Chapter 2: Internet Marketing Environment

2.1. Basic Forms of Virtual Business

2.1.1 Business –to- consumer (B2C) electronic commerce

It involves business organizations that sell products directly to consumers. Examples include
www.amazon.com, www.ediets.com, www.pets.com etc. Firms reach individual consumers
through the following business-to-consumer models:
I. Portal: They offer users powerful web search tools as well as integrated package of content
and service such as news, e-mail, instant messaging, calendars, shopping, music downloads,
video, business information, all in one place. Portals do not sell anything directly and in that
sense they can present themselves as unbiased. They generate revenue primarily by charging
advertisers for advertising placement, collecting referral fees for steering customers to other
sites, and charging for premium services. Portals fall into two categories:
 Horizontal/General portals: They define their markets space to include all users of the
internet. Good examples in this case are www.yahoocom, www.americanonline.com,
www.msn.com , www.google.com etc. They seek to be user’s home base.
 Verticals/specialized: They focus around a particular subject matter or subject market or
market segment. E.g. www.iboat.com, www.sailnet.com etc.
II. Electronic Tailer: It is online retail store where time-starved customers can shop at any hour
of the day or night without leaving home or office. The different type of electronic tailers are
discussed as under:
 Virtual Merchant: Online version of retail store, where customers can shop at any hour
of the day or night. A very good example is www.amazon.com.
 Click-and-Mortar: online distribution channel for company that also has physical
stores. E.g. www.walmart.com.
 Catalog Merchant: online version of direct mail catalog. E.g. www.landsend.com,
www.llbean.com
 Manufacturer Direct: Online sales made directly by the manufacturer itself. E.g.
www.dell.com and www.compaq.com.

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III. Content Providers: They are information and entertainment companies that provide digital
content over the Web. A way of internet service provision that can be defined broadly to
include all forms of intellectual property. They distribute information content such as digital
news, music, photo, video, and art work over the web. They make money by charging
subscribers a subscription fee. Some make money by selling advertising spaces. It is the
second largest source of B2C e-commerce revenue in 2002. Examples are
www.sportsline.com, www.cnn.com, www.espn.com, etc.

IV. Transaction Broker: Sites that process transactions for consumers normally handled in
person, by phone, or mail. The largest industries using this model are financial services,
travel services, and job placement services. The online transaction broker’s primary value
propositions are saving of money and time. Online stock brokers receive commissions that
are considerably less than traditional brokers, with many offering substantial deals.
Transaction brokers make money each time a transaction occurs. Examples include
www.ethiojobs.net, www.etrade.com etc.

V. Market Creator: It builds a digital environment where buyers and sellers can meet, display
products search for products and establish price for products. E.g. www.priceline.com,
www.ebay.com, www.amazon.com etc.

VI. Service Provider: They are companies that make money by selling users a service, rather
than a tangible product. Examples are www.myconsulting.com, www.lawinfo.com,
www.cfo.com etc.

VII. Community Providers: They are sites that create a digital online environment where people
with similar interests can transact (buy and sell goods), communicate with like minded
people, receive interest related information, and even play out fantasies by adopting online
personalities. It rely on a hybrid revenue model that includes subscription fees, sales
revenues, transaction fee, affiliate fees and advertising fees from other firms who are
attracted by a tightly focused audience.

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 E.g.www.village.com,www.blackplanet.com,www.epinions.com, www.oxygen.com, and
www.about.com etc.

