E-Commerce

CSC330 4(3,1)

Lecture 6

Part 1: Introduction to E-Commerce

Chapter 2: E-Commerce Business Strategies
Recap
 Eight Key Elements of a Business Model
 Value Proposition, Revenue Model, Market Opportunity,
Competitive Environment, Competitive Advantage, Market
Strategy, Organizational Development, and Management
Team
 Start-Up Business Raising Capital
 Seed Capital, Elevator Pitch, Incubators, Venture Capital Firms,
Crowdfunding, Commercial Banks, and Angel Investors

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Topics
 Major Business-to-Consumer (B2C) Business Models
 E-tailer, Market Creator, Transaction Broker, Community
Provider, Service Provider, and Content Provider, and Portal
 Major Business-to-Business (B2B) Business Models
 Net Marketplaces (E-Distributor, Exchange, E-Procurement, and
Industry Consortia) and Private Industrial Network
 How E-Commerce Changes Business: Strategy, Structure, and
Business
 Industry Structure, Industry Value Chains, Firm Value Chains,
Firm Value Webs, and Business Strategy
 Case Study: Weathering the Storm: Twitter Tweaks Its
Business Model

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Major Business-to-Consumer (B2C)
Business Models
 E-tailer
 Market Creator
 Transaction Broker
 Community Provider
 Service Provider
 Content Provider
 Portal

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Major Business-to-Consumer (B2C)
Business Models…
E-tailer
Online version of retail store.
Here customers can shop at any hour of the day or night without
leaving their home or office.
Come in all sizes, from giant setup (like Amazon) to tiny local store.
Divisions of existing physical stores and carry the same products
online (like Walmart) as bricks and clicks concept.
Example: Walmart (1962), Nike (1964), Zara (1975), Dell (1984),
Amazon (1994), Khaadi (1998), and Wayfair (2008).
Revenue Model: Sales.

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Major Business-to-Consumer (B2C)
Business Models…
Market Creator
Builds a digital environment where buyers and sellers can meet,
display products, search for products, and establish a price for
products.
Example: eBay (1995), Alibaba (1999), Airbnb (2008), Uber (2009),
and Daraz (2012).
Revenue Model: Transaction fees.

Transaction Broker
Processes transactions for consumers that are normally handled in
person, by phone, or by mail, such as stockbrokers, and travel agents.
Example: Skyscanner (2001).
Revenue Model: Transaction fees.

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Major Business-to-Consumer (B2C)
Business Models…
Community Provider
Create an online environment where people with common interests
can transact (buy and sell goods), share interests (text, photos, and
videos), and communicate.
Example: LinkedIn (2002), Facebook (2004), Twitter (2006),
Instagram (2010), and Pinterest (2010).
Revenue Model: Advertising, Subscription, and Affiliate referral fees.

Service Provider
Offers services online.
Example: Google (Gmail, Meet, Maps, Docs, and so on) (1998).
Revenue Model: Sales, advertising, and subscription fees).

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Major Business-to-Consumer (B2C)
Business Models…
Content Provider
Distributes information content on the web, such as digital news,
music, photos, video, and artwork.
Example: Financial Times Newspaper (1888), Harvard Business
Review Magazine (1922), IMDb (1990), Netflix (1997), and Spotify
(2006).
Revenue Model: Advertising, Subscription fees, and Sales.

Portal
Offers powerful search tools as well as an integrated package of
content and services, all in one place.
Example: AOL (1985), Yahoo (1994), MSN (1995), Google (1998),
and Facebook (2004).
Revenue Model: Advertising, Transaction fees, and Subscription.

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Major Business-to-Business (B2B) Business
Models
 Net Marketplaces
 E-Distributor
 Exchange
 E-Procurement
 Industry Consortium
 Private Industrial Network

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Major Business-to-Business (B2B) Business
Models…
Net-Marketplaces: E-Distributor
Company that supplies products and services directly to individual
businesses.
Example: W. W. Grainger (industrial supply) (1927).
Revenue Model: Sales.

Net-Marketplaces: Exchange
Independent digital marketplace where suppliers and commercial
purchasers can conduct transactions.
Example: Go2Paper (online software for paper print management)
(1999).
Revenue Model: Transaction (commission) fee.

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Major Business-to-Business (B2B) Business
Models…
Net-Marketplaces: E-Procurement
Creates and provides (sells) access to digital markets.
Example: Ariba (procurement and supplier chain network) (1996).
SaaS (Software as a Service) providers.
 Example: Google Workspace (1998).
PaaS (Platform as a Service) providers.
 Example: IBM (1911) offers Bluemix (2014), and Windows
(1985) offers Windows Azure (2010).
Revenue Model: Service fees.

