The Three Waves of Electronic Commerce

Instructor: David Whitsett

David has taught computer applications, computer fundamentals, computer networking, and marketing at the college level. He has a MBA in marketing.

Electronic commerce, like the Internet, is a relatively new phenomenon. It has gone through phases of development in its brief history and it continues to rapidly change. In this lesson, we'll examine the first three waves of electronic commerce.

Wave One: Dawn of Online Shopping (1995-2003)

If you're even a casual Internet user, it's hard to imagine a world without online shopping. Electronic commerce, which in simple terms is buying and selling things on the Internet. is still a youngster in the business world, but has grown considerably in the last few years. For example, Amazon has only been in existence since 1994, but their net sales were $136 billion in 2016.

How did we get here? Once upon a time, way back in 1991, the National Science Foundation opened up the Internet to commercial use. Just three short years later, Netscape's version 1.0 browser included a security protocol known as Secure Socket Layer (SSL), which allowed for encryption (think scrambling) of messages going back and forth during an online transaction. Next, third-party services for processing online credit card services began to pop up and things began to take off like a rocket. PayPal, another way for people to pay for online purchases, came into existence in 1998.

The other big engine driving the growth of electronic commerce during this time was eBay, which started in 1995. eBay leveled the playing field in that ordinary people could sell things online. In just two years, eBay's sales were at $95 million, and by 2007, auctions were at $52.5 billion.

There was one large hiccup during this era: the dotcom bubble burst of 2001. Eager investors flocked to pour money into Internet-based companies, only to find out most of those companies weren't making a profit and were overvalued. The market crashed, but the trend of online shopping didn't suffer any long-term detrimental effects.

So, to summarize Wave One: the technology is put in place and we learn that we like online shopping.

Online shopping can be fast and convenient

Wave Two: The Rise of Online Communities (2004-2009)

As online choices increased, people started looking for guidance in picking products. As the Internet moved toward becoming an interactive community, people began sharing opinions about products on sites like MySpace (2003) and Facebook (2006). Social shopping platforms began to emerge; they combined product sharing and social engagement.

Blogging also came into being during this wave, which turned ordinary folks into influencers as they wrote about their experiences with products. Twitter started in 2006. This form of micro-blogging allowed users to share their opinions 140 characters at a time.

During this time frame, there was the rise of Web 2.0, a term coined in 2004 referencing how the Internet morphed and grew after the dotcom bubble burst. Web 2.0 saw improved abilities to manage large global crowds with similar interests. International use of the Internet was growing during this time as well. Ninety-nine percent of international Internet traffic is running across cables at the bottom of the ocean, and high-speed fiber optic cables enabled greater bandwidth for data going under the sea.

Bottom line for Wave Two - the Internet expands internationally and online communities begin to form and discuss products.

Wave Three: The Rise of Mobile Platforms (2010 to present)

Apple landed a one-two punch in the mobile world with the introduction of the iPhone in 2007 and the iPad in 2010. Smartphones and tablets gave marketers a new audience (not everyone owns a PC or Mac) and enabled marketers to reach people out in the world. With GPS (global positioning system) technology embedded in mobile devices, people could be targeted with tailored ads and offers based on their physical location. Public wi-fi access points helped provide additional Internet access in shopping areas and public places. Here are some of the latest trends:

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