ELECTRONIC COMMERCE

Key words

Blog: short for Web log, a blog is a Web page that serves as a publicly accessible personal journal for an individual. Typically updated daily, blogs often reflect the personality of the author.

EDI: short for Electronic Data Interchange, the transfer of data between different companies using networks like the Internet.

Firewall: an information technology (IT) security device which is configured to permit, deny or proxy data connections set and configured by the organization's security policy. Firewalls can either be hardware and/or software based.

FTP: short for File Transfer Protocol, the protocol for exchanging files over the Internet. FTP works in the same way as HTTP for transferring Web pages from a server to a user's browser and SMTP for transferring electronic mail across the Internet in that, like these technologies, FTP uses the Internet's TCP/IP protocols to enable data transfer. FTP is most commonly used to download a file from a server using the Internet or to upload a file to a server.

HTML: a predominant markup language for the creation of web pages. It provides a means to describe the structure of text-based information in a document — by denoting certain text as headings, paragraphs, lists, and so on — and to supplement that text with interactive forms, embedded images, and other objects.

Instant messaging: a type of communications service that enables you to create a kind of private chat room with another individual in order to communicate in real time over the Internet using text-based communication.

Online Transaction Processing (or OLTP ) : a class of programs that facilitate and manage transaction-oriented applications, typically for data entry and retrieval transaction processing.

Search engine: a program that searches documents for specified keywords and returns a list of the documents where the keywords were found. Although search engine is really a general class of programs, the term is often used to specifically describe systems like Google and Yahoo that enable users to search for documents on the World Wide Web and USENET newsgroups.

Shopping carts: is software used in e-commerce to assist people making purchases online.

Transaction processing: is information processing that is divided into individual, indivisible operations, called transactions. Each transaction must succeed or fail as a complete unit; it cannot remain in an intermediate state.

UDDI: short for Universal Description, Discovery and Integration, a Web-based distributed directory that enables businesses to list themselves on the Internet and discover each other, similar to a traditional phone book's yellow and white pages.

Web bug: an object that is embedded in a web page or e-mail and is usually invisible to the user but allows checking that a user has viewed the page or e-mail. One common use is in e-mail tracking. Alternative names are Web beacon, tracking bug, pixel tag, and clear gif.

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Electronic commerce (also referred to as EC, e-commerce or ecommerce) consists primarily of the distributing, buying, selling, marketing, and servicing of products or services over electronic systems such as the Internet and other computer networks. The information technology industry might see it as an electronic business application aimed at commercial transactions. It can involve electronic funds transfer, supply chain management, e-marketing, online marketing, online transaction processing, electronic data interchange (EDI), automated inventory management systems, and automated data collection systems. It typically uses electronic communications technology such as the Internet, extranets, e-mail, e-books, databases, catalogues and mobile phones.

Often referred to as simply e-commerce, electronic commerce is business that is conducted over the Internet using any of the applications that rely on the Internet, such as e-mail, instant messaging, shopping carts, Web services, UDDI, FTP, and EDI, among others. Electronic commerce can be between two businesses transmitting funds, goods, services and/or data or between a business and a customer.

Historical development

The meaning of the term "electronic commerce" has changed over the last 30 years. Originally, "electronic commerce" meant the facilitation of commercial transactions electronically, usually using technology like Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), where both were introduced in the late 1970s, for example, to send commercial documents like purchase orders or invoices electronically.

The 'electronic' or 'e' in e-commerce or e-business refers to the technology/systems; the 'commerce' refers to be traditional business models. E-commerce is defined as the complete set of processes that support commercial/business activities on a network. In the 1970s and 1980s, this would also have involved information analysis. The growth and acceptance of credit cards, Automated Teller Machines (ATM) and telephone banking in the 1980s were also forms of e-commerce. However, from the 1990s onwards, this would include enterprise resource planning systems (ERP), data mining and data warehousing.

John Seely-Gant, F. Gordon Zophy, Gary Heiselberg, and George Fonda, consultants at Booz- Allen & Hamilton established the first U.S. Government electronic commerce system in 1981. This system, known as Automation of Procurement and Accounting Data Entry (APADE) was developed and fielded for the U.S. Naval Supply Systems Command (NAVSUP) in Mechanicsburg, Pennsylvania.

In the "dot com" era, it came to include activities more precisely termed "Web commerce" -- the purchase of goods and services over the World Wide Web via secure servers (note HTTPS, a special server protocol which encrypts confidential ordering data for customer protection) with e-shopping carts and with electronic payment services, like credit card payment authorizations.