Net-Marketplaces: Industry Consortium

Industry-owned vertical marketplaces that serve in specific industries.
Example: SupplyOn (Supply Chain Business Network) (2000)
Revenue Model: Transaction (commission) fee.

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Major Business-to-Business (B2B) Business
Models…
Private Industrial Network
Digital network designed to coordinate the flow of communications
among firms engaged in business together.
Also known as Private Trading Exchange (PTX).
Example: Walmart’s network for suppliers (1962).
Typically evolve large company’s internal enterprise system.
 Trusted and long-term suppliers invited to network.
Revenue Model: Sales.

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How E-Commerce Changes Business:
Strategy, Structure, and Process
 E-commerce changes business by:
 Industry Structure
 Industry Value Chains
 Firm Value Chains
 Firm Value Webs
 Business Strategy

Industry Structure
 Refers to the nature of the players (buyers, sellers, competitors) in
an industry, barriers to entry, threat of new substitute products, and
their relative bargaining power (buyers, suppliers).

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How E-Commerce Changes Business:
Strategy, Structure, and Process…
Industry Value Chains
Set of activates performed in an industry/firm that transforms raw
inputs into final products and services.

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How E-Commerce Changes Business:
Strategy, Structure, and Process…
Firm Value Chains
Set of activities a company/firm engages in to create final products
from raw inputs.

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 How E-Commerce Changes Business:
Strategy, Structure, and Process…
Firm Value Webs
Networked business ecosystem that coordinates the value chains of
several firms.

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MRO = Maintenance, Repair, and Operations.
How E-Commerce Changes Business:
Strategy, Structure, and Process…
Business Strategy
Set of plans for achieving superior long-term returns on the capital
invested in a business firm.

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Case Study: Weathering the Storm: Twitter
Tweaks Its Business Model
Twitter
Founded on March 21, 2006, by Jack Dorsey, Noah Glass, Biz Stone,
and Evan Williams.
Twitter Limits: direct messages 1,000 per day, tweets 2,400 per day,
and 280 tweet characters.
In 2006, around 5,000 tweets a day.
In 2020, around 6,000 tweets per second.

Case Study Questions

1.What are Twitter’s most important assets?
2.How has Twitter’s business model evolved since it was founded?
3.Why is machine learning an important initiative for Twitter?
4.What steps has Twitter taken to improve “conversational health” on its
platform?
5.How has the Covid-19 pandemic impacted Twitter?
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Case Study: Weathering the Storm: Twitter
Tweaks Its Business Model…
Important Assets
User attention, significant audience size (unique visitors), and
searchable database of tweets.

Business Model
Revenue generates from advertising (including promoted tweets,
promoted trends, promoted accounts, and promoted video).

Machine Learning
To get better information about user behavior and understand
customer sentiment, acquired companies (Lucky Sort, Topsy Labs, and
Gnip) for data analysis.

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Case Study: Weathering the Storm: Twitter
Tweaks Its Business Model…
Conversational Health
Adjusted its algorithm to ensure low-quality tweets are less accessible
in searches.
Remove dummy accounts and handles habitual abusers accounts.
In 2019, acquired Fabula AI company, which has developed machine
learning technology to detect network manipulation and online
disinformation.
In 2019, banned political ads, with some minor exceptions (such as
ads in support of voter registration).

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Case Study: Weathering the Storm: Twitter
Tweaks Its Business Model…
Covid-19 Pandemic
Although user engagement increased significantly in Covid-19
pandemic time, but advertising declined by almost 30% compared to
the similar period in 2018.
An investor group, acquired major portion of Twitter’s shares sought
to have Dorsey removed as Chief Executive Officer (CEO).
Event cancellations and other major sports leagues like Summer
Olympics 2020, negatively impact on advertising revenues.

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Summary
 Major Business-to-Consumer (B2C) Business Models
 E-tailer, Market Creator, Transaction Broker, Community
Provider, Service Provider, and Content Provider, and Portal
 Major Business-to-Business (B2B) Business Models
 Net Marketplaces (E-Distributor, Exchange, E-Procurement, and
Industry Consortia) and Private Industrial Network
 How E-Commerce Changes Business: Strategy, Structure, and
Business
 Industry Structure, Industry Value Chains, Firm Value Chains,
Firm Value Webs, and Business Strategy
 Case Study: Weathering the Storm: Twitter Tweaks Its
Business Model

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