The first major impact of information technology, as we think of it
today, was the facilitation of commercial transactions electronically,
usually using technology like Electronic Data Interchange (EDI,
introduced in the late 1970s) to send commercial documents like
purchase orders or invoices electronically.
Later, with the development of the internet, the effect of information
technology on consumer behavior could be seen in the purchase of goods
and services over the World Wide Web via secure servers with
e-shopping carts and with electronic pay services, like credit card
The Internet Boom:
"First we must confront the question of what happened during the late
1990s. Viewed from 2003, such an exercise is undoubtedly premature,
and must be regarded as somewhat speculative. No doubt a clearer view
will emerge as we gain more perspective on the period. But at least I
will offer one approach to understanding what went on.
I interpret the Internet boom of the late 1990s as an instance of what
one might call ``combinatorial innovation.''
Every now and then a technology, or set of technologies, comes along
that offers a rich set of components that can be combined and
recombined to create new products. The arrival of these components
then sets off a technology boom as innovators work through the
"The Internet for us was like air. It was there all the time - you
wouldn't notice it existed unless it was missing. But the Internet as
a major social phenomenon didn't enter our radar until the advent of
the World Wide Web, which was developed in Europe at CERN, beginning
in 1989, by a team of physicists that included an alumnus of the Media
Lab. That was what provoked the big change in the Internet. "
----------------------The impact of information technology-------------------------
"Electronic commerce is fundamentally changing the way consumers shop
and buy goods and services . Consumers have begun to learn how to act
in an ever-changing electronic market environment. Like any diffusion
of innovation, there is a learning curve for most consumers to behave
in electronic commerce in a way they feel the most comfortable. For
some consumers, shopping and buying online have become part of their
daily lives, whereas others may consider it, without taking any action
yet. What factors can explain the differences in online buying
behavior among Internet users? Our purpose in this study is to
identify what factors determine whether Internet users choose to buy
or not buy online, and how frequently they make such purchases."
"The economic impact of the digital revolution is, in many ways,
undeniable. Without the Internet, for example, globalization and
outsourcing would not be nearly as viable as they are today.
Nevertheless, computers are not a silver bullet magically solving all
problems they are applied to. For example, it can be argued that the
coming forth of desktop publishing in the mid 1980s actually slowed
office workers down. Whereas previously, they could just jot a quick
note on a piece of paper and maybe photocopy it to three or four
co-workers, now people feel the need to have spell checked,
grammatically correct and visually stunning memos! With the wide
spread acceptance of presentation software, now people spend uncounted
hours preparing presentations for a few co-workers, when a chat at a
chalk board would have accomplished nearly the same thing a generation
Some innovations, such as the cell phone have clearer economic return.
The cell phone had measurable impact on the productivity of the
American worker in the late 1990s that was far greater than most other
"The Net and other online systems - not to mention the growing
presence of personal computers. Andy Grove, CEO of Intel, is fond of
pointing out that every two years more computing is manufactured than
existed on the planet previously. By 2000, Grove estimates, the PC
industry will be shipping 100 million Pentium-style microprocessors a
year. I think he's wrong: he'll be shipping 500 million."
"Wired: Why do you think computers are going to replace TVs?
Negroponte: For the past five years, people who build TV sets have
been putting more and more computation into their TVs, and people who
build personal computers have been putting more and more video into
their personal computers. When these two industrial trends converge,
there will be no distinction between the two. Don't worry about the
difference between the TV set and the PC. That's not fundamental,
because basically a TV set is a personal computer you look at from the
sofa. Focus on the broadcasting side of it. In the future, we won't be
pushing bits at people like we're doing today. It doesn't matter
whether you call the receiver a TV or a PC. What's going to change is
how those bits are delivered. "
"[In the PSG report on predictions for 2000], my focus was on
point-of-sales information being integrated with Web data. People are
collecting so much data about what people are buying and returning,
what goes in the shopping cart, what comes out of the cart? But a
missing piece of the customer picture is the information from
point-of-sales systems within stores. This information is captured for
accounting and inventory, but too few companies actually use their
point-of-sales system to collect customer information.