Today, it encompasses a very wide range of business activities and processes, from e-banking to offshore manufacturing to e-logistics. The ever growing dependence of modern industries on electronically enabled business processes gave impetus to the growth and development of supporting systems. This includes backend systems, applications and middleware. Examples are broadband and fibre-optic networks, supply-chain modules, material planning modules, customer relationship modules, inventory control systems and financial accounting/corporate finance modules.

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When the Web first became well-known among the general public in 1994, many journalists and pundits forecast that e-commerce would soon become a major economic sector. However, it took about four years for security protocols (like HTTPS) to become sufficiently developed and widely deployed. Subsequently, between 1998 and 2000, a substantial number of businesses in the United States and Western Europe developed rudimentary Web sites.

Although a large number of "pure e-commerce" companies disappeared during the dot-com collapse in 2000 and 2001, many "brick-and-mortar" retailers recognized that such companies had identified valuable niche markets and began to add e-commerce capabilities to their Web sites. For example, after the collapse of online grocer Webvan, two traditional supermarket chains, Albertsons and Safeway, both started e-commerce subsidiaries through which consumers could order groceries online.

The evolution of e-commerce in the early 2000s onwards saw multinational (MNCs) or transnational (TNCs) companies establishing regional shared services centres, regional data centres and regional call centres. Today, this is not only a crucial part of a company's long-term corporate strategy in cost containment, but also in maintaining and winning market share in a borderless, global marketplace.

Success factors in e-commerce

Technical and organizational aspects

In many cases, an e-commerce company will survive not only based on its product, but by having a competent management team, good post-sales services, well-organized business structure, network infrastructure and a secured, well-designed website. Such factors include:

1. Sufficient work done in market research and analysis. E-commerce is not exempt from good business planning and the fundamental laws of supply and demand. Business failure is as much a reality in e-commerce as in any other form of business.

2. A good management team armed with good and sound information technology strategy. A company's IT strategy should be a part of the business re-design process.

3. Providing an easy and secured way for customers to effect transactions. Credit cards are the most popular means of sending payments on the internet, accounting for 90% of online purchases. In the past, card numbers were transferred securely between the customer and merchant through independent payment gateways. Such independent payment gateways are still used by most small and home businesses. Most merchants today process credit card transactions on site through arrangements made with commercial banks or credit cards companies.

4. Providing reliability and security. Parallel servers, hardware redundancy, fail-safe technology, information encryption, and firewalls can enhance this requirement.

5. 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.

6. Constructing a commercially sound business model. If this key success factor had appeared in textbooks in 2000, many of the dot-coms might not have gone into bankruptcy.

7. Engineering an electronic value chain in which one focuses on a "limited" number of core competencies -- the opposite of a one-stop shop. (Electronic stores can appear either specialist or generalist if properly programmed.)

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8. Operating on or near the cutting edge of technology and staying there as technology changes (but remembering that the fundamentals of commerce remain indifferent to technology).

9. Setting up an organization of sufficient alertness and agility to respond quickly to any changes in the economic, social and physical environment.

10. Providing an attractive website. The tasteful use of colour, graphics, animation, photographs, fonts, and white-space percentage may aid success in this respect.

11. Streamlining business processes, possibly through re-engineering and information technologies.

12. Providing complete understanding of the products or services offered; which not only includes complete product information, but also sound advisors and selectors.

Naturally, the e-commerce vendor must also perform such mundane tasks as being truthful about its product and its availability, shipping reliably, and handling complaints promptly and effectively. A unique property of the Internet environment is that individual customers have access to far more information about the seller than they would find in a brick-and-mortar situation.

Customer-Oriented

A successful e-commerce organization must also provide an enjoyable and rewarding experience to its customers. Many factors go into making this possible. Such factors 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 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.

4. 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.

5. Providing a sense of community. Chat rooms, discussion boards, soliciting customer input and loyalty programs (sometimes called affinity programs) can help in this respect.

6. 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.

7. Letting customers help themselves. Provision of a self-serve site, easy to use without assistance, can help in this respect. This implies that all product information is available, cross-sell information, advice for product alternatives, and supplies & accessory selectors.

8. Helping customers do their job of consuming. E-tailers and online shopping directories can provide such help through ample comparative information and good search facilities. Provision of component information and safety-and-health comments may assist e-tailers to define the customers' job.

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Problems and Limitations of Electronics Commerce

Even if a provider of E-commerce goods and services rigorously follows these "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 will to construct a viable book e-tailing business model, but lack the capability 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.

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Product suitability

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, office supplies, 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.

