Main book ecommerce (1)

ELECTRONIC COMMERCE

Ninth Edition

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ELECTRONIC COMMERCE

Ninth Edition

Gary P. Schneider, Ph.D., CPA
Quinnipiac University

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

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Electronic Commerce, Ninth Edition
Gary P. Schneider, Ph.D., CPA
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Library of Congress Control Number: 2009939853
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ISBN-13: 978-0-538-46924-1
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BRIEF CONTENTS

Preface

Part 1:

xvii

Introduction

Chapter 1
Introduction to Electronic Commerce

2

Chapter 2
Technology Infrastructure: The Internet and the World Wide Web

Part 2:

53

B u s i n e s s S tr at eg i e s f or E l ec t r on i c C om m er ce

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

108

Chapter 4
Marketing on the Web

163

Chapter 5
Business-to-Business Activities: Improving Efficiency and Reducing Costs

217

Chapter 6
Social Networking, Mobile Commerce, and Online Auctions

261

Chapter 7
The Environment of Electronic Commerce: Legal, Ethical, and Tax Issues

299

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Part 3:

Technologies fo r E l e c t r o n i c C o m m e r c e

Chapter 8
Web Server Hardware and Software

352

Chapter 9
Electronic Commerce Software

395

Chapter 10
Electronic Commerce Security

437

Chapter 11
Payment Systems for Electronic Commerce

Part 4:

493

Integration

Chapter 12

vi

Planning for Electronic Commerce

530

Glossary

561

Index

597

Brief Contents

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


TABLE OF CONTENTS

Preface

Part 1:
Chapter 1

xvii

Introduction
Introduction to Electronic Commerce

Electronic Commerce: The Second Wave
Electronic Commerce and Electronic Business
Categories of Electronic Commerce
The Development and Growth of Electronic Commerce

The Dot-Com Boom, Bust, and Rebirth
The Second Wave of Electronic Commerce
Business Models, Revenue Models, and Business Processes
Focus on Specific Business Processes
Role of Merchandising
Product/Process Suitability to Electronic Commerce
Advantages and Disadvantages of Electronic Commerce
Advantages of Electronic Commerce
Disadvantages of Electronic Commerce
Economic Forces and Electronic Commerce
Transaction Costs
Markets and Hierarchies
Using Electronic Commerce to Reduce Transaction Costs
Network Economic Structures
Network Effects
Using Electronic Commerce to Create Network Effects
Identifying Electronic Commerce Opportunities
Strategic Business Unit Value Chains
Industry Value Chains
SWOT Analysis: Evaluating Business Unit Opportunities
International Nature of Electronic Commerce
Trust Issues on the Web
Language Issues
Cultural Issues
Culture and Government
Infrastructure Issues
Summary
Key Terms
Review Questions
Exercises

Cases
For Further Study and Research

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Chapter 2
Technology Infrastructure: The Internet and the
World Wide Web
The Internet and the World Wide Web
Origins of the Internet
New Uses for the Internet
Commercial Use of the Internet
Growth of the Internet
Emergence of the World Wide Web
Packet-Switched Networks
Routing Packets
Internet Protocols
TCP/IP
IP Addressing
Domain Names

Web Page Request and Delivery Protocols
Electronic Mail Protocols
Unsolicited Commercial E-Mail (UCE, Spam)
Markup Languages and the Web
Markup Languages
Hypertext Markup Language
Extensible Markup Language (XML)
HTML and XML Editors
Intranets and Extranets
Public and Private Networks
Virtual Private Network (VPN)
Internet Connection Options
Connectivity Overview
Voice-Grade Telephone Connections
Broadband Connections
Leased-Line Connections
Wireless Connections
Internet2 and the Semantic Web
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Part 2:

Busi ness Str ategi es f o r El e c t r o n i c Co m m e r c e

Chapter 3

Selling on the Web: Revenue Models and Building a Web Presence

Revenue Models
Web Catalog Revenue Models
Digital Content Subscription Revenue Models
Advertising-Supported Revenue Models
Advertising-Subscription Mixed Revenue Models
Fee-for-Transaction Revenue Models
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Table of Contents

