2.3 Ecommerce Success Stories

Ecommerce has been outstandingly successful in six areas: media, travel, real estate, financial advice, classified ads and job placement services. In no case was success easily achieved, however. Some sites had brushes with the law, many had a bumpy ride, and most needed large advertising spends.

Online Media

The download of music files, and then video, soon became a favorite Internet pastime. Many sites — Grokster, Morpheus, Bearshare, iMesh, Kazaa and others — were illegal, and shown so by the US Supreme Court in its June 2005, and have gone out of business. {1} Even the owners of Pirate Bay, located in Sweden, were found guilty of violating Swedish copyright law, and sentenced to fines and custodial sentences by the First Swedish Court of Stockholm in April 2009. {2} Apple iTunes, {3} Amazon {4} and others have made music and video files easy to purchase, but millions, young people in particular, continue to use illegal Peer to Peer networks. {5}

Online Travel

Online travel companies are transaction brokers, providing not just hotels and transport but complete vacation packages. Traditionally the suppliers — large airlines, cruise operators, hotel chains, car rental services — did not sell directly to the public, but through intermediaries called global distribution systems (GDSs), which in turn sold to travel agencies. GDSs bought reservations in bulk, sold on their 'inventories' at large markups to travel agencies, who sold individual packages to the public at further though generally smaller markups. {6} Several business models applied, but online travel companies generally offered cheaper rates by putting the public directly in contact with suppliers, cutting out two levels of middlemen. {7}

The larger online travel companies (TripAdvisor, Yahoo Travel, Expedia, Travelocity, Priceline, Orbitz, etc.) receive millions or tens of millions of visitors monthly {8}) and are companies with considerable financial muscle. Even the less-well-known have large websites, with information updated automatically in realtime. Simple exercises with keyword programs show this clearly. For the search phrase 'Flights from New York' there are 42 searches made each day, for example, and the number of competing sites is 980. {9} The top-ranking five sites have these statistics: {10}

Online Real Estate

Real estate is big business. The USA had 130.6 million housing units in 2010, of which 6.3 million were for sale or rent. {11} Real estate brokers and sales agents numbered some 518,000 in 2008, {12} and real estate advertising spend was $20.2 billion in 2010. {14} In 2008 alone, the US government allocated over $900 billion to special loans and rescues related to the collapse of the housing market. {15}

Online real estate sites not only gave potential purchasers a ready access to information on prices — plus local amenities, schools, etc. through Google earth — but galvanized estate agents into offering more professional and flexible services. {16} {17} {18} Simple exercises with keyword programs are again helpful. For the phrase 'New York Real Estate', there are 131 searches made each day in the US, and the number of competing sites is 4.4 million. {9} The top-ranking five sites have these statistics: {10}

Online Financial Services

Once financial data was readily available, the stage was set for cheap electronic transactions. {20} The companies that prospered were the first movers, companies like Ameritrade, Datek, E*Trade and Schwab. Acquisition costs were high in the early days, but have fallen as online companies were joined by traditional brokerages. {21}

Today's companies are large, efficient and highly competitive. For 'Financial Services' there are 627 searches made each day in the US, and the number of competing sites is 17.7 million. {9} The top-ranking five sites have these statistics

Online Employment Agencies

Another early beneficiary of the web were job placement companies, in which, as in financial services, there has been much consolidation, with the larger companies outdistancing their smaller rivals. Today's companies are highly diversified {22} and make extensive use of selection software. {23}

Classified Ads

Once limited to newspapers, classified ads have taken on a life of their own under the Internet, and offer rental listings and roommates, computer programming, editing, used cars, job listings, personals ads, dating, and more. There are many such sites, and users are generally recommended to check them out carefully:

Nothing succeeds like success, and today's thriving B2C online businesses:

1. Empowered customers, giving them direct access to information that was previously restricted, available for a fee or commission.
2. Cut out middlemen and their profits.
3. Started early, aimed for market share, and invested in technology as it became available.
4. Have large, well-designed and -staffed websites that are now beyond the resources of the average company. {19}

Questions

1. List five areas in which online businesses have been particularly successful. Suggest why.
2. You're assessing the business plan of a new entrant into the online travel sector. Where would you be especially critical?
3. How could a new online real estate company be successful in today's difficult economic climate? What business model might be successful?
4. Your online brokerage company is losing customers. How could you compete with the big boys, and what sort of budget might be required?

Sources and Further Reading

1. Grokster Calls It Quits on Sharing Music Files by Jeff Leeds. NYT. November 2005.
2. Pirate Bay Founder Charged In Absentia to $1.1 Million and Jail Time. TheSpaceLab. October 2011.
3. DRM-free ITunes: What It Means for You by Christopher Breen. PCWorld. April 2009.
4. Amazon launches service for storing songs, videos. CBC News. March 2011.
5. Illegal P2P File Sharing on College Campuses — What's the Solution? by Antionette D. Bishop. JetLaw. October 2011.
6. The Role and Value of Global Distribution Systems in Travel Distribution by Douglas Quinby. InteractiveTravel. November 2009.
7. Business Model: the Travel Industry. Wikidot. Business models of Expedia, Orbitz, Travelocity, Priceline and Travelzoo. May 2008.
8. Top 15 Most Popular Travel Websites. eBizMBA. October 2011
9. Wordtracker. For any keyword phrase, gives the number of searches/year and number of competing sites (same keywords in title tag and the anchor text of a backlink.)
10. Market Samuri. Analyzes the top ten sites for a given keyword phrase.
11. Google indexed pages: found by Market Samuri. The free Xenu's Link Sleuth is useful for smaller sites.
12. US housing market — not looking so hot. Global Property Guide. April 2010.
13. Real Estate Brokers and Sales Agents. Bureau of Labor Statistics, Occupational Outlook Handbook, 2010-11 Edition. US Department of Labor. 2011.
14. 2011 Real Estate Advertising Outlook Borrell Associates. October 2011. Summary of commercial report.
15. United States housing bubble. Wikipedia. Detailed article with references.
16. Other Ways of Pricing — Alternative Real Estate Business Models: the traditional full commission model is being challenged by James Kimmons. About. Simple account with links.
17. Brokers Fiddle as Real Estate Burns by Alan Murray. W.S.J. September 2005.
18. New Year brings new business models for real estate. Unconditional Blog. February 2011.
19. CNN Money. Trading data and outline financials.
20. Models for pricing the distribution of information and the use of services over the Internet : A focus on the capital data market industry by Demetriades, Lee, et al. MIT. 1998.
21. Charles Schwab Corporation: History. AboutSchwab. 2011. One of the earliest online operators.
22. Job Sites. Online Recruiting News. Provides some background to the industry.
23. Recruitment Software for the Information Age. OnRec. October 2011.
24. Employment website. Wikipedia. Early history of online employment agencies.