Products such as spare parts, both for consumer items like washing machines and for industrial equipment like centrifugal pumps, also seem good candidates for selling online. Retailers often need to order spare parts specially, since they typically do not stock them at consumer outlets -- in such cases, e-commerce solutions in spares do not compete with retail stores, only with other ordering systems. A factor for success in this niche can consist of providing customers with exact, reliable information about which part number their particular version of a product needs, for example by providing parts lists keyed by serial number.

Purchases of pornography and of other sex-related products and services fulfill the requirements of both virtuality (or if non-virtual, generally high-value) and potential embarrassment; unsurprisingly, provision of such services has become the most profitable segment of e-commerce.

Products unsuitable for e-commerce include products that have a low value-to-weight ratio, products that have a smell, taste, or touch component, products that need trial fittings - most notably clothing - and products where colour integrity appears important. Nonetheless, Tesco.com has had success delivering groceries in the UK, albeit that many of its goods are of a generic quality, and clothing sold through the internet is big business in the U.S.

Acceptance

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 credit card 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.

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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 e-commerce.

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 shopping.

Poorly designed, bug-infested eCommerce web sites that frustrate online shoppers and drive them away.

Inconsistent return policies among e-tailers or difficulties in exchange/return.

Internet marketing

Internet marketing is the use of the Internet to advertise and sell goods and services. Internet Marketing includes pay per click advertising, banner ads, e-mail marketing, interactive advertising, search engine marketing (including search engine optimization), blog marketing, and article marketing.Internet marketing is a component of electronic commerce. Internet marketing can include information management, public relations, customer service, and sales. Electronic commerce and Internet marketing have become popular as Internet access is becoming more widely available and used. Well over one third of consumers who have Internet access in their homes report using the Internet to make purchases. Internet marketing is also useful for companies that wish to expand their "brick-and-mortar" business into an online business.Internet marketing first began in the early 1990s as simple, text-based websites that offered product information. It then evolved into advertisements complete with graphics. The most recent step in this evolution was the creation of complete online businesses that use the Internet to promote and sell their services and goods.

Business Models and Formats

Internet marketing is associated with several business models. The main models include business-to-business and business-to-consumer (B2C). B2B consists of companies doing business with each other, whereas B2C involves selling directly to the end consumer. When Internet marketing first began, the B2C model was first to emerge. B2B transactions were more complex and came about later. A third, less common business model is peer-to-peer (P2P), where individuals exchange goods between themselves. An example of P2P is Kazaa, which is built upon individuals sharing files.

Internet marketing can also be seen in various formats. One version is name-your-price (e.g. Priceline.com). With this format, customers are able to state what price range they wish to spend and then select from items at that price range. With find-the-best-price websites (e.g. Hotwire.com), Internet users can search for the lowest prices on items. A final format is online auctions (e.g. Ebay.com) where buyers bid on listed items.

Benefits

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Some of the benefits associated with Internet marketing include the availability of information. Consumers can log onto the Internet and learn about products, as well as purchase them, at any hour. Companies that use Internet marketing can also save money because of a reduced need for a sales force. Overall, Internet marketing can help expand from a local market to both national and international marketplaces.

Limitations

Limitations of Internet marketing create problems for both companies and consumers. Slow Internet connections can cause difficulties. If companies build overly large or complicated web pages, Internet users may struggle to download the information. Internet marketing does not allow shoppers to touch, smell, taste or try-on tangible goods before making an online purchase. Some e-commerce vendors have implemented liberal return policies to reassure customers.

Security Concerns

For both companies and consumers that participate in online business, security concerns are very important. Many consumers are hesitant to buy items over the Internet because they do not trust that their personal information will remain private. Recently, some companies that do business online have been caught giving away or selling information about their customers. Several of these companies have guarantees on their websites, claiming customer information will be private. By selling customer information, these companies are breaking their own, publicized policy. Some companies that buy customer information offer the option for individuals to have their information removed from the database (known as opting out). However, many customers are unaware that their information is being shared and are unable to stop the transfer of their information between companies.

Security concerns are of great importance and online companies have been working hard to create solutions. Encryption is one of the main methods for dealing with privacy and security concerns on the Internet. Encryption is defined as the conversion of data into a form called a cipher. This cipher cannot be easily intercepted unless an individual is authorized by the program or company that completed the encryption. In general, the stronger the cipher, the better protected the data is. However, the stronger the cipher, the more expensive encryption becomes.

Effects on Industries

Internet marketing has had a large impact on several industries including music, banking, and flea markets. In the music industry, many consumers have begun buying and downloading MP3s over the Internet instead of simply buying CDs. The debate over the legality of downloading MP3s has become a major concern for those in the music industry.