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Fee-for-Service Revenue Models
Free for Many, Fee for a Few
Revenue Models in Transition
Subscription to Advertising-Supported Model
Advertising-Supported to Advertising-Subscription Mixed Model
Advertising-Supported to Fee-for-Services Model
Advertising-Supported to Subscription Model
Multiple Transitions
Revenue Strategy Issues
Channel Conflict and Cannibalization
Strategic Alliances
Creating an Effective Web Presence
Identifying Web Presence Goals
Web Site Usability
How the Web Is Different
Meeting the Needs of Web Site Visitors
Trust and Loyalty
Rating Electronic Commerce Web Sites
Usability Testing
Customer-Centric Web Site Design
Connecting with Customers
The Nature of Communication on the Web
Summary
Key Terms
Review Questions
Exercises
Cases

For Further Study and Research

Chapter 4

Marketing on the Web

Web Marketing Strategies
Product-Based Marketing Strategies
Customer-Based Marketing Strategies
Communicating with Different Market Segments
Trust, Complexity, and Media Choice
Market Segmentation
Market Segmentation on the Web
Offering Customers a Choice on the Web
Beyond Market Segmentation: Customer Behavior and Relationship Intensity
Segmentation Using Customer Behavior
Customer Relationship Intensity and Life-Cycle Segmentation
Acquisition, Conversion, and Retention of Customers
Customer Acquisition, Conversion, and Retention: The Funnel Model
Advertising On The Web
Banner Ads
Text Ads
Other Web Ad Formats
Site Sponsorships
Online Advertising Cost and Effectiveness
Effectiveness of Online Advertising

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Table of Contents

ix

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E-Mail Marketing
Permission Marketing
Combining Content and Advertising
Outsourcing E-Mail Processing
Technology-Enabled Customer Relationship Management

CRM as a Source of Value in the Marketspace
Creating and Maintaining Brands on the Web
Elements of Branding
Emotional Branding vs. Rational Branding
Brand Leveraging Strategies
Brand Consolidation Strategies
Costs of Branding
Affiliate Marketing Strategies
Viral Marketing Strategies
Search Engine Positioning and Domain Names
Search Engines and Web Directories
Paid Search Engine Inclusion and Placement
Web Site Naming Issues
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Chapter 5
Business-to-Business Activities: Improving Efficiency
and Reducing Costs
Purchasing, Logistics, and Support Activities
Purchasing Activities
Direct vs. Indirect Materials Purchasing
Logistics Activities
Support Activities
E-Government
Network Model of Economic Organization in Purchasing

Electronic Data Interchange
Early Business Information Interchange Efforts
Emergence of Broader EDI Standards
How EDI Works
Value-Added Networks
EDI Payments
EDI on the Internet
Supply Chain Management Using Internet Technologies
Value Creation in the Supply Chain
Increasing Supply Chain Efficiencies
Using Materials-Tracking Technologies with EDI and Electronic Commerce
Creating an Ultimate Consumer Orientation in the Supply Chain
Building and Maintaining Trust in the Supply Chain
Electronic Marketplaces and Portals
Independent Industry Marketplaces
Private Stores and Customer Portals
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Table of Contents

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Private Company Marketplaces
Industry Consortia-Sponsored Marketplaces
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Chapter 6

Social Networking, Mobile Commerce, and Online Auctions

From Virtual Communities to Social Networks
Virtual Communities
Early Web Communities

Social Networking in the Second Wave of Online Communities
Revenue Models for Social Networking Sites
Mobile Commerce
Mobile Operating Systems and Applications
The Future of Mobile Commerce
Online Auctions
Auction Basics
Online Auctions and Related Businesses
Auction-Related Services
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Chapter 7
The Environment of Electronic Commerce: Legal, Ethical,
and Tax Issues
The Legal Environment of Electronic Commerce
Borders and Jurisdiction
Jurisdiction on the Internet
Conflict of Laws
Contracting and Contract Enforcement in Electronic Commerce
Use and Protection of Intellectual Property in Online Business
Copyright Issues
Patent Issues
Trademark Issues
Domain Names and Intellectual Property Issues
Protecting Intellectual Property Online

