February 1999
The Future of Electronic Commerce
By Mike Trick
The Future of Electronic CommerceI saw a resume a few weeks ago from someone with "six years of Web programming experience." Pretty impressive, given that six years ago (January 1993), there were only 50 Web servers in the world, and Web traffic represented under 0.1 percent of the traffic on the electronic backbones then in existence. This candidate was remarkably prescient when it came to the future of the World Wide Web! Or perhaps "years" on the Internet don't mean the same as "years" in the real world.
I was not as insightful as this candidate: I created my first Web pages in mid-1994. And I certainly don't see myself as a particularly well-qualified fortune teller when it comes to the future of the Web. For instance, the mania in financial markets for any new stock that has any electronic aspect continues to confuse me. It seems that under current stock pricing, losses are good, and companies are measured by the extent of their losses (the comic strip "Doonesbury" has a continuing story arc on this theme).
It seems to me that much of "electronic commerce" is nothing more than the trading of venture capital among start-up firms. For instance, Amazon.com has had increasing losses in every year of its existence, and its statements of risk (required by the Securities Exchange Commission, and available in its EDGAR database at http://www.sec.gov/edgarhp.htm; search on Amazon and see its 10-K filings) make for hair-raising reading. Despite this, Amazon has a market capitalization of over $1.5 billion.
Even the financially successful Yahoo! makes essentially all of its money on banner ads and other advertising, much of which is nothing more than the spending of venture capital by start-ups who are ringing up the losses. Clearly I am not as insightful as financial markets about the future of the Web as a whole.
I do have stronger, and I hope more insightful, views on the future of the Web with regards to professional societies like INFORMS. There is no doubt that electronic communication and service will be an increasingly large aspect of any professional society. Web systems will increasingly be expected to become profit centers, valued services for members, and vehicles for attracting new members to the society. INFORMS Online will be celebrating its fourth birthday in two months, and for these four years we have concentrated on providing useful information to members and the world at large. All aspects of IOL are available to anyone, members or not. I believe we have been very successful with this approach: Hundreds of thousands of different people, many who have never heard of OR/MS, have accessed our offerings and seen a bit of what we can do. More than 5,000 people have been interested enough to ask for a membership kit through the Web site.
This activity is, however, not enough. INFORMS, like all professional societies, exists to meet educational and professional goals. Meeting these goals is often (though not always!) expensive. How can IOL further help INFORMS meet those goals?
One mechanism to provide resources to INFORMS is to provide services that can result in income to INFORMS. Recently, IOL made its first foray in that direction by opening the INFORMS Online Bookstore (http://mail.informs.org/Bookstore). Despite my confusion about the valuation of Amazon.com's stock, I think online purchasing of books is tremendously convenient. Both Amazon.com and its chief competitor, barnesandnoble.com, have an "affiliate program" which allows any person with a Web page to open a bookstore. All ordering and order fulfillment is done by Amazon (or Barnes and Noble): In essence, the affiliate gets paid simply for referring customers.
Under the agreement IOL made with barnesandnoble.com (who had, in my opinion, a fairer affiliate agreement than Amazon, and who had lower prices and better availability on a selection of technical books that I checked), INFORMS gets 5 percent or more on any sales generated through the INFORMS Bookstore. An interesting aspect is that customers need only enter barnesandnoble.com through the IOL site; the books need not be OR/MS-oriented or particularly highlighted on the site. There is an INFORMS graphic on the Barnes and Noble site when purchases are being credited to INFORMS.
Simply providing pointers to a bookstore would not meet IOL's and INFORMS' goals of providing a service, so the INFORMS Online Bookstore contains book reviews from the practitioner-oriented journal Interfaces, commentary from members, a discussion area and pointers to books that have won INFORMS prizes. We have tried to create an informative environment even for those who choose not to purchase online. Those who do choose to enter barnesandnoble.com through the INFORMS Online Bookstore, however, can be pleased in knowing that a portion of their purchases will be helping INFORMS in its activities (and prices and service are exactly the same as for those who enter Barnes and Noble directly).
In my next column, I will talk about another approach for using the Web to increase resources: making some areas "members only" so as to increase the membership base. I personally would like to keep much or all of IOL available to members and nonmembers alike. But the future is clear: Societies need members and income in order to meet their goals, and Web systems are going to become a primary means for that to happen.
New at IOL
Michael Trick of the Graduate School of Industrial Administration, Carnegie Mellon University, is the editor of INFORMS Online (http://www.informs.org/).
OR/MS Today copyright © 1999 by the Institute for Operations Research and the Management Sciences. All rights reserved.
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