Internet marketing has also affected the banking industry. More and more banks are offering the ability to perform banking tasks online. Online banking is believed to appeal to customers because it is more convenient than visiting bank branches. Currently, over 50 million U.S. adults now bank online. Online banking is now the fastest-growing Internet activity. The increasing speed of Internet connections is the main reason for the fast-growth. Of those individuals who use the Internet, 44% now perform banking activities over the Internet.

As Internet auctions have gained popularity, flea markets are struggling. Unique items that could previously be found at flea markets are being sold on Ebay.com instead. Ebay.com has also affected the prices in the industry. Buyers and sellers often look at prices on the website before going to flea markets and the Ebay.com price often becomes what the item is sold for. More and

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more flea market sellers are putting their items up for sale online and running their business out of their homes.

Recent Issues

In November 2004, a lawsuit was filed against Bonzi Buddy software. The lawsuit alleged that Bonzi's banner ads were deceptive. These ads often looked like Microsoft Windows message boxes. Internet users would run across the ads and when they attempted to close the boxes, they found themselves redirected to a website determined by Bonzi.

On May 27, 2005, Bonzi Buddy agreed to change the format of its ads so they did not resemble Windows message boxes. The boxes will now contain the word "Advertisement" so computer users know what they are looking at. The boxes will also no longer carry buttons that do not perform the correct actions.

Sales tax issues have also recently become debated. In the USA, the current laws require that buyers of online products pay their state all due taxes on these goods at the end of the year, along with their other state taxes. However, most consumers do not appear to be making these payments. Thirteen states have now begun encouraging Internet businesses to collect sales tax on every sale. These states are currently not forcing the companies to collect the tax. However, it appears that if companies do not begin collecting the sales tax on their own, states will begin forcing the companies to do so. The states are claiming that each year they lose $15 billion in unpaid sales taxes associated with online purchases.

Online users up today still loose money through deception. On many occasions users receive emails claiming that they need to update their credit card information and any other information that these deceptive tricksters may deem necessary to steal from online users.

This act of sending an e-mail to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft is called phishing. The e-mail directs the user to visit a Web site where they are asked to update personal information, such as passwords and credit card, social security, and bank account numbers, that the legitimate organization already has. The Web site, however, is bogus and set up only to steal the user’s information. For example, 2003 saw the proliferation of a phishing scam in which users received e-mails supposedly from eBay claiming that the user’s account was about to be suspended unless he clicked on the provided link and updated the credit card information that the genuine eBay already had. Because it is relatively simple to make a Web site look like a legitimate organizations site by mimicking the HTML code, the scam counted on people being tricked into thinking they were actually being contacted by eBay and were subsequently going to eBay’s site to update their account information. By spamming large groups of people, the “phisher” counted on the e-mail being read by a percentage of people who actually had listed credit card numbers with eBay legitimately.

E-mail marketing

E-mail marketing is a form of direct marketing which uses electronic mail as a means of communicating commercial or fundraising messages to an audience. In its broadest sense, every e-mail sent to a potential or current customer could be considered e-mail marketing. However, the term is usually used to refer to:

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Sending e-mails with the purpose of enhancing the relationship of a merchant with its current or old customers and to encourage customer loyalty and repeat business.

Sending e-mails with the purpose of acquiring new customers or convincing old customers to buy something immediately.

Adding advertisements in e-mails sent by other companies to their customers. Emails that are being sent on the Internet (Email did and does exist outside the Internet,

Network Email, FIDO etc.)

Researchers estimate that as of 2004 the E-mail Marketing industry's revenue has surpassed the $1 billion/yr mark.

Advantages

E-mail marketing (on the Internet) is popular with companies because:

Compared to other media investments such as direct mail or printed newsletters, it is less expensive.

Return on investment has proven to be high when done properly. It is instant, as opposed to a mailed advertisement; an e-mail arrives in a few seconds or

minutes. It lets the advertiser "push" the message to its audience, as opposed to a website that

waits for customers to come in. It is easy to track. An advertiser can track users via web bugs, bounce messages, un-

subscribes, read-receipts, click-throughs, etc. These can be used to measure open rates, positive or negative responses, corrolate sales with marketing.

Advertisers can reach substantial numbers of e-mail subscribers who have opted in (consented) to receive e-mail communications on subjects of interest to them

When most people switch on their computer the first thing they do is check their e-mail. Specific types of interaction with messages can trigger other messages to be

automatically delivered.

Disadvantages

Many companies use e-mail marketing to communicate with existing customers, but many other companies send unsolicited bulk e-mail, also known as spam.

Illicit e-mail marketing antedates legitimate e-mail marketing, since on the early Internet (see Arpanet) it was not permitted to use the medium for commercial purposes. As a result, marketers attempting to establish themselves as legitimate businesses in e-mail marketing have had an uphill battle, hampered also by criminal spam operations billing themselves as legitimate.

