Web Commerce: Show Me the Money
MDG Showcase & Panel Event - 4/2/97
With the latest improvements in Internet security, industry predictions about electronic commerce on the Web have taken off, perhaps more so than the actual growth in online transactions. A quick survey of attendees of this interesting and timely event revealed that only a handful of people are currently conducting business on the Web, and of those, none have been profitable so far. It's no wonder everyone is saying "show me the money!"
The panelists, three of whom represented key players in this industry sector and one who managed the implementation of a major commerce site, offered useful insight into the state of the industry.
Doug Shulze, the Director of Business Development for iCat Corporation, a leading provider of affordable commerce solutions, led off the evening by challenging a widely-held myth --that the infrastructure to manage electronic commerce is not fully there yet. To prove his point, he asked the audience to name an established computer company that doesn't have an e-commerce initiative in place.
According to Shulze, all existing commerce-enabled sites are about to make the transition to commerce "solutions," which will facilitate the dynamic management of vast amounts of constantly changing data, in addition to enabling fully secure transactions. He wisely pointed out that you don't need to build an amazon.com or a Virtual Vineyards (two of the most widely cited success stories on the Web) to do it. In fact, the best approach is to keep it simple --start small and evolve. Shulze's parting words were, in effect, 'the tools are ready, the products are ready, so get out there and get on the commerce bandwagon!' Spoken like a true evangelist . . .
Steve Oriola, Manager of Integration Channels for CyberCash, a pioneer in Internet Payment Systems, followed with an informative overview of how CyberCash fits into the bigger picture of e-commerce. In a nutshell, CyberCash allows people to do on the Internet, what they can do in the real world. In other words, CyberCash creates payment instruments that allow financial institutions to extend their existing payment systems to the Internet by directly leveraging their existing payments infrastructure.
How does that actually work? The CyberCash model attempts to model "real world" behavior --that is, all real world payment options such as cash, debits/checks, and credit cards-- allowing merchants to accept payment in a variety of ways. Credit cards are currently the standard purchasing medium on the Net, and CyberCash has been supporting secure credit card transactions for awhile.
In anticipation of a boon in small value (under $10) cash transactions, CyberCash developed the CyberCoin micropayment system which works with existing ACH/debit networks to load funds from an individual's bank account and store them in a temporary account prior to making purchases. The micropayment system provides an alternative to advertising as a revenue model for content-rich sites and is key to the commercialization of this major sector of online commerce.
Currently under development, with an expected release sometime this fall, is the CyberCash PayNow Check Service for automated bill payments. When this software component is complete, then it will act together with the other CyberCash components (credit and coin) to form a complete end-to-end real-time payments system.
But what about security you ask? Bob Pratt, Product Line Manager for Verisign, the leading provider of Internet authentication services, pointed out that worries about Internet security are more "perceived" than "real." While businesses worry about things like unauthorized purchases, impersonation or theft, and the cost/complexity of implementing security, consumers worry about unsafe transactions, privacy of information, and computer viruses (i.e. how do you know what you're getting is real?).
In truth, credit card numbers are relatively safe. Even though they can be "sniffed" on the Internet, there are much easier ways to steal that information offline. The newest developments in Internet security go above and beyond what is necessary, and will make virtual transactions and communications much safer than those in the real world.
Web-based scams are a bigger problem. How do you know if the site you are buying something from is a bonafide merchant? That's where brand identification, and absent that, authentication, come in handy.
Todays' solution to security is largely based on password protection, which is not very good technology. Tomorrow's solution will be based on Digital Certificates or Digital I.D.s. This technology is based on public-key cryptography which is what current commerce sites are using to conduct secure transactions. Digital Certificates provide authentic identification on the Internet by binding the public key to its owner and by relying on independent, third party Certificate Authorities (CAs) who issue and digitally sign them. These CAs vouch for all parties to a transaction and take on the liability for any fraud or misrepresentation or errors that may occur.
Pratt predicted that email signing will be the next "killer app," representing the initial big use of certificate technology. Eventually it can be used for coupons and different EDI (Electronic Data Interchange) transactions as well.
This lively and highly informative panel ended with an insightful presentation by Christine McCarthy, Shockwave Product Marketing Manager for Macromedia. McCarthy was originally the Web Operations Manager responsible for developing and managing all aspects of Macromedia's electronic commerce channel. She gave an overview of the evolution of the Macromall --a four server system for selling Macromedia products online.
Christine emphasized the importance of planning and paying attention to hits on various areas (i.e. certain graphics, pages, etc.) and the importance of being flexible in making changes to your site and observing the effectiveness of those changes. One example she cited was that, much to her surprise, consumers choes text links 2 to 1 over graphical links. Making this minor change significantly increased revenues made at the site!
This article originally appeared in the May 1997 MDG Newsletter