More clicks-and-mortar companies will not only start collecting
information at the cash register but will integrate this information
with data collected online and from catalog sales, feeding it all into
marketing automation systems."
Several factors have a role in the success of any e-commerce venture.
They may include:
1. Providing value to customers. Vendors can achieve this by offering
a product or product-line that attracts potential customers at a
competitive price, as in non-electronic commerce.
2. Providing service and performance. Offering a responsive,
user-friendly purchasing experience, just like a flesh-and-blood
retailer, may go some way to achieving these goals.
3. Providing an attractive website. The tasteful use of colour,
graphics, animation, photographs, fonts, and white-space percentage
may aid success in this respect.
4. Providing an incentive for customers to buy and to return. Sales
promotions to this end can involve coupons, special offers, and
discounts. Cross-linked websites and advertising affiliate programs
can also help.
5. Providing personal attention. Personalized web sites, purchase
suggestions, and personalized special offers may go some of the way to
substituting for the face-to-face human interaction found at a
traditional point of sale.
6. Providing a sense of community. Chat rooms, discussion boards,
soliciting customer input, loyalty schemes and affinity programs can
help in this respect.
7. Providing reliability and security. Parallel servers, hardware
redundancy, fail-safe technology, information encryption, and
firewalls can enhance this requirement.
8. Providing a 360-degree view of the customer relationship, defined
as ensuring that all employees, suppliers, and partners have a
complete view, and the same view, of the customer. However, customers
may not appreciate the big brother experience.
9. Owning the customer's total experience. E-tailers foster this by
treating any contacts with a customer as part of a total experience,
an experience that becomes synonymous with the brand.
10. Streamlining business processes, possibly through re-engineering
and information technologies.
Problems posed by e-commerce:
"From the perspective of the privacy advocate, digital information
today is far too easy to reproduce, and far too hard to destroy. Once
a piece of digital data is put onto the Internet, it is copied by
search engines, various archives and other places. If you posted an
article about a teacher in your high school using illegal drugs to a
blog, that information would be readily available to anyone searching
the Internet for years, regardless of the truthfullness of the story."
Even if a provider of E-commerce goods and services rigorously follows
these sixteen "key factors" to devise an exemplary e-commerce
strategy, problems can still arise. Sources of such problems include:
1. Failure to understand customers, why they buy and how they buy.
Even a product with a sound value proposition can fail if producers
and retailers do not understand customer habits, expectations, and
motivations. E-commerce could potentially mitigate this potential
problem with proactive and focused marketing research, just as
traditional retailers may do.
2. Failure to consider the competitive situation. One may have the
capability to construct a viable book e-tailing business model, but
lack the will to compete with Amazon.com.
3. Inability to predict environmental reaction. What will competitors
do? Will they introduce competitive brands or competitive web sites.
Will they supplement their service offerings? Will they try to
sabotage a competitor's site? Will price wars break out? What will the
government do? Research into competitors, industries and markets may
mitigate some consequences here, just as in non-electronic commerce.
4. Over-estimation of resource competence. Can staff, hardware,
software, and processes handle the proposed strategy? Have e-tailers
failed to develop employee and management skills? These issues may
call for thorough resource planning and employee training.
5. Failure to coordinate. If existing reporting and control
relationships do not suffice, one can move towards a flat,
accountable, and flexible organizational structure, which may or may
not aid coordination.
6. Failure to obtain senior management commitment. This often results
in a failure to gain sufficient corporate resources to accomplish a
task. It may help to get top management involved right from the start.
7. Failure to obtain employee commitment. If planners do not explain
their strategy well to employees, or fail to give employees the whole
picture, then training and setting up incentives for workers to
embrace the strategy may assist.
8. Under-estimation of time requirements. Setting up an e-commerce
venture can take considerable time and money, and failure to
understand the timing and sequencing of tasks can lead to significant
cost overruns. Basic project planning, critical path, critical chain,
or PERT analysis may mitigate such failings. Profitability may have to
wait for the achievement of market share.
9. Failure to follow a plan. Poor follow-through after the initial
planning, and insufficient tracking of progress against a plan can
result in problems. One may mitigate such problems with standard
tools: benchmarking, milestones, variance tracking, and penalties and
rewards for variances.