It is frequently difficult for observers to distinguish between legitimate and spam e-mail marketing. First off, spammers attempt to represent themselves as legitimate operators, obfuscating the issue. Second, direct-marketing political groups such as the U.S. Direct Marketing Association (DMA) have pressured legislatures to legalize activities which many Internet operators consider to be spamming, such as the sending of "opt-out" unsolicited commercial e-mail. Third, the sheer volume of spam e-mail has led some users to mistake legitimate commercial e-mail (for instance, a mailing list to which the user subscribed) for spam — especially when the two have a similar appearance, as when messages include HTML and flashy graphics.

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Due to the volume of spam e-mail on the Internet, spam filters are essential to most users. Some marketers report that legitimate commercial e-mails frequently get caught by filters, and hidden; however, it is somewhat less common for e-mail users to complain that spam filters block legitimate mail.

Companies considering an e-mail marketing program must make sure that their program does not violate spam laws such as the United States' CAN-SPAM Act, the European Privacy & Electronic Communications Regulations 2003 or their Internet provider's acceptable use policy. Even if a company follows the law, if Internet mail administrators find that it is sending spam it is likely to be listed in blacklists such as SPEWS.

E-mail marketing terms

Auto-respondersAutomatic replies sent by the e-mail software of the recipient after receipt of an e-mail.

Bounce messagese-mail sent back to the server that originally sent the e-mail.

Bounce rateRatio of bounced e-mails to total e-mails sent.

Bulk, bulkingTerms used by spammers to refer to their line of work. Mostly synonymous with spam or UCE.

Call to actionWords in the e-mail that entice recipients to do something.

Click-throughThe action of clicking on a link.

Click-through rate (CTR)Ratio of click-throughs to total e-mails sent.

Commercial e-mailAny e-mail sent for commercial purpose; for instance, an advertisement to buy a product or service, an order confirmation from an online store, or a paid subscription periodical delivered by e-mail. Commercial e-mail is not synonymous with spam; see unsolicited commercial e-mail below.

DemographicCharacteristic of a group of e-mail recipients.

Double opt-inA term coined by spammers to refer to the normal operation of secure electronic mailing list software. A new subscriber first gives his/her address to the list software (for instance, on a Web page) and then confirms subscription after receiving an e-mail asking if it was really him/her. This ensures that no person can subscribe someone else out of malice or error. The intention of the term "double opt-in" is to make it appear that the confirmation is a duplication of effort; and thus, to justify not confirming subscriptions. Mail system administrators and non-spam mailing list operators refer to confirmed subscription or closed-loop opt-in. [1]

Double opt-outSame as Opt-In, but the recipient unsubscribes instead of subscribes. Borderline spam operations frequently make it difficult to unsubscribe from lists, in order to keep their lists large. Hard-core spam operations make it impossible -- they treat opt-out requests as confirmations that the address works and is read.

E-mail BlastAn e-mail sent to multiple recipients, intended to inform them of announcements, events or changes. A variety of methods can be used to send the same e-mail to multiple

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recipients: for example: using options within an e-mail program, using the mail merge option within a word processing program, or using a commercial e-mail list programs.

Express consentA recipient agrees actively to subscribe by checking a box on a web form, paper form or by telephone. A recipient not unchecking a box is not express consent.

False positivesE-mail that is not spam but is labeled spam by a spam filter of the recipient. Note that e-mail marketers may have different opinions of what is "spam" than e-mail recipients.

FormatE-mails can be sent in plain text, HTML, or Microsoft's rich text format.

Hard bounceBounced e-mail that could never get through because the e-mail address doesn't exist or the domain doesn't exist.

List brokerReseller of lists of e-mail addresses.

List buildingProcess of generating a list of e-mail addresses for use in e-mail campaigns.

List hostWeb service that provides tools to manage large e-mail address databases and to distribute large quantities of e-mails.

List managerOwner or operator of opt-in e-mail newsletters or databases. Also software used to maintain a mailing list.

Look and feelAppearance, layout, design, functions & anything not directly related to the actual message on an e-mail.

Open rateE-mail open rate measures the ratio of e-mails "opened" to the number sent or "delivered." The ratio is calculated in various ways, the most popular is: e-mails delivered (sent - hard bounces) /unique opens.

Opt-inThe action of agreeing to receive e-mails from a particular company, group of companies or associated companies, by subscribing to an e-mail list.

