ON ONLINE COMMERCE
Part 2: Businesses on the Net
Wednesday, July 12, 1995 - Volume 01, Issue 02b
"God is in the details"
TABLE OF CONTENTS
- Beam Me Up, Scotty - Characteristics of Internet Businesses
- Old Dog, New Tricks - Traditional Businesses Take Advantage of the Internet
- Electronic Bears and Bulls - The Securities Business Online
- Shop Until you Drop - Online Shopping Malls
- Digital Delivery's the Name - Internet as a Distribution Channel
- On the Farther, Wilder Side - More Internet Businesses
- Will That be E-Cash, NetChex, or First Virtual? - Payment Systems
- Fort-Knox-in-a-Box - Electronic money
- Greasing the Wheels of Commerce - Electronic Data Interchange
- Sign of the Times - On the Lighter Side
- Who's Making Money? - Print Resources
- Dangling Pointers - Future Issues of Netsurfer Focus
- Old Dog, New Tricks - Traditional Businesses Take Advantage of the Internet
Our Sponsor: National Semiconductor and ACMA Computers
100% pure, recycled 1's and 0's
So what's this fuss about doing business on the Internet? Basically, anything that can be digitized - stored in representations of 1's and 0's, can be sent quickly down the data pipes. So the Net is not just a communication channel, but a distribution channel of information, words, numbers, sounds, pictures, videos, computer programs, etc. as well. It can't quite get me a carton of milk from the corner store, or get me into the office and bypass the rush hour traffic as old Scotty can. But hey, we are still in the 20th Century. so it's not a bad start.
The Internet is fast - important for delivering time sensitive information. As a distribution channel, it meets our desire for instant gratification. The 24 hour availability and hyperlinks of the web make self service convenient. Being computerized, it's also easy to search for particular items in a large collection - a book in a library, or a section of the tax code. And speaking of libraries, who needs to keep copies around if the whole, most up-to-date Internet library is a few mouseclicks away?
The drawbacks are packaging and the early stage of the technology. Most of us don't yet have the setup to download music or videos for real-time use, although the next generation data plumbers are already working on that. Packaging is tougher: print is still better for portability and readability on longer tracts of information. However, it doesn't need to be a either-or proposition; print and online sources can be used to effectively complement each other.
Successful businesses on the Internet take advantage of its unique characteristics and customers, just like successful businesses anywhere else. The rest just becomes cyber-roadkill. Here is a report from the early days on the road.
The Internet is just another channel
The first step in many business relationships is getting to know about each other, and the web is an excellent way to get information to potential customers and partners - open 24 hours a day, instant access, leisurely browsing, and downloadable for future reference but always there and always up-to-date. These days, a corporate information center on the Internet is a must for any high tech company - and many other businesses are moving in as well.
The de rigueur info center typically has detailed information about
- Products and services, including pricing and availability
- News and press releases
- Contact information
- A search mechanism if the site is extensive
- Showcase of upcoming products and technologies
- Financial information for shareholders
- Locator, e.g., of branches or service counters
- Corporate history
- Employment opportunities
- Reader feedback mechanism
- Interesting and relevant information sites
The growing popularity of the web will bring a flood of simple and complex service transactions. Already, you can check airline schedules and fares, buy a ticket, rent a car, check your bank balance, or find out the location of your express shipment through the web. Eventually, anything we can now do via telephone can be done via the web, and better. Just wait and see.
