.yahoo.com

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Vertical portal, which are focused on one functional area and is a specialized
entry point to a specific market or interest. like www.autobytel.com

Internal Web Portals

Run on intranets and Can save significant amounts of money by replacing the printing
and distribution of paper memos, newsletters, and other correspondence
Can become a good way of creating virtual community among employees. Example. Kardan
Attendance

Chapter 7: Web Server, Hardware & Software

1. Structure of the Internet
Network of interconnected host computers is called internet. Each host has unique
address called IP address. IP address is generally a unique numeric address assigned to
each and every computers on the internet like 192.168.1.19

Packet Switching
Each host computer Communicate by sending packets of data across network. Packets are
small chucks (pieces) of data having the following information
7) Source IP address
8) Destination IP address
9) Sequencing information
10) Error-control information
11) Data

Router
Moves packets across Internet, Packets not sent directly could pass through many
routers. If one part of Internet fails, rest can still function

2. Hardware
– Server
– Communications Media
Server
A powerful computer that provide services to all the computers on the network.
A server fulfills all the requests of client computers. A server can be dedicated server
or General purpose server.

Types of Servers
Web servers (A server that are hosting websites), e-mail servers (A server
use for sending and receiving electronic mails), database servers (A server that
store related data of an organization in a very organized form) and file servers

A general purpose server are those servers that resides many types of servers in
one computer that is the same machine can be a Web Server, Database Server, Email
Server etc. While a dedicated server is normally dedicated to a special task like
database server that is only responsible for database.

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Communications Media
It is a hardware that connects digital equipment together.

Bandwidth
Measure of how much data a communication media can be transferred per unit time.
The more the bandwidth the more data can be transferred. Bandwidth is normally
measured in bits per second (bps), kilobits per second (Kbps) or megabits per
second (Mbps)

Copper wire
Widely used, widely available, reliable and easy to install. Not suitable for high
speed data transmission. Copper wire normally need Modem, A device that convert
Digital Signals to Analog Signals (Modulation) and convert Analog Signals to
Digitals Signals (Demodulation).

Fiber-optic cable
Thinner and lighter than copper and higher bandwidth. Quite expensive and are
difficult to install. The data that are transmitting in Fiber-Optic Cables are in
the form of light and thus need Optical Modem for Converting Light in to Digital
Signals and Digital Signal back to Light. Optical Modem comes up with Opto-Chip
which now have to capability to use the smallest particle of light that is Photon
in order to increase bandwidth.

Signal strength
Normally decreases over distance. In order to stable the signal strength a special
hardware called repeater is used.
Repeaters
Retransmit signals across copper wire or fiber-optic cable when they become
weak
3. Software
– Application service providers (ASPs)
– Operating systems
– Databases

Application service providers (ASPs)

These are remote software which is normally access through internet using web
browser. ASPs provide customized business software applications over Internet. ASPs
develop commonly used applications and provide customization. The software is
normally installed in the server at ASPs offices and businesses or individuals are
using browsers to access that software through internet. Applications maintained
and updated by ASP. ASPs are able to provide applications with less development
time. Examples: www.eproject.com which provides project management services.
Another examples are Web Mails service like Yahoo Mail, Hotmail, Gmail etc which
can be accessed through internet using browsers with actually installing any
mailing software.

Operating system
Software use to operate the computer or hardware. Also called system software and
are normally developed by the manufacturer of computer hardware.
Different types of operating systems are available in the market which includes
Multi-user (capable of managing multiple users at the same time like Email server
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of Yahoo are normally access by millions of users at the same time), multi-
processing (capable of managing multiple processers installed at the same time),
multi-tasking (capable of managing multiple tasks at the same time like listening
to a song while preparing E-Commerce presentation).
Major Operating systems are Unix, Linux, Macintosh and Windows. Linux is very
popular for Web hosting and is Open source that is the Source code is readily
available
Database
Database is an organized collection of logically related data. Organized collection
of data helps the users to perform various operations like insertion, deletion,
update easily. Related data means all the data stored must be related to one
organization.
A database need Database management system (DBMS) which can be define as “ A
software that can manage the data, use for the creation of the database, storing
the data in the database, performing operations on the database, taking backups,
restoration, assigning user rights etc. ”
Well known DBMS includes MySQL, MS SQL Server, Oracle, MS Access.
4. Domain names
Domain Names are the real estate of the Internet like http://www.kardan.edu.af which
points to a disk space on the web server.
A typical Domain has three parts (www.yahoo.com)
1. Host name – usually “www”
2. Domain name – name of company or key word or phrase “Yahoo”
3. Top-level domain (TLD) – describes type of organization that owns the domain
name, com and org are widely used examples
4. An optional Country code TLD (CCTLD) can also be added with the domain name
in order to make it country specific like www.mof.gov.af