Opt-outA mailing list which transmits e-mails to people who have not subscribed and lets them "opt-out" from the list. The subscribers' e-mail addresses may be harvested from the web, USENET, or other mailing lists. ISP policies and some regions' laws consider this equivalent to spamming.

PersonalizationThe use of technology and customer information to tailor e-mails between a business and each individual customer. Using information previously obtained about the customer, the e-mail is altered to fit that customer's stated needs as well as needs perceived by the business based on the available customer information, for the purpose of better serving the customer by anticipating needs, making the interaction efficient and satisfying for both parties and building a relationship that encourages the customer to return for subsequent purchases.

PrivacyThe Privacy Act of 1974, Public Law 93-579, safeguards privacy through creating four procedural rights in personal data. It requires government agencies to show an individual any records kept on him/her; also requires agencies to follow "fair information practices" when gathering and handling personal data. It places restrictions on how agencies can

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share an individual's data with other people and agencies and also lets individuals sue the government for violating its provisions.

Rental listA mailing list that can only be used once or for a limited time. The user of the list pays the owner of the list less money than if he/she would have bought the list outright. Note that this term is usually used for lists generated by address harvesting or other means; the investment made by the list creator does not correlate with the permission of the e-mail recipients. Many firms who "rent" or "buy" a list face spam complaints afterward from persons who never subscribed.

Segmentation (or Targeting)The use of previously gathered information to send e-mails of a particular offer to a subset of the list.

Soft bounceA soft bounce is an e-mail that gets as far as the recipient's mail server but is bounced back undelivered before it gets to the intended recipient. it might occur because the recipient's inbox is full. A soft bounce message may be deliverable at another time or may be forwarded manually by the network administrator in charge of redirecting mail on the recipient's domain. On the other hand, a hard bounce is an e-mail message that has been returned to the sender because the recipient's address is invalid.

Spam or UCE (Unsolicited Commercial e-mail-UCE)From the sender's point-of-view, spam is a form of bulk mail, often sent to a list obtained by companies that specialize in creating e-mail distribution lists. To the receiver, it usually seems like junk e-mail. Spam is equivalent to unsolicited telemarketing calls except that the user pays for part of the message since everyone shares the cost of maintaining the Internet. Spammers typically send a piece of e-mail to a distribution list in the millions, expecting that only a tiny number of readers will respond to their offer. The term spam is said to derive from a famous Monty Python sketch ("Well, we have Spam, tomato & Spam, egg & Spam, Egg, bacon & Spam...") that was current when spam first began arriving on the Internet. SPAM is a trademarked Hormel meat product that was well-known in the U.S. Armed Forces during World War II.

Spam filterSoftware that is usually installed in the users e-mail client, with the purpose of avoiding spam e-mail to get into the client's inbox or at least to be flagged as such.

Subject lineIt is one of the most important issues in e-mail marketing. The better the subject line of an e-mail, the better probability of being opened by the recipient.

Targeting (or segmentation)Sending e-mails to a subset of a mailing list based on a specific filter, trying to improve CTR and/or open ratios.

TrackingThe act of reporting CTR, open ratios, bounces, etc.

Trigger based messagingTriggering a message based on an event or interaction with a previous message. Popular for customers who request more information

Unique clickDuring a particular period, a visitor to a website could click several times on a particular link, but during that period it is counted only as one and considered a unique visitor.

Unsolicited commercial e-mail (UCE)Commercial e-mail, usually of an advertising nature, sent at the expense of the recipient without his or her permission. Sending UCE is an offense against all major ISPs' terms of service, and is a crime in some jurisdictions.

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Ad serving

Ad serving describes the technology and service that places advertisements on web sites. Ad serving technology companies provide software to web sites and advertisers to serve ads, count them, choose the ads that will make the website or advertiser most money, and monitor progress of different advertising campaigns.

Two types of internet companies use ad serving: web sites and advertisers. The main purpose of using an ad server is different for both of them:

For a website, the ad server needs to look through all the ads available to serve to a user who is on a page, and choose the one that will make the web site the most money, but still conform to the rules that the advertiser and web site have agreed. For example if a web site has 10 different advertisers that have paid for a big square ad, the ad server must decide which one to serve (or display). One advertiser may have only agreed to pay for ads from 9am - 5pm. If it is after 5pm, then the Ad Server must not serve that one. Another advertiser may only have paid to show one ad to each user per day. The ad server must therefore see if a user has seen that ad before, on that day and not serve it again if the user has seen it. Another advertiser may have agreed to a high price, but only if the person watching the page is in the United States. In that case, the Ad Server needs to check the IP address to determine if the user is in the US and then decide which is the highest paying ad for that user, in the US, at that time, given what that user has seen in the past.