10. Becoming the victim of organized crime. Many syndicates have
caught on to the potential of the Internet as a new revenue stream.
Two main methods are as follows: (1) Using identity theft techniques
like phishing to order expensive goods and bill them to some innocent
person, then liquidating the goods for quick cash; (2) Extortion by
using a network of compromised "zombie" computers to engage in
distributed denial of service attacks against the target Web site
until it starts paying protection money.
"Certain products/services appear more suitable for online sales;
others remain more suitable for offline sales. Many successful purely
virtual companies deal with digital products, including information
storage, retrieval, and modification, music, movies, education,
communication, software, photography, and financial transactions.
Examples of this type of company include: Google, eBay and Paypal.
Virtual marketers can sell some non-digital products and services
successfully. Such products generally have a high value-to-weight
ratio, they may involve embarrassing purchases, they may typically go
to people in remote locations, and they may have shut-ins as their
typical purchasers. Items which can fit through a standard letterbox -
such as music CDs, DVDs and books - are particularly suitable for a
virtual marketer, and indeed Amazon.com, one of the few enduring
dot-com companies, has historically concentrated on this field."
"Wired: Printed books have been around for 500 years. Obviously,
they're an enduring medium.
Negroponte: The thing that's been around for thousands of years and is
so powerful is the word. The power of the word is extraordinary, and
if the word is embodied as text, that, too, is powerful, regardless of
whether the text lives as ink on pulp or signal on fiat-panel display.
Words aren't going away, and I think the book/no-book argument is dumb
once you realize that all we're talking about are variations in
display technology. I'm not anti-book or anti-print; it's just that
soon we're going to be doing our "printing" in a different medium. "
--------------Consumer Acceptance of New Technologies-------------------
"Consumers have accepted the e-commerce business model less readily
than its proponents originally expected. Even in product categories
suitable for e-commerce, electronic shopping has developed only
slowly. Several reasons might account for the slow uptake, including:
* Concerns about security. Many people will not use credit cards over
the Internet due to concerns about theft and fraud.
* Lack of instant gratification with most e-purchases (non-digital
purchases). Much of a consumer's reward for purchasing a product lies
in the instant gratification of using and displaying that product.
This reward does not exist when one's purchase does not arrive for
days or weeks.
* The problem of access to web commerce, particularly for poor
households and for developing countries. Low penetration rates of
Internet access in some sectors greatly reduces the potential for
* The social aspect of shopping. Some people enjoy talking to sales
staff, to other shoppers, or to their cohorts: this social reward side
of retail therapy does not exist to the same extent in online
The Impact of Perceived Channel Utilities, Shopping Orientations, and
Demographics on the Consumer?s Online Buying Behavior
This study proposed and tested a model of consumer online buying
behavior. The model posits that consumer online buying behavior is
affected by demographics, channel knowledge, perceived channel
utilities, and shopping orientations. Data were collected by a
research company using an online survey of 999 U.S. Internet users,
and were cross-validated with other similar national surveys before
being used to test the model. Findings of the study indicated that
education, convenience orientation, experience orientation, channel
knowledge, perceived distribution utility, and perceived accessibility
are robust predictors of online buying status (frequent online buyer,
occasional online buyer, or non-online buyer) of Internet users.
Implications of the findings and directions for future research were
------------------------Economic Theories/ Theorists/ Models-------------------
From Wikipedia, the free encyclopedia.
"Nicholas Negroponte (born 1943) is a Greek-American computer
scientist best known as founder and director of Massachusetts
Institute of Technology's Media Lab.
In 1968 he also founded MIT's Architecture Machine Group, a
combination lab and think tank which studied new approaches to the
In 1985, Negroponte piloted MIT's Media Lab into existence. It
developed into a famous and generously-funded computer science
laboratory for new media and a high-tech playground for investigating
the human-computer interface.
In 1992, he became involved in the creation of Wired Magazine as a
minority investor. From 1993 to 1998, he contributed a monthly column
to the magazine in which he reiterated a basic theme, his credo "Move
bits, not atoms."