Major Corporate Information Centers
- Hewlett-Packard Company
- "http://www.hp.com"
- IBM
- "http://www.ibm.com"
- Sun Microsystems
- "http://www.sun.com"
Traditional Businesses on the Internet
- Alamo Rent A Car - car reservation
- "http://www.freeways.com"
- Federal Express - check service availability and shipment status
- "http://www.fedex.com"
- Southwest Airlines - check schedules and fares
- "http://www.iflyswa.com"
- PC Travel - purchase airline tickets and car rental
- "http://www.pctravel.com"
- Wells Fargo Bank - account information (and more features to come)
- "http://www. wellsfargo.com"
The Internet Ticker Tape
One activity that operates on timely information is the stock market. So it is no surprise that stock information and brokerage services have been quick to set up shop on the net. Since this is still quite new, however, there is no standardization of service for the Internet brokerage. Various approaches and services are offered by the different organizations, both for fee and for free. All sites typically have the online ticker tape, a stock-quote server. Quotes tend to be either delayed (15-20 minutes), or from the end of the previous trading day. Sites may simply provide quotes or also offer brokerage services through a secure Web server. Additional financial products, such as subscriptions to financial newsletters, may also be available.
PAWWS Financial Network - Security-APL, who runs this service,
has been in the portfolio accounting business since the days of
analog computers. They offer their services in conjunction with
a discount brokerage firm, and provide a 15-minute delayed quote
server for free.
"http://pawws.secapl.com/top.html"
Galt Technologies - The Net Worth site focuses on mutual
fund information supplied by Morningstar. A 15-minute delayed
stock quote server is also provided. All services are free, and
paid for by mutual fund companies who place their information
at the site. However, users must register, and there are also
other disclosure information products for sale.
"http://networth.galt.com/"
E-Trade Securities - This is an online deep discount broker.
The W3 interface interfaces to telnet to their online trading
system. There is the usual time-delayed quote server, and also
an online stock game where you can test your skills without risking
your dollars.
"http://www.etrade.com/etrade/html/ethome.htm"
InterQuote - Paragon Software provides software to analyze
and report stock information. It is packaged with various levels
of stock information services. Quotes may continuously via telnet
and W3 or at the end of the day via email. Registered users can
get five free end-of-day quotes on their W3 server.
"http://www.interquote.com"
Deciding on the right investments can be an information-intensive effort. Here are some other useful sources for investors on the net.
Wall Street Direct - If you have trouble remembering the
difference between the bull and the bear, the Elliott wave will
have your head spinning. However, you can find resources on technical
analysis including books, seminars, software packages, and market
predictions at this site.
"http://www.cts.com/~wallst/"
MIT Experimental Stock Server - Historical price and volume
charts for stocks since 1993.
"http://www.ai.mit.edu/stocks.html"
EDGAR - Online disclosure information filed with the Securities
Exchange Commission (SEC).
"http://edgar.stern.nyu.edu"
University of Texas Kiwi Club - An extensive list of resources
including banks, financial information centers, commodity exchanges,
and government and economic information.
"http://kiwiclub.bus.utexas.edu/finance/kiwiserver/kiwiserver.html"
without leaving your desk
Another telephone-based business that works well over the Internet is online catalog shopping. There are the usual tradeoffs between using a paper or an online catalog - the paper version is portable and easier to handle, but has high printing cost and long lead times for updates. An online catalog has the advantage of easy keyword based searching through large databases of products, pictures and detailed spec sheets (if necessary), and low cost, automated self service.
Retail stores were some of the first businesses to arrive on the Internet. Many Internet service providers also offered web presence services that could provide a home page for a small fee. Online catalogs proliferated, particularly in areas matching the Internet's interest - music, books, wine, chocolates and desserts. Florists, used to dealing with FTD (long distance) orders, also arrived quickly. Internet shopping malls flourished.
Mail order shopping is big business in the US, accounting for over $200 billion of business a year. Internet-based automation can drastically cut down the cost of each transaction from dollars to cents. Already we can shop until we drop in the comfort of our desks. So small wonder that Home Shopping Network has already bought out the Internet Shopping Network.