For an advertiser the ad server needs to try to serve the ad that is most likely to result in a sale of the product advertised. For example if a user is viewing a page, the advertiser's ad server needs to decide from previous history, what ad that user is most likely to click on and then buy the product advertised. If the user is on a technology page, then the ad server may know that on technology types of pages, the ad that works best is a blue one with mostly text and pricing and numbers, not the green ad with a picture of a model and little text. The central ad server will therefore serve this ad, to try and get the highest probability of a sale from the ad.

Ad Serving is most complex when it is used by an Advertising Network. An advertising network buys ads from many web sites and therefore acts like an advertiser user of Ad Serving. When the network buys ads, it tries to place ads on sites where they work best. However an ad network then sells its aggregated ad inventory to advertisers. When doing this, it uses its Ad Serving software as a web site does. In this case it tries to make the most money by only running the ads from advertisers that pay most.

Viral marketing

Viral marketing and viral advertising refer to marketing techniques that use pre-existing social networks to produce exponential increases in brand awareness, through self-replicating viral processes, analogous to the spread of a computer virus. It can often be word-of-mouth delivered and enhanced online; it can harness the network effect of the Internet and can be very useful in reaching a large number of people rapidly.

Some of the first recorded offline / online viral campaigns were developed by Tim Nolan of Spent2000.com fame circa 1996. By placing abstract pairings of catch-phrases, quotes, song lyrics and image mashups, Mr. Nolan developed a method of creating "buzz" around a URL based installation. Phrases like "This city isn't safe" placed along side a URL created curiousity enough in people's minds to remember a URL and visit again once they were online.

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Viral marketing sometimes refers to Internet-based stealth marketing campaigns, including the use of blogs, seemingly amateur web sites, and other forms of astroturfing, designed to create word of mouth for a new product or service. Often the goal of viral marketing campaigns is to generate media coverage via "offbeat" stories worth many times more than the campaigning company's advertising budget.

The term "viral advertising" refers to the idea that people will pass on and share interesting and entertaining content; this is often sponsored by a brand, which is looking to build awareness of a product or service. These viral commercials often take the form of funny video clips, or interactive Flash games, an advergame, images, and even text.

Viral marketing is popular because of the ease of executing the marketing campaign, relative low-cost (compared to direct mail), good targeting, and the high and rapid response rate. The main strength of viral marketing is its ability to obtain a large number of interested people at a low cost.

The hardest task for any company is to acquire and retain a large customer base. Through the use of the internet and the effects of e-mail advertising, the business-to-consumer (B2C) efforts have a greater impact than many other tools of marketing. Viral marketing is a technique that avoids the annoyance of spam mail; it encourages users of a specific product or service to tell a friend. This would be a positive word-of-mouth recommendation. One of the most successful perspectives found to achieve this customer base is the integrated marketing communication IMC perspective.

History of Viral marketing

Some argue the term viral marketing was originally invented by Tim Draper and coined by venture capitalist Steve Jurvetson of Draper Fisher Jurvetson in 1997 to describe Hotmail's e-mail practice of appending advertising for themselves to outgoing mail from their users. The first to write about viral marketing was media critic Douglas Rushkoff in his 1994 book "Media Virus." The assumption is that if such an advertisement reaches a "susceptible" user, that user will become "infected" (i.e., sign up for an account) and can then go on to infect other susceptible users. As long as each infected user sends mail to more than one susceptible user on average (i.e., the basic reproductive rate is greater than one), standard results in epidemiology imply that the number of infected users will grow according to a logistic curve, whose initial segment appears exponential.

If each user sends mail to more than one susceptible user then the campaign will in theory continue forever, or at least until all susceptible users have already received the message. Even if the message is not forwarded quite that often, the message might still be forwarded many more times than it was initially sent. For example, consider a campaign that starts out by mailing 100 users. Not all of them will forward the email, but some of them might. This 'some' would be tested using market research; say, for example, that it turns out to be 80% and that each forwards it to only one friend. In this case, 80 people would receive a "first generation" forwarded message. From there it would decline roughly exponentially, so that each generation would be smaller than the next, as 80, 64, 51, 41, 33...

Eventually the campaign would fade out. Research must be carried out on the life expectancy of such a campaign. More complicated formulas can be generated, but this would be the easiest for most marketing departments to work out. So the final campaign would cost the original amount of funds needed to send the email to 100 users and the rest (357, in this case) would be users marketed by viral methods and normally for free.

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Types of viral campaigns

Pass-along: A message which encourages the user to send the message to others. The crudest form of this is chain letters where a message at the bottom of the e-mail prompts the reader to forward the message. More effective are short, funny clips of video which people spontaneously forward. Many of these, such as the Cog (television commercial) from Honda began life as TV commercials and have since circulated on the web by word of mouth. The number of people reached in this way is often much greater than the number who viewed the original ad.