First, get a domain name then you are free to assign sub names Example:
www.weather.yahoo.com belongs to www.yahoo.com.

Domain Names are regulated by global non-profit bodies that is Internet Corporation
for Assigned Names and Numbers (ICANN) which Regulates domain names and IP
addresses. www.nwtworksolutions.com and register.com allow domain name registration

Typical Top-Level Domains are

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Typical CCTLD are

Chapter 8: Payment System for Electronic Commerce

E-payments
The financial exchange that takes place online between buyers and sellers.
Or
“E-payment can be defined as the method of effecting payments from one end to another end through the medium of
the computer without manual intervention beyond inputting the payment data.”

Characteristics of Cash
12) Real time payment
Also called Instant time payment
13) Authentication
Authenticated by third party and people just trust on third party
14) Anonymity
No identity on the cash, No name but on check you have your name
15) Transferability
Can easily be transferred to another person
16) Diversability
It can be used for anything, that is you can buy any kind of things
17) Independence
Can be divided into independent unit and all units can be used independently
Limitation in traditional payment system
18) Not adequate for real time payment interaction.
19) The parties that are involve in the transaction I.e. buyers and sellers must
physically exist.
20) Sufficient delay in the payment process.
21) Lack of security that is providing the card/payment/account details through mail or
telephone is very risky.
22) Lack of coverage I.e. credit card only work with signed up merchant and not
generally support individual to individual.
E-Mint
These are the Companies enable merchants to accept E-payments online. These companies
have established business relationships with financial institutions that will accept
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online credit-card payments for merchant clients. CyberCash and iCat, Trintech. E-
Payments like E-Cash, Cyber coin, digit cash, cyber dollar etc are offered by these
companies. E-Mint must be trust worthy and merchant who have the sites must pay them
(Amazon.com)

E-payments on the Internet

1. E-Credit Card
In Credit-Card Transactions, a merchant must have a merchant account with a bank.
Transactions are processed by banks or third-party services.
Seek to extend the functionality of existing credit cards for use as online shopping
payment tools
The players
23) The cardholder: a consumer or a corporate purchaser who uses credit cards to pay
merchants.
24) The merchant: the entity that accepts credit cards and offers goods or services in
exchange for payments.
25) The card issuer: a financial institution (usually a bank) that establishes accounts
for cardholders and issues credit cards.
26) The acquirers: a financial institution tat establishes an account for merchants and
acquires the vouchers for authorized sales slips.
27) The card brand: Visa and MasterCard

E-Credit Card (How it works)

28) The consumer access the merchant server or web site and the merchant website
provides goods to the consumer.
29) The consumer fill out the form containing information such as credit card number ,
item selected , shipping information, billing and price information.
30) The information is sent to cybercash for validation, the cyberRegister validate the
Credit Card number by offering the number to the appropriate financial institution.
31) The cyberRegister accept the Credit Card an interact with bank for the fund to
transfer from consumer bank to merchant bank.

For Diagram refer “E_commerce ( E-Credit Card).ppt”

2. E-cash
Digital cash is like having a virtual savings account where charges are made for ongoing
purchases, particularly micropayments, small payments from $0.01 to $10 that can be used
to pay for access to digital information such as newspaper articles or software, this is
very useful for high risk services such as adult, gaming, software download or any kind
of pay per view or pay per minute type product.

Uses of E-Cash:
1. One-click micro-payments over the Internet:
A visitor to a site clicks on a link to buy access to an article for a nickel; one click
and he gets to read.

2. Anonymous payments on the Internet:

People are increasingly concerned about being tracked through their purchases on the
web, and worry about giving out their credit card number on sites they don't know.