Defamation
Deceptive Trade Practices
Advertising Regulation
Online Crime, Terrorism, and Warfare
Online Crime
Online Warfare and Terrorism

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Table of Contents

xi

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Ethical Issues
Ethics and Online Business Practices
Privacy Rights and Obligations
Communications with Children
Taxation and Electronic Commerce
Nexus
U.S. Income Taxes
U.S. State Sales Taxes
Import Tariffs
European Union Value Added Taxes
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Part 3:
Chapter 8

Technologies fo r E l e c t r o n i c C o m m e r c e
Web Server Hardware and Software

Web Server Basics
Dynamic Content Generation
Various Meanings of “Server”
Web Client/Server Architectures

Software for Web Servers
Operating Systems for Web Servers
Web Server Software
Finding Web Server Software Information
Electronic Mail (E-Mail)
E-Mail Benefits
E-Mail Drawbacks
Spam
Solutions to the Spam Problem
Web Site Utility Programs
Finger and Ping Utilities
Tracert and Other Route-Tracing Programs
Telnet and FTP Utilities
Indexing and Searching Utility Programs
Data Analysis Software
Link-Checking Utilities
Remote Server Administration
Web Server Hardware
Server Computers
Web Server Performance Evaluation
Web Server Hardware Architectures
Summary
Key Terms
Review Questions

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Table of Contents

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Exercises
Cases
For Further Study and Research

Chapter 9

Electronic Commerce Software

Web Hosting Alternatives
Basic Functions of Electronic Commerce Software

Catalog Display
Shopping Cart
Transaction Processing
Advanced Functions of Electronic Commerce Software
Databases
Middleware
Enterprise Application Integration
Integration with ERP Systems
Web Services
Electronic Commerce Software for Small and Midsize Companies
Basic Commerce Service Providers
Mall-Style Commerce Service Providers
Estimating Operating Expenses for a Small Web Business
Electronic Commerce Software for Midsize to Large Businesses
Web Site Development Tools
Electronic Commerce Software for Large Businesses
Enterprise-Class Electronic Commerce Software
Customer Relationship Management Software
Supply Chain Management Software
Content Management Software
Knowledge Management Software
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Chapter 10

Electronic Commerce Security

Online Security Issues Overview
Computers and Security: A Brief History
Computer Security and Risk Management
Elements of Computer Security
Security Policy and Integrated Security
Security for Client Computers
Cookies
Web Bugs
Active Content
Java Applets
JavaScript
ActiveX Controls
Graphics and Plug-Ins

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Viruses, Worms, and Antivirus Software
Digital Certificates
Steganography
Physical Security for Clients
Communication Channel Security
Secrecy Threats
Integrity Threats
Necessity Threats
Threats to the Physical Security of Internet Communications Channels
Threats to Wireless Networks
Encryption Solutions
Ensuring Transaction Integrity with Hash Functions
Ensuring Transaction Integrity with Digital Signatures
Security for Server Computers
Web Server Threats
Database Threats
Other Programming Threats

Threats to the Physical Security of Web Servers
Access Control and Authentication
Firewalls
Organizations that Promote Computer Security
CERT
Other Organizations
Computer Forensics and Ethical Hacking
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Chapter 11

Payment Systems for Electronic Commerce

Online Payment Basics
Payment Cards
Advantages and Disadvantages of Payment Cards
Payment Acceptance and Processing
Electronic Cash
Micropayments and Small Payments
Privacy and Security of Electronic Cash
Holding Electronic Cash: Online and Offline Cash
Advantages and Disadvantages of Electronic Cash
Electronic Cash Systems
Electronic Wallets
Microsoft Windows Live ID

Yahoo! Wallet
Stored-Value Cards
Magnetic Strip Cards
Smart Cards
Internet Technologies and the Banking Industry
Check Processing
Mobile Banking
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Criminal Activity and Payment Systems: Phishing and Identity Theft
Phishing Attacks
Using Phishing Attacks for Identity Theft
Phishing Attack Countermeasures
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