- CDNow (CD's, magazines, and t-shirts)
- "http://www.cdnow.com"
- Computer Literacy Bookstore
- "http://www.clbooks.com"
- Godiva Chocolatier
- "http://www.godiva.com"
- Kaua'i Exotix (Florist)
- "http://www. service.digital.com/ke/"
- Virtual Vineyards
- "http://www.virtualvin.com"
- Internet Shopping Network
- "http://shop.internet.net"
- Directory of Malls
- "http://www.nsns.com/MouseTracks/HallofMalls.html"
- Catalog Collections
- "http://www.catalogsite.com"
- "http://catalog.savy.com"
Instant gratification's the game
For products that can be digitized, the Internet gives the added benefit of instant delivery of either samples or the real thing. Although some of the first Internet stores are no more than online catalogs, new ventures have moved quickly to capitalize on the digital advantage. If it can be shipped right down the wire, why wait for the slow boat from China? Now if only someone could get that transporter room set up...
Infohaus
First Virtual's Infohaus is one of Internet's first digital
content marketplace. For a small fee, anyone can place text, image,
sound, video, and even software online for purchase by downloading.
Although the 70 plus "merchants" mostly offer text based
materials, images and sound clips are also available for a few
dollars. The low cost of entry encourages some level of vanity
publishing.
"http://www.infohaus.com
software.net
Close to 8000 software packages for PC's, Macs, and different
flavours of Unix can be found at the software.net location. Cross
indexing makes searching for what you want a simple task when
compared with the typical PC/Mac catalogs, and linkage to CMP's
extensive product review library assists in the decision process.
Demo programs and sometimes the entire product can be downloaded
and installed with a few keystrokes.
"http://www.software.net"
IUMA (International Underground Music Archive
The Internet Underground Music Archive started as a labour
of love by three UC Santa Cruz students to provide online exposure
for unsigned, independent bands and musicians. It now showcases
between 500 and 600 artists with information, pictures, downloadable
music samples, discography and sells their music on traditional
media.
"http://www.iuma.com"
Buena Vista Pictures
Walt Disney's Buena Vista Pictures has a virtual cinema on
the Internet. Currently you can't buy anything there, but information,
pictures, and short quicktime videoloops from the latest movie
releases are available for downloading. The future of video across
the Internet is clearly calling.
"http://BVPM/MooVPlex.html"
More is yet to come
Selling - delivering for a fee - digital content on the Internet is, after all, the obvious application on a digital network. However, part of the power of the Internet is all the creative minds relentlessly thinking about different angles and clever new ways to take advantage of the Internet. Here are a few of them.
Auto Dealers
Automobile dealerships may, at first glance, seem a trifle
out of the place on the high tech Internet. But cars are big ticket
items that often require a lot of information and comparison shopping
in the decision process. It is a "considered purchase"
in the vernacular, and the Web is excellent for providing the
levels of detailed information required for the consideration.
For finding just the right used car, online searching and matching
your desired criteria against the inventory available is even
more valuable. DealerNet is a Washington State based group of
dealerships, and if imitation is the sincerest form of flattery,
it definitely has admirers.
"http://www.dealer.net"
Matching
Matching what we are looking for with what is available is
a process we have all gone through with classified advertising
in traditional newspapers. Buying a used car is an example, and
finding a friend or a date is another. Electric Classifieds, Inc.
is deploying their Internet-based implementation of this traditional
database application in the form of Match.com, a personals and
dating service for the Internet. Doubtlessly other "classified"
sections will follow. While we will all match with more efficiency,
will we lose that unique sociological insight that comes from
browsing the classifieds that leave ink all over our fingers?
"http://www.match.com/?netsurf"
Media Combo
A number of television shows have their own web pages, but
c/net plans to be both an Internet based online service and a television
network for those interested in computers. Currently its
programming airs for about 6 times a week on network
television. Program content is supplemented by more
resources at their web site. c/net: the Computer Network will
go to 24-hour satellite-delivered programming next year.
Does it up the ante for all online services, or is it a marriage
of two media that don't mix? Only time will tell.
"http://www.cnet.com "
Gambling
Since geographic distance has little meaning on the Internet,
but our laws are based on geographic boundaries, a discontinuity
is created for entrepreneurial exploitation. Take an activity
that is illegal in many countries, e.g., erotica or gambling.