3. Payments from non-traditional devices:

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The user would keep his wallet in a device like a palmtop, or a smart phone, and make
payment wirelessly by pointing it at a vending machine or entering a code into the phone
to charge movie tickets from the car on the way to the theater.

E-cash (How it works)

Obtaining E-cash
32) The consumer requests his bank to transfer money to E-mint to obtain E-cash.
33) The customer bank transfer money from the customer accounts to E-Mint.
34) The E-mint sends E-cash to the consumer, who saves it on the hard drive.

Purchasing with E-cash

35) The customer select goods and transfer E-cash to the merchant.
36) The merchant provide/deliver goods to the consumer.
Redeeming cash by the merchant.
37) The merchant transfers e-cash to the e-mint
38) The e-mint transfer money to the merchant bank for crediting the merchant account
39) The merchant bank send message to the merchant

For Diagram refer “E_commerce ( E-Cash) works.ppt”

3. E-Check
Seek to extend the functionality of existing checking accounts for use as online
shopping payment tools

For Diagram refer “E_commerce (how E-Check Works).ppt”

4. Stored value card

An IC card that stores the money values in numbers. Normally Prepaid card like debit
card. The only difference between stored value card and debit card is that the debit
card is issued in the name of account holder but stored value card cannot. It can be
anonymous or onymous. The anonymous card can be transfer from one person to another and
the onymous can not transfer from one person to another. CyberCash provides the store
value card called “cybercoin”

Stored value card is used if only a small monetary amount is involved. It minimizes the
transaction - processing cost by carrying a monetary value directly in the card. It’s
relatively inexpensive because the cost of production is very low upto $0.25 per card
and inexpensive equipments are used to change the contents of magnetic strip. It’s
normally very hard for a customer to control utility expenses using stored value card.

5. Smart Card
An electronic card containing an embedded microchip that enables predefined operations
or the addition, deletion, or manipulation of information on the card

Stored value card is used if only a small monetary amount is involved and adding
security, reliability and reusability to a card, A Smart Card is used. It is relatively
expensive because the cost of production ranges 1 to $30 per card and expensive
equipments are used to reprogrammed the contents of the chip. Customer can easily
control utility expenses by using Small program install on the card.
The security is very stronger by using two level of authentication first it check card
holder finger print and then it ask for the pin code as well.

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Types of Smart Cards

Contact card
A smart card containing a small gold plate on the face that when inserted in a
smart card reader makes contact and passes data to and from the embedded microchip

Contactless card
A smart card with an embedded antenna, by means of which data and applications are
passed to and from a card reader unit or other device without contact between the
card and the card reader

Applications of Smart Card

• e-purse or e-wallet
Smart card application that loads money from a card holder’s bank account
onto the smart card’s chip
• E-Identification
Because they have the capability to store personal information, including
pictures, digital signatures, and private security keys, smart cards are
being used in a variety of identification, access control, and authentication
applications
• Health Care
Speeding up the hospital or emergency room admissions process
• Ticketless travel
• Store loyalty programs
• Personal profiles
• Licenses

6. Debit card
While credit card is a way to pay later but debit card is a way to pay now. Customer can
also withdraw from their account through ATM. It is often easier to get than a credit
card.

Advantages of Debit Card

40) You don't have to get your check approved or show identification at stores.
41) You don't have to carry cash, a checkbook or traveler's checks.
42) Debit cards are more readily accepted than checks, especially when you are
traveling.
43) You don't pay interest charges.
Disadvantages of a debit card
44) You need enough money in your bank account to cover each purchase.
45) You may have bank fees—such as monthly service charges, per-transaction costs or
penalties—for dropping below your required minimum balance.
46) You have less protection if your debit card is lost or misused than with a credit
card.

7. Micropayments
Merchant must pay a fee for each credit card transaction, but some time the customer
purchase an inexpensive items like music, picture, video etc I.e. the cost of item is

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lower than standard transaction fee. Internet payments for items costing from a few
cents to approximately $10 are called micropayments. Micropayments generally do not
exceed $10
Micropayment is attractive where:
 in the sale of goods and services of less than $10
 in the sale of higher-priced goods and services to those without access to
credit cards
 Companies offer micropayment systems include iPin, eChange, Qpass, 1ClickBrands,
and PayPal.com.
Example:
Millicent provides electronic currency that is very similar to traditional cash.
Customers must first purchase an InternetCash card from stores such as Circle K.
Customers then go online and activate their cards by entering a 20-digit code and
creating a PIN. Once their card is activated, customers can pay for purchases using
the InternetCash card at any site accepting them.