2.1.2 Business –to- business (B2B) electronic commerce

It is about a commercial transaction between businesses that focus on selling to other businesses.
It includes the following:
1) Marketplace/Exchange (B2B Hub): It is digital/electronic market place where suppliers
and commercial purchasers can conduct transaction. Business-to-Business Hubs make it
possible to gather information, check out suppliers, collect prices, and keep up-to-date on
the latest happening all in one place. Sellers, on the other hand, benefit from expanded
access to buyers. They make transaction and inventory carrying cost lower. B2B hubs rely
on transaction fee for their existence. They can be of two type:
 Vertical market places that serve specific industries, for example. www.e-steel.com
 Horizontal marketplaces that sell specific products to a wide range of companies.
E.g, www.tradeout.com etc.
2) Electronic Distributor: They are companies that supply products and services directly to
individual businesses. Where as Business-to-business hubs pull together many businesses,
making it possible for them to do business with other companies, electronic distributors are
set up by one company seeking to serve many customers. With electronic distributors, the
more products and services a company makes available on its site, the more attractive that
site to potential customers. E.g. www.grainger.com
3) Business-to-Business Service providers: They sell services to other firms. Traditional
business-to-business service providers offer online equivalents to common business
services such as accounting, financial services, human resource management (HRM),
printing, and so on. The other category may include www.salesforce.com and
www.corio.com which rent internet-based software applications to businesses and collect
rental fee.
4) Match makers: Companies that make money by linking other companies and taking cut
of any business that occur via a transaction or usage fee are called matchmakers. For
example, www.iship.com compares prices among shipping companies. Once a company

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 has the cheapest shipper for its particular package, it pays www.iship.com a fee in order to
get service the shipments.
5) Infomediary: It is a company that would act as custodian, agents, and broker of customer
information marketing it to businesses on consumer’s behalf while protecting their privacy
at the same time. They can be classified into two:
 Audience Brokers: they capture information about customers and use it to help
advertisers find the most appropriate audience. The source of information is sales of
information. E.g. www.doubleclick.com
 Lead Generators: They gather customers data from which they then create customer
profile or reference. They then direct vendors of products and services that fit the
profiles of the customer. The source of revenue here is referral fee.
2.3. Business Models in Emerging E-commerce areas
2.3.1. Consumer –to- Consumer (C2C) Business Models
Consumer-to-consumer (C2C) Business Models: They provide a way for consumers to sell to
each other, with help of an online business. For example, www.half.com enables consumers to
sell off unwanted books, movies, etc to other consumers. www.eBay.com is also a person-to-
person online trading community with more than 23 million registered users.

2.3.2. Peer-to-Peer(P2P) Business Models

Peer-to-Peer (P2P) Business Models: They link users, enabling them to share files and
computer resources without a common server. For example, www.groovenetwork.com help its
workers share files, calendars, work schedules, and plans without burdening central servers.
2.3.3. M-Commerce Business Models
M-commerce (mobile commerce) is the buying and selling of goods and services through
wireless technology-i.e., handheld devices such as cellular telephones and personal digital
assistants (PDAs). Japan is seen as a global leader in m-commerce.

As content delivery over wireless devices becomes faster, more secure, and scalable, some
believe that m-commerce will surpass wire line e-commerce as the method of choice for digital

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commerce transactions. This may well be true for the Asia-Pacific where there are more mobile
phone users than there are Internet users.

Industries affected by m-commerce include:

● Financial services, including mobile banking (when customers use their handheld devices to
access their accounts and pay their bills), as well as brokerage services (in which stock quotes
can be displayed and trading conducted from the same handheld device);

● Telecommunications, in which service changes, bill payment and account reviews can all be
conducted from the same handheld device;

● Service/retail, as consumers are given the ability to place and pay for orders on-the-fly; and

● Information services, which include the delivery of entertainment, financial news, sports
figures and traffic updates to a single mobile device

2.4. Internet Demographics and Villages

2.4.1. Internet Demographics
There has never been a better time to learn more about your online client base (Internet
Demographics) and how to do a better job of reaching them. Your customers’ age groups,
spending habits, engagement with your site and plenty more can all be tracked with the right set
of analytics. It wasn’t that long ago when businesses would run an ad in the newspaper or on TV
and have no idea how many people directly responded by cutting it out of a newspaper or calling
a number they saw on TV. Basically, there was a lot less information out there about how many
people you were actually reaching. That has changed dramatically.
Today, you can understand your customers better than ever, if you know how to pick the right
tools. Here are a few of the best.
GoogleAnalytics
Undoubtedly the most well known system, Google Analytics will tell you how many people are

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visiting your site, where they come from and how they found you. You’ll also learn how long the
average visitor stayed on your website and how many purchased your product or service
(converted). If an ad campaign is underperforming, you’ll know it in almost real time, allowing
you to tweak and tailor your campaign to get better results.