Then set up a web server in a country that permits this. And voila,
you have a supply of customers who would otherwise have to physically
leave their home countries for their pleasures. Although the common
theoretical example is an erotica site in a Scandinavian country,
casinos and gambling organizations based in the Caribbean are
already leading by a nose.
"http://www.vegas.com/wagernet"
"http://www.casino.org/cc"
WILL THAT BE E-CASH, NETCHEX, OR FIRST VIRTUAL?
Some things in life aren't free
You've found the perfect gargleblaster from the W3 store, so just enter your credit card number in the online form, right? The only problem is, unlike your home phone, the Internet is one giant party line. There is a widespread concern that someone is snooping on the line to steal your credit card number. So, the first problem for online purchases is to make it safe from the wiretappers.
Historically - as much as one can call a year or so historical - the solutions ranged from not worrying about it (and sending the credit card number out), to calling in the order by phone, to PGP encryption of credit card information and other proprietary solutions. However, the approaches are rapidly converging.
The defence mechanism of choice is definitely encryption. SHTTP (secure HTTP) and SSL (Secure Sockets Layer) have now become the de facto standard protocols for securing W3 transactions. Incorporation of this technology into web servers and browsers allows secure, encrypted transactions to take place across the Internet. Currently the Netscape supports SSL, and a significant proportion of Internet businesses use its secure server. Terisa Systems has been tasked with merging the two protocols and making the technology available for licensing.
In using SHTTP or SSL, the transaction information is encrypted. This means that you are still paying through a conventional credit card account, and the recipient must have a merchant account with the credit card company. Another alternative is an Internet-based charge account. You set up an account with the provider and it acts as an Internet front end to any existing credit card or chequing accounts that you designate. When you make a purchase, you use proprietary (and usually free) client software that sends the purchase and account information in encrypted form to the account provider. The provider in turn sends the information to the appropriate financial organization for processing. With this kind of arrangement, it is possible to transfer amounts between accounts without requiring a credit card merchant account. Currently, CyberCash offers accounts for use with your credit card (with debit card and demand deposit accounts to come) while NetChex offers a similar capability for your chequing accounts.
Another variation, in use since last October, is the First Virtual account. The account is set up by phone using a traditional credit card account. The purchase information, including the First Virtual account number (and not the credit card number) is sent over the Internet without encryption. However, each purchase is subject to an email confirmation. This requires no special software for either the merchant or the buyer's, and has the advantage of verifying the purchase. (After all, a stolen credit card number can be used without detection by a system using encryption alone.)
The pioneers to date have been small, innovative companies. What of the existing players? The credit card business is big business and the players aren't likely to give it away. Microsoft and Visa have cooperated on the development of secure transaction technology based on non-repudiable dignital signatures. Mastercard has signed up to support this, and no doubt Mastercard partner Netscape, and Netscape partner Terisa Systems, will follow along. Will this shut out the adventurous entrepreneurs? Stay tuned.
- Network Security
- "http://www.netsurf.com/nsf/v01/01/nsf.01.01.html"
- CyberCash
- "http://cybercash.com"
- First Virtual
- "http:www.fv.com/info/index.html"
- NetChex
- "http://www.netchex.com/index.html"
- Secure HTTP and SSL Toolkit
- "http://www.terisa.com/prod/prod.html"
Making money takes on new meaning
The payment schemes described in the previous section rely upon a pre-existing relationship between the user and either a conventional credit card vendor or bank, or an online credit service like Cybercash. You have an established account, and all transactions are tracked and accounted for. Just as cash has its advantages in the offline world, the concern about privacy, and a need for inexpensive ways to pay small amounts of money, say $0.10 for an electronic newspaper, is driving the development is electronic cash. Pioneered by David Chaum, electronic cash technology uses cryptographic algorithms to "mint" money that is simply bits of information residing an electronic wallet on your computer. Like cash, its user cannot be identified, it can be irretrievably lost if your hard disk is damaged, and it can be stolen.