Customer they buy products receive monthly bills include description of all purchases
made during the month. CyberCash created CyberCoin for micropayments.

8. Peer to Peer Payment

Payments not involving a bank that is payments “directly” between payor and payee. A
classic example is cash. Other examples are email payments, transfers between digital
wallets and purchasing online content micropayments

Paypal is one of the payment processor offering peer to peer payment and having more
than 140,000,000 accounts and are commonly use as Bookkeeping & accounting system. Allow
online monetary transfers between consumers.

eCash allows the transfer of digital cash via e-mail between two people who have
accounts at eCash-enabled banks

PayPal offers X payments

Allows user to send money to anyone with an e-mail address
The transaction begins processing immediately after it is initiated, reducing the
risk of fraud
BillPoint
Allows buyers to submit electronic payments to sellers’ checking accounts

Tradesafe.com (larger transactions, B2B)

E-wallets
• An electronic wallet serves a function similar to a physical wallet, also:
• Holds credit cards, electronic cash, owner identification, and owner contact
information
• Provides owner contact information at an electronic commerce site’s checkout
counter
• Keep track of your billing and shipping information so that it can be entered
with one click at participating merchants’ sites
• Makes shopping easier and more efficient
• Eliminates need to repeatedly enter identifying information into forms
to purchase

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• Amazon.com one of the first online merchants to eliminate repeat form-filling
for purchases
• Credit-card companies offer a variety of e-wallets (Visa e-wallets )
• Electronic wallets are particularly useful and save a lot of time to fill out
electronic checkout counter form.
• Electronic wallets can enter required information into checkout forms
automatically.
• MasterCard offers its own electronic wallet, called the MasterCard e-wallet.
• Electronic wallets fall into two categories based on where they are stored:
• Server-side electronic wallet
• Client-side electronic wallet

Types of Electronic Wallets

Agile Wallet (Server side E-Wallet)

Developed by CyberCash. Allows customers to enter credit card and identifying
information once, stored on a central server. Information pops up in supported
merchants’ payment pages, allowing one-click payment

eWallet (Client Side E-Wallet)

Developed by Launchpad Technologies. Free wallet software that stores credit card
and personal information on users’ computer, not on a central server; info is
dragged into payment form from eWallet. Information is encrypted and password
protected. Works with Netscape and Internet Explorer

Chapter 9: Electronic commerce Security

Security
Security involves protecting data so it is not misused or lost.

Internet security
Consumers entering highly confidential information, Number of security attacks
increasing because computer systems continually accessible

Security requirements
Authentication
A method to verify the sender and receiver identity
Encryption
A process of making messages unreadable except by those who are authentic
Integrity
Ensuring that information will not be accidentally or maliciously altered or
destroyed during transmission
Privacy
Information not read by third party
Non repudiation
Merchant saying no after payment submitted by customer and Customer saying no about
order submission after receiving product

Basic Terminologies
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Cryptography
The art of writing in secrete character, used to secure information
Various organizations have patents and standards for cryptography. They include the
International Organization for Standardization (ISO), the International Electrotechnical
Commission (IEC), the American National Standards Institute (ANSI), the United States
Federal Information Processing Standards (FIPS), and the Internet Engineering Steering
Group (IESG) of the Internet Engineering Task Force (IETF), as well as private
interests. A Dutch company, DigiCash, owns most of the digital cash patents
Cryptanalysis
is the use of mathematics and statistics to crack cryptographic techniques as employed
by a cryptanalyst
Cryptology:
The area of mathematics and statistics that studies cryptography and cryptanalysis.