MintAnalytics
Mint analytics will tell you what you need to know with style. The beautiful interface is easy to
read and harbors a wealth of valuable information. You’ll learn how many people are visiting
your site, how they are finding you and the most powerful referral sources. Mint will also show
you what keyword se

Generally speaking, the demographics of the Internet are a marketer’s dream. Internet users,
considered as a group, have greater buying power and could perhaps be considered as a
population group skewed towards the middle-classes.
 Typical user is young, highly educated, urban or suburban, and affluent.
• Demographics are shifting; there is decreasing difference in Internet purchasing habits among
groups.
 Online market is changing as customers become more familiar with online shopping.
2.4.2. Internet Village
The Internet is a world wide network of interconnected computer systems. It originated in a
family of separate networks primarily ( for example) connecting researchers in Ethiopian
universities and other higher educational and research institutions. However, it has grown to
become a genuinely global network. It now includes many commercial organizations, but also
schools of all levels, and many private individuals. At this stage, it is practically accessible, with
modest costs, to any individual or organization, anywhere in the world, possessing a suitable
computer and a standard telephone line. Internet is, so, bringing peoples and/or organizations
into one/common village.

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2.5. The Global Village

The Internet is defined as the worldwide interconnection of individual networks operated by

government, industry, academia, and private parties. Originally the Internet served to
interconnect laboratories engaged in government research, and since 1994 it has been expanded
to serve millions of users and a multitude of purposes in all parts of the world.

In a matter of very few years, the Internet consolidated itself as a very powerful platform that
has changed forever the way we do business, and the way we communicate. The Internet, as no
other communication medium, has given an International or, if you prefer, a "Globalized"
dimension to the world. Internet has become the Universal source of information for millions of
people, at home, at school, and at work.

Internet is changing all the time. Two things, in our opinion, have marked it's evolution recently:
the social web and mobile technology. These two innovations have changed the way people use
the Internet. In the social web people have found a new way to communicate. Since its creation
in 2004, Facebook has grown into a worldwide network of over 1,000 million subscribers.
Mobile technology, on the other hand, has made possible a much greater reach of the Internet,
increasing the number of Internet users everywhere.

The Internet continues to be the most democratic of all the mass media. With a very low
investment, anyone can have a web page in Internet. This way, almost any business can reach a
very large market, directly, fast and economically, no matter the size or location of the business.
With a very low investment, almost anybody that can read and write can have access and a
presence in the World Wide Web. Blogging has consolidated the social media and the people
everywhere are expressing and publishing their ideas and opinions like never before.

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The internet has changed the world. It has greatly impacted communication virtually reducing
the world to a global village by enabling individuals to communicate easily and quickly. The
internet has also changed the conventional ways of buying and selling and has transformed
commercial activities. The term “e-commerce” simply put is the use of the internet to conclude
contracts through electronic means. In Europe, statistics show that most countries have a
growing internal e-commerce market with more and more e-shoppers using the internet to
purchase goods and services daily. Countries like Norway, Germany, France and the United
Kingdom (just to mention a few) have the highest percentage of individuals between the ages of
16-74 that use the internet to order goods and services. While national e-commerce markets
flourish, such an evident contrast exists with regards to the growth of cross border consumer e-
commerce. Cross border e-commerce has an untapped potential that could empower not only the
economies of member states, but consumers as well by providing them with diversity in choice
and prices.
In spite of this, there are noticeable barriers to cross border consumer e-commerce which hinder
its growth. Several reports like by EU report and the Organization for Economic Cooperation
and Development (OECD) Conference on Empowering E-Consumers have identified several
barriers that have stunted the growth of cross border e-commerce. Factors such as: lack of
internet connectivity in homes across local areas in; lack of access to specific websites from
other countries advertising goods and services; inadequate consumer confidence in online
payment systems from other jurisdictions as well as delivery methods, returns policies and
refunds. Language has rightly been identified as one of such barriers, perhaps one of the most
important aspects, because it encapsulates such matters as communication, advertising and
jurisdiction.