Starting an E-business

Dr. John P. Abraham

Professor

UTPA

Pre-requisite

• Finish studying how to start a business in Texas.

• Complete all necessary requirements to start a business in texas.

Determine what model of ecommerce

• Most common is Business to consumer

• If you are a manufacturer, business to business is the way to go.

• If you are a manufacturer, selling directly to the customers might impede your growth.

Selling directly to consumers

• It appears starting a business with either eBay or Amazon (or both) initially would be easier.

• Consumers are now used to going to one or both of these websites for purchases.

• You have a built in customer base.

Before launching your business

• Get registered with a name– Network solutions, or another registrar– Try to get a .com. Hard to get. .co would be

your second choice.– Choose a name that is short and easy to

remember.

Agencies that controls

– ICAAN (internet corporation for assigned names and numbers) oversees the domain registration.

– W3C (weld wide web consortium) sets standards for HTML and web

– IETF (internet engineering task force) sets standards for Internet architecture.

Get a broadband service

• ISDN – integrated services digital network 128 Kbps

• DSL digital subscriber line 144 Kbps to 8 Mbps. It is asynchronous.

• T1 – 1.5 Mbps up and down• T2 is a combined foru t1 lines to give over

6Mbps• T3 is comnbination of 28 t1 lines– up to

44.736 Mbps

Build a website

• Start with Static (passive) web presence– Just showing your presence

• Advertise on the web to generate traffic. This is what you gain from being on eBay or Amazon.

• When advertising know how many people will be exposed to your ad, and how long. Checkout google, ebay, microsoft, aol, ask, etc. for advertising

• Register with search engines• Titles and metatags are important for each page.

Create a Web Service

• Other web services can integrate with yours.

Determine how to collect payments

• Bank accounts– Wire transfer

• Setup credit card services

• Paypal

• Google payment

Accounting

• Integrated with online sales

• Payroll

• Automatic completion of reporting forms (sales tax, w-2, 941s and so on)

• Inventory control, ordering (PO), receiving, RMAs

• Must collect tax if sold in Texas.

Shipping

• Determine how you want to ship

• Trucking

• UPS, FedEx, USPS

• Create volume shipping rates

Web programming

• Move up to interactive dynamic web pages

• This is what we have been covering so far– AJAX, PHP, Ruby on Rails, ASP, etc.

Alliances

• If you are a BtB, register with an alliance such as the airline alliances, hospitality, hotels, etc.

• Become a business at social networks, such as Facebook, Twitter, etc.

Other issues

Marketing Issues

• E-Mail marketing– Cheap – Must know target (reach)– Use customer names where possible– Different languages (www.logos.it - does

translations to 20 languages)– Consider outsourcing – Boldfish.com,

messagemedia.com, digitalimpact.com, ilux.com, etc.

Marketing Issues (2)

• Promotions– Netcentives.com– Frequent miles– Directcoupons.com, coolsavings.com, etc.

• Advertising– TV, movies, newspapers, magazines– Online advertising

• Linking your site, banner ads, search engine ads, etc.

Marketing Issues (3)

• Buying and selling ads on the web– Put your ad on other popular sites that sells

similar products– Sell banner ads on your site.– Cost is based on hits, pay-per-lead, pay-per-

click, pay-per-lead,etc.– www.valueclick.com– Webcasts (Victoria Secret).

Public Relations

• Chat sessions

• Crisis management (within company)

• Press releases www.prweb.com

• CRM customer relationship management – www.datadistilleries.com, egain.com– Datamining– Record customers’ behavior

Online Monetary Transactions

• Credit-card– Merchant account with a bank– www.cybercash.com www.icat.com will set up accounts

so that you can accept credit cards online.

• COD• Debit Cards and debit-it.com (just give bank

account info).• Digital currencty – ecash.com – internetcash.com• Paypal.com• Smart cards

Monetary transactions (2)

• Micropayments – save on credit card fees– Combining many small charges into one

charge, like a telephone bill.

• Check free

• Electronic Fund transfer (for large amounts)

• Bank credit line

Legal Issues

• Privacy – a major concern in web practices.• Tracking devices• Cookies – advantages of cookies come at the

price of security.• Keystroke cops (employer/employee tension)• Defamation• Child pornography• Intellectual property – napster• Spam• Internet taxation

Advertising related

Traditional Advertising

• Print, TV, Radio, Direct Mail, Yellow Pages

• National Advertising– Dominated by large holding companies like

Omnicom or WPP

• Local Advertising– Small businesses

• Pricing vary based on quantity.

Online Advertising

• Banner Ads– Some relevance to content viewed, may be

directed to locality.

• Search Linked Ads– Related search terms

• Context linked Ads– Related Content on the page– Up to Google, or Yahoo’s capability to

determine content

Advertising money (year 2006)

• 220 to 240 billion with 1-2% growth per year

• $17 billion spent for internet advertisingwith rapid grown.

• (Google’ revenue is ~7billion)

Search share

Google 46%

Yahoo 23%

MSN 11%

AOL 7%

Search Engine Marketing

• Per click cost per keyword– Example laptop $2.00 per click

• Bid on this, based on bid an ad may go first place to second place, etc.

• Bid is the determinant of ad position

• Bidding on the word takes place continuously

Auction for keyword

• Internet user enters a search term• Gets a page with results• Also shows ads to the side• If a user click on ad – pay for click• Top ads are clicked most• Advertisers submit bids stating maximum pay for

click• Ad with highest bid is displayed on top• Advertisers can change their bid frequently

Generalized Second Price Auction (GSP)

• New mechanism used by search engines to sell online advertising.– Advertiser submit bids stating their maximum

willingness to pay for a click for a key word.– If a user click an advertiser that is not on top,

the advertiser pays an amount equal to the next highest bid (bid for advertiser i+1)

– http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1015&context=berkeley_econ221