Part 4:
Chapter 12

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Integration
Planning for Electronic Commerce

Identifying Benefits and Estimating Costs of Electronic Commerce Initiatives
Identifying Objectives
Linking Objectives to Business Strategies
Identifying and Measuring Benefits
Identifying and Estimating Costs
Funding Online Business Startups
Comparing Benefits to Costs
Return on Investment (ROI)
Strategies for Developing Electronic Commerce Web Sites
Internal Development vs. Outsourcing
New Methods for Implementing Partial Outsourcing
Managing Electronic Commerce Implementations
Project Management
Project Portfolio Management
Staffing for Electronic Commerce
Postimplementation Audits
Change Management
Summary
Key Terms
Review Questions
Exercises
Cases
For Further Study and Research

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Glossary

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Index

597

Table of Contents

xv

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


PREFACE

Electronic Commerce, Ninth Edition provides complete coverage of the key business and
technology elements of electronic commerce. The book does not assume that readers have
any previous electronic commerce knowledge or experience.
In 1998, having spent several years doing electronic commerce research, consulting,
and corporate training, I began developing undergraduate and graduate business school
courses in electronic commerce. Although I had used a variety of books and other materials
in my corporate training work, I was concerned that those materials would not work well
in university courses because they were written at widely varying levels and did not have
the organization and pedagogic features, such as review questions, that are so important to
students.
After searching for a textbook that offered balanced coverage of both the business and
technology elements of electronic commerce, I concluded that no such book existed. The
first edition of Electronic Commerce was written to fill that void. Since that first edition,
I have worked to improve the book and keep it current with the rapid changes in this
dynamic field.

New to this Edition
This edition includes the usual updates to keep the content current with the rapidly

occurring changes in electronic commerce. The ninth edition also includes new material
on the following topics:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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Expanded discussion of first-mover advantage (Chapter 1)
Multiple marketing channels (Chapter 3)
Revenue models for specialized information Web sites (Chapter 3)
The future of electronic books and newspaper Web sites (Chapter 3)
Free for many, fee for a few revenue models (Chapter 3)
Online delivery of television shows and movies (Chapter 3)
E-procurement software for smaller companies (Chapter 5)
Social networking business opportunities (Chapter 6)
Growth of mobile commerce applications on smart phones (Chapters 3, 6)
Re-emergence of group shopping Web sites (Chapter 6)
Click-wrap and Web-wrap contract acceptances (Chapter 7)

Emergence of Chinese Web server software (Chapter 8)
Growing use of Web services and other Web 2.0 technologies in electronic
commerce (Chapters 6, 9)
Expanded coverage of database management software (Chapter 9)
Specialized customer relationship management software (Chapter 9)
New major viruses and security threats (Chapter 10)

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


•
•
•
•

Secure Sockets Layer-Extended Validation digital certificates (Chapter 10)
Mobile banking and mobile payment services (Chapter 11)
Use of credit card verification numbers in electronic commerce (Chapter 11)
Expanded coverage of jobs in electronic commerce (Chapter 12)

ORGANIZATION AND COVERAGE
Electronic Commerce: Ninth Edition introduces readers to both the theory and practice of
conducting business over the Internet and World Wide Web. The book is organized into four
sections: an introduction, business strategies, technologies, and integration.

Introduction
The book’s first section includes two chapters. Chapter 1, “Introduction to Electronic
Commerce,” defines electronic commerce and describes how companies use it to create
new products and services, reduce the cost of existing business processes, and improve

the efficiency and effectiveness of their operations. The concept of the second wave of
electronic commerce is presented and developed in this chapter. Chapter 1 also describes
the history of the Internet and the Web, explains the international environment in which
electronic commerce exists, provides an overview of the economic structures in which
businesses operate, and describes how electronic commerce fits into those structures.
Two themes are introduced in this chapter and recur throughout later chapters: examining a firm’s value chain can suggest opportunities for electronic commerce initiatives, and
reductions in transaction costs are important elements of many electronic commerce
initiatives.
Chapter 2, “Technology Infrastructure: The Internet and the World Wide Web,”
introduces the technologies used to conduct business online, including topics such as
Internet infrastructure, protocols, and packet-switched networks. Chapter 2 also describes
the markup languages used on the Web ( HTML and XML) and discusses Internet connection
options and tradeoffs, including wireless technologies.