Incentivised viral: A reward is offered for either passing a message along or providing someone else's address. This can dramatically increase referrals. However, this is most effective when the offer requires another person to take action. Most online contests offer more chances of winning for each referral given; but when the referral must also participate in order for the first person to obtain that extra chance of winning, the chance that the referral participates is much greater.

Undercover: A viral message presented as a cool or unusual page, activity, or piece of news, without obvious incitements to link or pass along. In Undercover Marketing, it is not immediately apparent that anything is being marketed. Particular effort is made to make the discovery of the item seem spontaneous and informal, to encourage natural memetic behavior. Outside world "clues", such as graffiti appearing in cities with key viral words, is often used to direct people to search out the presented "mystery". Because of the large amount of unusual and entertaining content on the internet, this can be the hardest type of viral to spot, especially as companies try to imitate the style and content of amateur websites and authentic underground movements.

"Edgy Gossip/Buzz marketing" ads or messages that create controversy by challenging the borders of taste or appropriateness. Discussion of the resulting controversy can be considered to generate buzz and word of mouth advertising. Prior to releasing a movie, some Hollywood movie stars get married, get divorced, or get arrested, or become involved in some controversy that directs conversational attention to them. An alleged example is the publicity campaign about the dubious love affair between Tom Cruise and Katie Holmes that came out just before each of them released a movie.

User-managed database: Users create and manage their own lists of contacts using a database provided by an online service provider. By inviting other members to participate in their community, users create a viral, self-propagating chain of contacts that naturally grows and encourages others to sign up as well. Examples of such services include anonymous matching services like eCrush, business contact management services like Plaxo, and other social databases like Evite and Classmates.com

Methods of transmission

Transmission of viral marketing can occur in various ways:

Word of Web: Typing into a web-based form that converts that information into an e-mail, sends to recipients. An example of this is any article at MSNBC.com. In the article, there are links that encourage readers to send the article to a friend; this brings them to a web-based form to be filled out. This form converts all of the information to the recipient in an e-mail.

Word of E-Mail: A very common type: forwarding e-mails, such as jokes, quizzes and 'compromising' pictures.

Word of mouth

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Word of IM: Perhaps the fastest-growing mode of transmission, hyperlinks are sent over instant messaging servers such as Jabber, AIM, ICQ, MSN, Yahoo!, or Google Talk. This method is popular with many young people who are arguably more likely to trust a link sent by a friend via IM than by that same friend through e-mail.

Forum Discussions: Many online communities have forums dealing with a lot of topics. These forum topics can either give a positive or negative feedback, depending on the community "culture".

Social Bookmarking: People submit links to a website, then the website compiles these links, to which people can vote for a link that interests them.

Reward for Referrals: Sometimes, the marketing company offers a reward for referring customers, encouraging them to use any of the above methods.

Communications Protocol: In amateur radio, the ham operators on each end of a conversation generally exchange QSL cards. The communication protocol generally expects each person to transmit their QSL information to the other person. If that QSL information refers to an electronic QSL card exchange, then the subscriber base of the exchange will grow exponentially.

Bluetooth: The widespread use of mobile phones which support free Bluetoothing has enabled promotional videos to be distributed virally between handsets.

Blog Publicity: When enough opinion leaders in an industry discuss something, it will usually spread to the other blogs as well. Copycat bloggers are pretty common, and the leaders are often a source of information/inspiration/material-to-steal, which means that the sub-readerships of the smaller blogs also get read.

Barriers to viral marketing

Size: If viral content is a video clip or streaming video, it may be too large for the recipient to receive. However, newer technologies are eliminating this problem, as internet connections grow faster and e-mail inboxes become more capable of receiving large files.

Media Format: A viral marketing campaign will be unsuccessful if the message is in a format that most people can't use; for example if particular software is needed that is not widely used, then people will not be able to open or view the message.

E-mail attachment: Many people receive viral marketing messages while at the office, and company anti-virus software or firewalls can prevent people from receiving or viewing such attachments.

Cumbersome Referral Mechanism: For a viral marketing campaign to be successful, it must be easy to use. For example, if the promotion is some sort of game or contest, then asking for referrals should be an option immediately after the game, not as a condition to play.

Sabotage: Especially in the case of Undercover style marketing campaigns, the discovery of the marketing nature of a popular campaign may cause the same social networks to inform people of the commercial intent of the meme, and promote a formal or informal boycott of the company or product in question.

AUTHORWALTER ANGOL

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