Negroponte expanded many of the ideas he wrote about in his Wired
columns to a bestselling book Being Digital (1995), in which he
surveyed the recent history of media technology, his now rehashing
well-known forecast that the interactive world, the entertainment
world, and the information world would eventually merge.
Being Digital sold well and was translated into some twenty languages.
However, critics faulted his techno-utopian ideas for failing to
consider the historical, political, cultural realities with which new
technologies should be viewed. In the years following dot-com bust,
the book dated quickly. Yet one can still appreciate the unique
quality of the author's vision, and draw inspiration from the sense of
speculative possibility that washes over the reader."
Negroponte's homepage at the Media Lab
* David Weinberger
Unified Theory of the Web
"What is the Web for? And why do we care so much? Why has this simple
technology sent a lightning bolt through our culture? It goes far
beyond the Web's over-hyped economic impact: 500 million of us aren't
there because we want a better "shopping experience." The Web, a world
of pure connection, free of the arbitrary constraints of matter,
distance and time, is showing us who we are - and is undoing some of
our deepest misunderstandings about what it means to be human in the
"The Web would be important enough if it hooked up our species on a
global scale. But, Weinberger argues, it is doing much more than that.
Unlike previous technologies, such as the phone or fax, the Web is a
permanent public space that gathers value every time someone posts a
Web page, or responds on a discussion board, or replies to a mail
list. The result is that the Web is a second world, layered on top of
the real world, that's drawing into it more and more of our social
life lives together."
Small Pieces Loosely Joined: A Unified Theory of the Web
Digital Media Project
* Patricia Seybold
<<Two years ago, management consultant Patricia Seybold rocked the
business world with her surprisingly simple primer on e-commerce,
Customers.com: How to Create a Profitable Business Strategy for the
Internet and Beyond. In the book, she warned that e-business was the
wave of the future and that customer service would be its banner.
Those who didn?t heed the importance of e-commerce in surviving the
brutal business world would be seriously affected, but those who
underestimated the value of customer satisfaction would perish. >>
On E-valiablility Theory:
"Can you explain the theory of e-vailability?
If you go to a website and it's not available, you won't go back. It?s
that simple. Customer expectations have changed. They expect your site
to be available at all times.
So those days of accepting that a store has certain hours of operation
and, if it?s closed, you have to come back, are over?
Absolutely. If you go to a website and it?s not available, you may
think it?s no longer there. So you?ll look elsewhere to have your
On Customer Service:
"Yes, everyone expects quality from the companies they do business
with. With business-to-business e-commerce, it?s easier, but it?s a
little different. Businesses still need to have exquisite customer
service, but the business processes are more important than with
consumers. If companies don?t do it right on the Web, it will hurt
them and they will lose market share."
* Online auction business model
"Strengths of the business model
The strategic advantages of this business model are:
1) No time constraints. Bids can be placed at any time, 24 / 7 . Items
are listed for between for a number of days (normally between 1 and
10) (at the discretion of the seller), giving purchasers time to
search, decide, and bid. This convenience increases the number of
2) No geographical constraints. Sellers and bidders can participate
from anywhere that has internet access. This makes them more
accessible and reduces the cost of ?attending? an auction. This
increases the number of listed items (ie.: number of sellers) and the
number of bids for each item (ie.: number of bidders). The items do
not need to be shipped to a central location, reducing costs, and
reducing the seller?s minimum acceptable price.
3) Intensity of social interactions. The social interactions involved
in the bidding process are very similar to gambling. The bidders wait
in anticipation hoping they will ?win? (eBay calls the successful
bidder the ?winner?). Much like gambling addiction, many bidders bid
primarily to ?play the game? rather than to obtain products or
services. This creates a highly loyal customer segment for eBay.
4) Large number of bidders. Because of the potential for a relatively
low price, the broad scope of products and services available, the
ease of access, and the social benefits of the auction process, there
are a large numbers of bidders.
5) Large number of sellers. Because of the large number of bidders,
the potential for a relatively high price, reduced selling costs, and
ease of access, there are a large number of sellers.