Business Strategies for Electronic Commerce
The second section of the book includes five chapters that describe the business strategies
that companies and other organizations are using to do business online. Chapter 3, “Selling
on the Web: Revenue Models and Building a Web Presence,” describes revenue models that
companies are using on the Web and explains how some companies have changed their
revenue models as the Web has matured. The chapter explains important concepts related
to revenue models, such as cannibalization and coordinating multiple marketing channels.
The chapter also describes how firms that understand the nature of communication on the
Web can identify and reach the largest possible number of qualified customers.
Chapter 4, “Marketing on the Web,” provides an introduction to Internet marketing and
online advertising. It includes coverage of market segmentation, technology-enabled
customer relationship management, rational branding, contextual advertising, localized
advertising, viral marketing, and permission marketing. The chapter also explains how
online businesses can share and transfer brand benefits through affiliate marketing and
cooperative efforts among brand owners.
xviii

Preface

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Chapter 5, “Business-to-Business Activities: Improving Efficiency and Reducing Costs”
explores the variety of methods that companies are using to improve their purchasing and
logistics primary activities with Internet and Web technologies. Chapter 5 also provides an
overview of EDI and explores how the Internet provides an inexpensive EDI communications channel that allows smaller businesses to reap EDI’s benefits. Chapter 5 describes how
businesses are using technologies such as e-procurement, radio-frequency identification,
and reverse auctions in the practice of supply chain management online.
Chapter 6, “Social Networking, Mobile Commerce, and Online Auctions,” outlines how
companies now use the Web to do things that they have never done before, such as creating
social networks, engaging in mobile commerce, and operating auction sites. The chapter
describes how businesses are developing social networks and using existing social networking Web sites to increase sales and do market research. The emergence of mobile commerce
in meaningful volumes after many years of anticipation is outlined. The chapter also
explains how companies are using Web auction sites to sell goods to their customers and
generate advertising revenue.
Chapter 7, “The Environment of Electronic Commerce: Legal, Ethical, and Tax Issues,”
discusses the legal and ethical aspects of intellectual property usage and the privacy rights
of customers. Online crime, terrorism, and warfare are covered as well. The chapter also
explains that the large number of government units that have jurisdiction and power to tax
makes it essential that companies doing business on the Web understand the potential
liabilities of doing business with customers in those jurisdictions.

Technologies for Electronic Commerce
The third section of the book includes four chapters that describe the technologies of electronic commerce and explains how they work. Chapter 8, “Web Server Hardware and
Software,” describes the computers, operating systems, e-mail systems, utility programs,

and Web server software that organizations use in the operation of their electronic commerce Web sites. The chapter describes the problem of unsolicited commercial e-mail
(UCE, or spam) and outlines both technical and legal solutions to the problem.
Chapter 9, “Electronic Commerce Software,” describes the basic functions that all electronic commerce Web sites must accomplish and explains the various software options used
to perform those functions by companies of various sizes. This chapter includes an overview
of Web services ( Web 2.0 technologies), database management, shopping cart, and other
types of software used in electronic commerce. The chapter also includes a discussion of
Web hosting options for online businesses of various sizes.
Chapter 10, “Electronic Commerce Security,” discusses security threats and countermeasures that organizations can use to ensure the security of client computers, communications channels, and Web servers. The chapter emphasizes the importance of a written
security policy and explains how encryption and digital certificates work. The role of industry organizations in promoting computer, network, and Internet security is also outlined.
Chapter 11, “Payment Systems for Electronic Commerce,” presents a discussion of
electronic payment systems, including mobile banking, electronic cash, electronic wallets,
and the technologies used to make stored-value cards, credit cards, debit cards, and charge
cards work. The chapter describes how payment systems operate, including approval of
transactions and disbursements to merchants, and describes how banks are using Internet
technologies to improve check clearing and payment-processing operations. The use of
Preface

xix

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


mobile technologies for making small payments today and in the future is outlined. The
chapter also includes a discussion of the threats that phishing attacks and identity theft
crimes pose for individuals and online businesses.