The main effort in e-cash is the CyberBucks experiment being conducted by Chaum's company, DigiCash. Every participant is given $100 in CyberBucks for free, and there are over 50 participating shops and about $1,000,000 in circulation. There are also a few other systems in use by small communities on the Internet, e.g., NexusBucks and GhostMarks. The obvious question that comes to mind is the ability to exchange e-cash for conventional currency. This is, however, not an absolute requirement if enough of the desired goods and services are available for your particular form of e-cash. What is inevitable is the tax man. Since 1982, barter systems are legal forms of trade in the United States. However, barter "dollars" must be reported for the purposes for income and sales taxes, and these taxes must be paid in US dollars. With the international nature of the Internet, of course, this problem will be a lot more complicated. Right now it's too small to catch much attention, but doubtlessly the tax man and the regulators cometh.
- Overview of Electronic Payment Systems
- "http://ganges.cs.tcd.ie/mepeirce/project.html"
- Papers on Electronic Cash Technology
- "http://www.digicash.com/ecash/about.html"
- "http://www.digicash.com/publish/sciam"
- CyberBucks Experiment
- "http://www.digicash.com/ecash/ecash-home.html"
- Other E-Cash Systems
- "http://ganges.cs.tcd.ie/mepeirce/Project/Oninternet/mm.html"
- "http:// www.c2.org/nexbucks"
- "ftp://ftp.u.washington.edu/public/phantom/cpunk/mgmny.html"
- "http:// www.c2.org/nexbucks"
GREASING THE WHEELS OF COMMERCE
The unglamorous EDI oilcan
Online commerce involves a lot more than electronic money and credit card numbers. Long before the Internet captured the headlines, hundreds of millions of dollars of business was being carried out internationally through private networks provided by the likes of AT&T and GE. Electronic Data Interchange (EDI) is the set of standards for the electronic transmission of information about trade in goods and services. It is an active industry involving dozens of national and international standards bodies - including the United Nations - and hundreds of organizations worldwide. A quick look into some of the many data interchange standards reveals the breadth of coverage: predefined datasets range from "Grocery Product Purchase Order Change" and "Ocean Vessel Schdule and Itinerary" to "Residential Mortgage Credit Report Order" and "Student Loan Application". In comparison, that cgi-script-based form to order the CD's or a dozen roses is still just a babe in the woods.
The EDI industry is now moving onto the Internet to take advantage of its speed and increasing reach. In addition to porting the data interchange software to run securely on TCP/IP networks, the dialup Value Added Networks (VANs) are setting up shop on the web. Membership-based World Wide Web sites dedicated to industrial buyers are appearing beneath the buzz of online consumer shopping. - Truly an industrial strength undertaking.
- A Primer on EDI
- "http://www.premenos.com/edi/edi.html "
- Website for Manufacturers and Buyers
- "http://www.industry.net"
and other lighter elements
Sign of the Times:
The June 29th edition of the Wall Street Journal
featured an 8-page advertising supplement entitled
"The Internet Directory".
Jammed with about 100 advertisers, front page listings include
JP Morgan, Northern Telecom,
Intel, and the inevitable Netscape.
"http://www.adnet.wsj.com"
Sign of the Times in Silicon Valley:
Highway 101 runs down the coast of California through the
heart of Silicon Valley. Just south of the University Avenue
exit, gateway to downtown Palo Alto, the first city on the
Internet, and Stanford University, spawning grounds for many
of the Valley's bright lights, this billboard has stood beside the
northbound lanes for over a year promoting jobs for the wired:
"http://www.intellimatch.com/intellimatch/"
"SAVE $0.40 on any Ragu(R) Pasta Sauce" ... and ... "Now you can visit us on the Internet at http://www.eat.com." Found printed on a manufacturer's coupon inserted into local newspapers. And if you go to their site, you can fill in a form and get a coupon book (by mail). On the other hand, if you prefer cruising down the blacktop to cooking in the kitchen, you can always decorate your bike with a licence plate holder that says "http://www.harley.com".