Ancient Cryptosystems
Substitution (PRESTON------- QSFTUPO)
Every occurrence of a given letter is replaced by a different letter
Transposition (PRESTON------PETN RSO)
Shifts the ordering of letters

Modern cryptosystems
Transform data by using a key. Key is a string of digits that acts as a password.
Digital, based on bits not the alphabet. Key is having a length called key length.
The more the key length the more the secure the system will be.
Plain-text or Original Text
The original message or unencrypted data
Cipher or Encryption
An algorithm that is applied on the plain text to get the cipher text.
Cipher-text or Encrypted Text
A text that is encrypted, converted into a form which is not readable
Decipher or Decryption
An algorithm that is applied on the encrypted text to get the plain text.

Security Schemes
1. Secret key cryptography
Also called Symmetric key cryptography or Private Key cryptography. The same key must
be used for encryption (sender) and for the decryption (Receiver). The same key must be
share among the two parties. Normally used in B2B transactions.

Diagram Required

Problem with secret-key cryptography is the sharing of the key. Key distribution centers
used to reduce these problems who generates session key and sends it to sender and
receiver encrypted with the unique key
Example of Private key Cryptography includes DES, Blowfish, IDEA, LOKI and RC4

Julius Caesar algorithm

Replace each letter by an integer from 0 t0 25 based on its position in the alphabet

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Do encryption using function f (p)=(p+3)mod 26 {each letter is shifted forward three
position}
Do decryption using function f-1 (p)=(p -3)mod 26 {each letter is shifted back three
position with the first three letters sent to the last three position}

2. Public Key Cryptography

Also called Asymmetric key cryptography. It uses two inversely related keys
‾ Public key
‾ Private Key

If public key encrypts only private can decrypt the message

If Private key encrypts only Public Key can decrypt the message
Each party has both a public and a private key
If Encrypted or decrypted with private key, Proves identity (Authentication) while
maintaining security.
Examples of Public key Cryptography includes RSA public key algorithm
www.rsasecurity.com, AES, Diffie-Hellman, ElGama

Diagram Required

RSA Algorithm
Sender is doing encryption using C=Me mod(n) and receiver is doing decryption using M=Cd
mod(n)
Where d is private key, e is public key, M is the original message, C is cipher text and
n is P*Q

3. Digital signature
Used for authentication of senders by using public key cryptography in reverse
Sender
‾ Run the encrypted message through hashing function to get message digest
‾ Encrypt the message digest using sender private key which creates digital signature
‾ Encrypt the message through receiver public key
‾ Send encrypted message and digital signature and hashing function to the receiver
Receiver
‾ Decrypt the message using receiver private key
‾ Decrypt the message digest using sender public key
‾ Run the hashing function to get the message and compare
Diagram Required

4. Key agreement protocol

Process by which parties can exchange keys. Use public-key cryptography to transmit
symmetric keys
Digital envelope
Encrypt the message using symmetric key. Symmetric key is then encrypted with the
public key. Then send the encrypted symmetric key and the encrypted message which
is called digital envelope. The receiver will use his private key to decrypt the
symmetric key and then use the symmetric key to decrypt the message

Security Protocol

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Secure Sockets Layer(SSL)
Developed by Netscape Communications. Used to secure communication on the internet. Does
not protect once stored on receivers server. Built into many web browsers like Netscape,
Internet Explorer. It operates between Internet TCP/IP.
A sender message is passed to a socket that interprets the message in TCP/IP. TCP/IP at
the receiving end then passes the message to the socket at the receiver end which
converts the message back into its original form.

Secure Electronic Transaction™ (SET™)

Designed to protect e-commerce payments. SET Certifies customer, merchant and merchant’s
bank by using Digital Certificate
Requirements
Merchants must have a digital certificate and SET software
Customers must have a digital certificate and digital wallet
How it works
Merchant SET software sends the order information and the merchants digital certificate
to the customer digital wallet, thus activating the wallet software. The customer
selects the credit card to be used for the transaction. The credit card and order
information are encrypted using merchants bank public key and sent to the merchant along
with the customer digital certificate. The merchant then forwards the information to the
merchant’s bank to process the payment. Only the merchant's bank can decrypt the
message. The merchant's bank sends the amount of purchase and its own certificate to the
customer bank for approval. The consumer bank sends authorization back to merchant's
bank which sends credit card authorization to the merchant. And the merchant sends a
confirmation order to the customer.

Compile by Irfan Khan