Integration
The fourth and final section of the book includes one chapter that integrates the business and
technology strategies used in electronic commerce. Chapter 12, “Planning for Electronic

Commerce,” presents an overview of key elements that are typically included in business
plans for electronic commerce implementations, such as the setting of objectives and estimating project costs and benefits. The chapter describes outsourcing strategies used in
electronic commerce and covers the use of project management and project portfolio
management as formal ways to plan and control tasks and resources used in electronic
commerce implementations. This chapter includes a discussion of change management and
outlines specific jobs available in organizations that conduct electronic commerce.

FEATURES
The ninth edition of Electronic Commerce includes a number of features and offers
additional resources designed to help readers understand electronic commerce. These
features and resources include:
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•

xx

Business Case Approach The introduction to each chapter includes a real business case that provides a unifying theme for the chapter. The case provides a
backdrop for the material described in the chapter. Each case illustrates an
important topic from the chapter and demonstrates its relevance to the current
practice of electronic commerce.
Learning From Failures Not all electronic commerce initiatives have been successful. Each chapter in the book includes a short summary of an electronic
commerce failure related to the content of that chapter. We all learn from our
mistakes—this feature is designed to help readers understand the missteps of
electronic commerce pioneers who learned their lessons the hard way.

Summaries Each chapter concludes with a Summary that concisely recaps the
most important concepts in the chapter.
Online Companion The Online Companion is a set of Web pages maintained
by the publisher for readers of this book. The Online Companion complements
the book and contains links to Web sites referred to in the book and to other
online resources that further illustrate the concepts presented. The Web is constantly changing and the Online Companion is continually monitored and
updated for those changes so that its links continue to lead to useful Web
resources for each chapter. You can find the Online Companion for this book
by visiting Course Technology’s Web site at www.cengage.com/mis and
searching for Electronic Commerce.
Online Companion References in Text Throughout each chapter, there are
Online Companion References that indicate the name of a link included in
the Online Companion. Text set in bold, green, sans-serif letters (Metabot Pro)
indicates a like-named link in the Online Companion. The links in the Online

Preface

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


•

•

•

•

Companion are organized under chapter and subchapter headings that correspond to those in the book. The Online Companion also contains many supplemental links to help students explore beyond the book’s content.

Review Questions and Exercises Each chapter concludes with meaningful
review materials including both conceptual discussion questions and hands-on
exercises. The review questions are ideal for use as the basis for class discussions or as written homework assignments. The exercises give students
hands-on experiences that yield computer output or a written report.
Cases Each chapter concludes with two comprehensive cases. One case uses a
fictitious setting to illustrate key learning objectives from that chapter. The
other case gives students an opportunity to apply what they have learned from
the chapter to an actual situation that a real company or organization has
faced. The cases offer students a rich environment in which they can apply
what they have learned and provide motivation for doing further research on
the topics.
For Further Study and Research Each chapter concludes with a comprehensive list of the resources that were consulted during the writing of the chapter.
These references to publications in academic journals, books, and the IT
industry and business press provide a sound starting point for readers who
want to learn more about the topics contained in the chapter.
Key Terms and Glossary Terms within each chapter that may be new to the
student or have specific subject-related meaning are highlighted by boldface
type. The end of each chapter includes a list of the chapter’s key terms. All of
the book’s key terms are compiled, along with definitions, in a Glossary at the
end of the book.