6) Network economies. The large number of bidders will encourage more
sellers, which, in turn, will encourage more bidders, which will
encourage more sellers, etc., in a virtuous spiral. The more the
spiral operates, the larger the system becomes, and the more valuable
the business model becomes for all participants.
7) Captures consumers? surplus. Auctions are a form of first degree
price discrimination. As such, they attempt to convert part of the
consumers? surplus (defined as the area above the market price line
but below the firm?s demand curve) into producers? surplus. On-line
auctions are efficient enough forms of price discrimination that they
are able to do this."
* Schumpeter's Theory
<<As Schumpeter points out in several of his writings (e.g., Shumpeter
), combinatorial innovation is one of the important reasons why
inventions appear in waves, or ``clusters,'' as he calls them.
... as soon as the various kinds of social resistance to something
that is fundamentally new and untried have been overcome, it is much
easier not only to do the same thing again but also to do similar
things in different directions, so that a first success will always
produce a cluster. (p 142)
Schumpeter emphasizes a ``demand-side'' explanation of cluster of
innovation; one might also consider a complementary ``supply-side''
explanation: since innovators are, in many cases, working with the
same components, it is not surprising to see simultaneous innovation,
with several innovators coming up with essentially the same invention
at almost the same time. There are many well-known examples, including
the electric light, the airplane, the automobile, and the telephone.>>
<<But the Internet revolution took only a few years. Why was it so
rapid compared to the others? One hypothesis is that the Internet
revolution was minor compared to the great technological developments
of the past. (See, for example, Gordon .) This may yet prove to
be true-it's hard to tell at this point.
But another explanation is that the component parts of the Internet
revolution were quite different from the mechanical or electrical
devices that drove previous periods of combinatorial growth.
The components of the Internet revolution were not physical devices as
all. Instead they were ``just bits.'' They were ideas, standards
specifications, protocols, programming languages, and software. >>
* Past Economic Theories
"There are those that claim that we need a new economics to understand
the new economy of bits. I am skeptical. The old economics-or at least
the old principles-work remarkably well. Many of the effects that
drive the new information economy were there in the old industrial
economy-you just have to know where to look.
Effects that were uncommon in the industrial economy-like network
effects, switching costs, and the like-are the norm in the information
economy. Recent literature that aims to understand the economics of
information technology is firmly grounded in the traditional
literature. As with technology itself, the innovation comes not in the
basic building blocks, the components of economic analysis, but rather
the ways in which they are combined. "
----------------------------Primary References/ Sources-----------------------
Economics of Information Technology
Hal R. Varian1
University of California, Berkeley
Revised: Mar 23, 2003
From Wikipedia, the free encyclopedia.
Wired interview with Negroponte
Consumers & B2C E-Commerce
Consumer Behavior Information Center
Marketing and Consumer Behavior in Electronic Markets
CRITO: Center for Research on Information Technology
B01.2119 Information Technology and Electronic Commerce
"Major technological advances always bring with them changes to
industries, companies and managerial requirements. This was true with
the introduction of the steam engine, the railroads, the electric
motor, the telephone, and so on. It is happening again as powerful,
distributed, interconnected information systems become ubiquitous. "
Consumer Project on Technology
From Wikipedia, the free encyclopedia.
"The Consumer Project on Technology (CPTech) is a non-governmental
organization founded by Ralph Nader in 1995. It deals with issues
related to the effects of intellectual property on public health,
cyberlaw and e-commerce, and competition policy. It has fought the
Microsoft monopoly, the ICANN monopoly, software patents, business
method patents. It has supported free software in government, open
access for the Internet, and privacy regulation. CPTech does extensive
work on access to medicines, including a major effort on compulsory
licensing of patents. Beginning in 2002, CPTech began to work
seriously with Tim Hubbard and others on a new trade framework for
medical R&D. In the context of current bilaterial agreements, this is
referred to as R&D+, which in contrast to TRIPS+ approaches.
CPTech is also working with a number of other NGOs to change the
mission of the World Intellectual Property Organization (WIPO), so
that it operates more like a true UN agency, with a social rather than
a commercial agenda.
The organization is directed by James Love."
Home Page of Consumer Project on Technology
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CIO's Ebusiness Research Center
NetAcademy on Electronic Markets