Cybersplat:
Meanwhile, on the information highway, the first road
kill has been sighted. Even as some companies reach
for gold and glory, others are ground into dust.
Formerly at "http://www.cybermalls.com". R.I.P. announcement at
"http://www.netsurf.com/nsf/v01/02/local/splat.html"
WHO'S MAKING MONEY ON THE INTERNET?
Curl up with a good book
Business on the Internet is new and growing. It is in, it is hype, it is the new media darling. But who is making money on the net? Although some businesses claim to be turning a profit, the clear winners are the authors of Internet books. Here is our selection of some entertaining titles - and no promises on the contents.
Aether Madness
by Michael Stein, Gary Wolf
Paperback (September 1994)
Peachpit Press
ISBN: 1566090202Free Stuff from the World Wide Web: Your Guide to Getting Hundreds of Valuable Goodies
by Patrick Vincent
Paperback (1995)
Coriolis Group Books
ASIN: 1883577276The Internet Voyeur
by Jim Howard
Paperback (1995)
Sybex
ASIN: 0782116558Walking the World Wide Web
by Shannon Turlington
Paperback - 2nd edition (March 1996)
Ventana Communications Group, Inc.
ISBN: 1566042984Spinning the Web
by Andrew Ford, Tim Dixon
Paperback - 2nd edition (August 1996)
International Thomson Publishing
ISBN: 1850322902Internet Gizmos for Windows
by Joel Diamone, Howard Sobel, Valda Hilley
Paperback (1995)
IDG Books
ASIN: 1568844514E-Mail Addresses of the Rich and Famous
by Seth Godin
Paperback (1994)
Addison-Wesley
ASIN: 0201408937Harley Hahn's Internet & Web Yellow Pages, 1999 Edition
by Harley Hahn
Paperback - 6th edition(October 1998)
Osborne McGraw-Hill
ISBN: 0072118873Planet Internet
by Steve Rimmer
Hardcover (October 1994)
Windcrest
ISBN: 0070530149The Complete Idiot's Guide to Mosaic
by Joe Kraynak
Paperback (January 1995)
Alpha Books
ISBN: 1567615880The Web Empowerment Book
by Ralph Abraham, Frank Jas, Willard Russell
Paperback (June 1995)
Springer-Verlag
ISBN: 0387944311Zen and the Art of the Internet: A Beginner's Guide
by Brendan Kehoe
Paperback (November 1995)
Prentice Hall
ISBN: 0134529146I Lost My Baby, My Pickup, and My Guitar on the Information Highway
by Judy Heim
Paperback (March 1995)
No Starch Press
ISBN: 188641100X
AKA coming attractions
As in all ecologies, that of the Internet is complex and interconnected. In talking about the business of and on the net, we touch on a broad range of issues from the telecommunications giants to First Amendment rights and network security. Yet there are equally important and fascinating topics that we have neglected. Some of these will be featured in future issues of Netsurfer Focus. We welcome pointers to interesting and relevant online resources in these areas. Please send mail to the editor at mailto:focus@netsurf.com.
Cryptography and Privacy
Cryptography is a critical technology for secure online commerce,
electronic signatures, and anonymous electronic cash. Cryptography
ensures privacy of communications. Yet many forms of cryptography
are considered "arms", and the US government would like
to make sure that it can break the code in the name of national
security. Technologies, applications, and social/legal issues
abound.
Health
Two of the key strengths of the Internet are the ready dissemination
of information and the sense of community and support that develop
in various newsgroups, chatrooms, and mailing lists. The characteristics
of information and support are also most critical when we face
ill health and when we try to improve or maintain good health.
What resources does the Internet have to offer?
Diversity
Despite our sometimes parochial US point of view, we know
that the Internet is a truly international community. The diversity
and richness of resources is mirrored in the participants on the
net. We will be exploring the Internet in its manifestations of
race, gender, age, religion, ideology, sexual preference, wealth,
and many of the other differences that make us all unique.
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"God is in the Details" is a quote from Mies van der Rohe.