TEACHING TOOLS
When this book is used in an academic setting, instructors may obtain the following
teaching tools from Course Technology:
•

•

•

Instructor’s Manual The Instructor’s Manual has been carefully prepared and
tested to ensure its accuracy and dependability. The Instructor’s Manual is
available through the Course Technology Instructor Downloads. (Call your
customer service representative to obtain your username and password.)
ExamView© This textbook is accompanied by ExamView, a powerful testing
software package that allows instructors to create and administer printed,
computer (LAN-based), and Internet exams. ExamView includes hundreds of
questions that correspond to the topics covered in this text, enabling students
to generate detailed study guides that include page references for further
review. The computer-based and Internet testing components allow students
to take exams at their computers, and also save the instructor time by grading
each exam automatically.
PowerPoint Presentations Microsoft PowerPoint slides are included for each
chapter as a teaching aid for classroom presentations, to make available to
students on a network for chapter review, or to be printed for classroom
Preface

xxi

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


•

distribution. Instructors can add their own slides for additional topics they
introduce to the class. The presentations are included on the Instructor’s CD.
WebTutor Whether you want Web-enable your class or teach entirely online,
WebTutor provides customizable, rich, text-specific content that can be used
with both WebCT and Blackboard. WebTutor allows instructors to easily blend,

add, edit, reorganize, or delete content. Each WebTutor product provides
media assets, quizzing, Web links, discussion topics, and more.

ACKNOWLEDGMENTS
I owe a great debt of gratitude to my good friends at Course Technology who made this book
possible. Course Technology remains the best publisher with which I have ever worked.
Everyone at Course Technology put forth tremendous effort to publish this edition on a very
tight schedule. My heartfelt thanks go to Charles McCormick, Jr., Senior Acquisitions
Editor; Kate Mason, Product Manager; and Karunakaran Gunasekaran, Production Project
Manager, for their tireless work and dedication. I am deeply indebted to Amanda Brodkin,
Development Editor extraordinaire, for her outstanding contributions to all nine editions
of this book. Amanda performed the magic of turning my manuscript drafts into a highquality textbook and was always ready with encouragement and fresh ideas when I was
running low on them. Many of the best elements of this book resulted from Amanda’s ideas
and inspirations. In particular, I want to thank Amanda for contributing the Dutch auction
example in Chapter 6 and the ideas for the cases in Chapters 7 and 8.
I want to thank the following reviewers for their insightful comments and suggestions
on current and previous editions:
Paul Ambrose
Kirk Arnett
Tina Ashford
Rafael Azuaje
Robert Chi
Chet Cunningham
Roland Eichelberger
Mary Garrett
Barbara Grabowski
Milena Head
Perry M. Hidalgo
Brent Hussin
Cheri L. Kase

Joanne Kuzma
Rick Lindgren
Victor Lipe
William Lisenby
Diane Lockwood
Jane Mackay
Michael P. Martel
William E. McTammany
xxii

University of Wisconsin, Milwaukee
Mississippi State University
Macon State College
Sul Ross State University
California State University-Long Beach
Madisonville Community College
Baylor University
Michigan Virtual High School
Benedictine University
McMaster University
Gwinnett Technical Institute
University of Wisconsin, Green Bay
Legg Mason Corporate Technology
St. Petersburg College
Graceland University
Trident Technical College
Alamo Community College
Albers School of Business and Economics, Seattle University
Texas Christian University
Culverhouse School of Accountancy, University of Alabama

Florida Community College at Jacksonville

Preface

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


Leslie Moore
Martha Myers
Pete Partin
Andy Pickering
David Reavis
George Reynolds
Barbara Warner
Gene Yelle

Jackson State Community College
Kennesaw State University
Forethought Financial Services
University of Maryland University College
Texas A&M University
Strayer University
University of South Florida
Megacom Services

Special thanks go to reviewer A. Lee Gilbert of Nanyang Technological University in
Singapore, who provided extremely detailed comments and many useful suggestions for
improving Chapter 12. My thanks also go to the many professors who have used the previous editions in their classes and who have sent me suggestions for improving the text. In
particular, I want to acknowledge the detailed recommendations made by David Bell of

Pacific Union College regarding the coverage of IP addresses in Chapter 2.
The University of San Diego provided research funding that allowed me to work on the
first edition of this book and gave me fellow faculty members who were always happy to discuss and critically evaluate ideas for the book. Of these faculty members, my thanks go first
to Jim Perry for his contributions as co-author on the first two editions of this book. Tom
Buckles, now a professor of marketing at Biola University, provided many useful suggestions,
pointed out a number of valuable research resources, and was willing to sit and discuss ideas
for this book long after everyone else had left the building. Rahul Singh, now teaching at the
University of North Carolina-Greensboro, provided suggestions regarding the book’s coverage of electronic commerce infrastructure. Carl Rebman made recommendations on a number of networking, telecommunications, and security topics. The University of San Diego
School of Business Administration also provided the research assistance of many graduate
students who helped me with work on the first seven editions of this book. Among those
research assistants were Sebastian Ailioaie, a Fulbright Fellow who did substantial work on
the Online Companion, and Anthony Coury, who applied his considerable legal knowledge
to reviewing Chapter 7 and suggesting many improvements.
Many of my graduate students provided helpful suggestions and ideas. My special thanks
go to two of those students, Dima Ghawi and Dan Gordon. Dima shared her significant background research on reverse auctions and helped me develop many of the ideas presented
in Chapters 5 and 6. Dan gave me the benefit of his experiences as manager of global EDI
operations for a major international firm and provided an in-depth review of Chapter 5.
I am also grateful to Robin Lloyd for her help with the Lonely Planet case (in Chapter 3) and
to Zu-yo Wang for his help with the Alibaba.com case (Chapter 6). Other students who
provided valuable suggestions include Maximiliano Altieri, Adrian Boyce, Karl Flaig, Kathy
Glaser, Emilie Johnson Hersh, Chad McManamy, Dan Mulligan, Firat Ozkan, Suzanne
Phillips, Susan Soelaiman, Carolyn Sturz, and Leila Worthy.
Finally, I want to express my deep appreciation for the support and encouragement of
my wife, Cathy Cosby. Without her support and patience, writing this book would not have
been possible.

Preface

xxiii

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


DEDICATION
To the memory of my father, Anthony J. Schneider.

ABOUT THE AUTHOR
Gary Schneider is the William S. Perlroth Professor of Accounting at Quinnipiac University.
His prior teaching appointments include the University of San Diego, the University of
Tennessee, and Xavier University. He has won several teaching awards and has served as
academic director of the University of San Diego’s graduate programs in electronic commerce and information systems. Gary has published more than 50 books and 100 research
papers on a variety of accounting, information systems, and management topics. His books
have been translated into Chinese, French, Italian, Korean, and Spanish. Gary’s research
has been funded by the Irvine Foundation and the U.S. Office of Naval Research. His work
has appeared in the Journal of Information Systems, Interfaces, Issues in Accounting
Education, and the Information Systems Audit & Control Journal. He has served as editor
of the Business Studies Journal and the Accounting Systems and Technology Reporter, as
accounting discipline editor of Advances in Accounting, Finance and Economics, as associate editor of the Journal of Global Information Management, and on the editorial boards
of the Journal of Information Systems, the Journal of Electronic Commerce in Organizations, the Journal of Database Management, and the Information Systems Audit & Control
Journal. Gary has lectured on electronic commerce topics at universities and businesses
in the United States, Europe, South America, and Asia. He has provided consulting and
training services to a number of major clients, including Gartner, Gateway, Honeywell, the
National Science Foundation, Qualcomm, and the U.S. Department of Commerce. In 1999,
he was named a Fellow of the Gartner Institute. In 2003, he was awarded the Clarence L.
Steber professorship by the University of San Diego. Gary is a licensed CPA in Ohio, where
he practiced public accounting for 14 years. He holds a Ph.D. in accounting information
systems from the University of Tennessee, an M.B.A. in accounting from Xavier University,
and a B.A. in economics from the University of Cincinnati.

xxiv

Preface

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.


PART

1

INTRODUCTION

CHAPTER 1

Introduction to Electronic Commerce, 2
CHAPTER 2

Technology Infrastructure: The Internet and the World
Wide Web, 53

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.