Introduction to the E-Commerce & Internet Business

The global internet audience continues to grow steadily, with the worldwide base of broadband internet users (including fixed and wireless) standing in excess of 5.35 billion as 2024 began according to DataReportal. This vast base of high-speed internet users encourages businesses to innovate in order to offer an ever-evolving array of online services. Thanks to the Coronavirus pandemic, even groceries have moved into the fast lane, as online grocery and household product sales are widely available, while consumers enjoy same-day delivery options.

Top Internet Trends

= AI-powered search

= Generative AI tools

= Booming online gaming

= Growth in regulatory concerns and efforts, including consumer privacy, protection of children’s online activities, free speech vs. controlled posting and anti-trust issues

= Social platforms extending into additional services, such as merchandising and ecommerce

= Migration of entertainment to streaming services by subscription, and away from traditional cable, satellite and broadcast radio/tv

= Software as a Service (SaaS)

The standout winner in ecommerce merchandising continues to be Amazon, where sales have soared thanks to aggressive pricing, free shipping for its “Prime” members and an ever-growing variety of merchandise and services. The firm’s sales outside of North America are booming as well. Meanwhile, Amazon has a massive on-site advertising business and cloud services business, while facing aggressive competition from non-U.S. ecommerce firms, particularly Shein and Temu.

Analysts at eMarketer reported American ecommerce sales in 2023 of an estimated $1.177 trillion, up significantly from $815.4 billion in 2020. This figure includes all goods and services purchased using the internet but excludes travel and event tickets. On the same basis, global internet ecommerce sales exceeded $5.78 trillion in 2023, according to eMarketer. China had an estimated 2023 total of $2.93 trillion.

Digital advertising in the U.S., during 2022, was a projected $239.89 billion, according to eMarketer, up 13.6% from 2021. Mobile advertising was projected at $168.88 billion for the year.

Growth in broadband subscriptions worldwide continues at a strong pace. The number of American homes and businesses with broadband access capabilities topped 126.8 million by the end of 2023, according to Plunkett Research estimates, thanks in part to modest monthly fees at internet service providers. This number does not include mobile broadband subscriptions, estimated at another 390.3 million devices, including smartphones.

A Brief History of the Online Sector: The ecommerce and internet sector has evolved rapidly, going through several distinct stages since its beginnings in the 1970s:

The Internet Is Born: First, there were the early days, when the internet was seen by many as a realm for techies only, one that would produce few, if any, commercial enterprises. Initially designed in 1973, the internet was a series of communication protocols written by Vinton Cerf as part of a project sponsored by the U.S. Department of Defense’s Defense Advanced Research Projects Agency (DARPA). The first demonstration of a three-network internet protocol-based connection occurred in November 1977. Eventually, a well-enabled internet was rolled out in 1983, primarily as a failsafe method of defense communications and as a means for researchers at various universities to communicate.

The Web Is Created: Next, the World Wide Web and the coding language of HTML were conceived in 1989 and implemented between 1990 and 1993 by Tim Berners-Lee, enabling a never-ending hyperlinked cyber world where sharing unlimited data became user-friendly thanks to the magic of linked pages.

The Boom Ensues: Starting in 1993 and 1994, entrepreneurs and financiers realized that hyperlinked, electronically posted data could be commercialized with vast, global potential. Amazon.com was launched in 2004. A dramatic revolution in retailing, publishing and entertainment was visualized, one in which consumers and businesspeople alike would eagerly pay for the convenience of online shopping, trading and viewing of published data. An economic boom ensued, the likes of which hadn’t been seen since the beginnings of earlier technological breakthroughs: electricity, the railroad, the telephone, the automobile and the passenger-carrying airliner.

Thousands of hopeful new businesses were launched. Capitalization for these new internet-enabled companies ranged from cash-strapped ventures launched in garages with Visa card credit lines, to companies like WebVan that received vast sums from professionally managed venture capital firms only to fail miserably. Roughly 6,000 new firms of significant size raised a cumulative total of more than $100 billion in venture capital in the boom period (1994-2000). About 450 of these companies sold their stock to the public via IPOs (initial public offerings). Stock markets soared and instant billionaires were made, although many of those stocks later plummeted. Venture funds that cashed out early reaped phenomenal gains, and financiers easily found additional investors for new venture capital pools. Companies with little or no sales and profits, led by the success of Netscape’s IPO, found eager buyers for their newly issued stocks. The NASDAQ index of stocks rose to 5,000 by early in the year 2000, and the Chairman of the Federal Reserve warned of “exuberant optimism.” Some said this boom couldn’t last—others said it was the beginning of a “new economy” that would last forever.

The Bust: In mid-2000, the internet industry entered a bleak and dreary phase after the NASDAQ collapsed in March, bringing the entire sector to its knees. By October 10, 2002, the NASDAQ was down to 1,108 from a high of 5,132 in March 2000. Hundreds of thousands of people lost their jobs. Stock portfolio values plummeted. Thousands of firms closed their doors, filed bankruptcy, downsized or were scooped up at bargain prices by competitors. Sellers of hardware, software, consulting and telecommunications services suffered mightily. Entrepreneurs found it nearly impossible to raise funds to launch or sustain their businesses. The dream of a “new economy” became a nightmare for some—profits still matter; business cycles still happen.

The Reality Phase: By early 2003, this sector’s dark clouds were abating, and a “reality phase” was taking shape. Well-conceived, internet-based businesses were proving their value. Consumers had become devoted fans of buying over the internet. Businesses of all types found that the internet creates true operating efficiencies and drives profitability (such as booking travel reservations online rather than through costly human agents). “Efficiency” is the most important factor in the ecommerce and internet sector’s newfound success. Consumers find the internet to be a terrific way to efficiently expend their shopping and banking efforts. Consumers of all types use eBay to look for bargains, autotrader.com to look for cars at great prices and iTunes to download music. Corporate procurement managers find the internet to be the most efficient way to purchase needed goods and inventory. Billions of people worldwide find e-mail, instant messaging and VOIP telephony to be the most efficient ways to communicate.

Low Costs Fuel the Steady Global Growth: Today, access to fast internet, both wired and wireless, is available at bargain prices in a vast footprint across the globe. Even in relatively undeveloped nations, both consumers and businesses have grown to rely on the internet for everyday needs. Inexpensive devices and wireless networks continue to proliferate in most of the world. Mobile computing is accelerating at blazing speed thanks to moderately-priced smartphones and service plans, offering fast internet access and very advanced features. Meanwhile, the cost of developing and maintaining web sites has plummeted, opening the door to millions of self-funded entrepreneurs, and making it easier for venture capital firms to fund startups using low amounts of cash. Trends such as open software and cloud computing, along with modular software development tools, have made it easier, faster and cheaper to start sophisticated web sites.

Artificial Intelligence (AI): Artificial intelligence is rapidly and dramatically changing three segments of the internet:

1) Creative applications. Generative AI (such as ChatGPT) is enabling content creators to use online tools to write text, design advertising, generate online games and virtual worlds, write software code, create websites and generate graphics.

2) AI-driven search. Search engines are adding artificial intelligence (AI)-driven features that are dramatically changing the nature and effectiveness of search results.

3) Ecommerce sites. Many sites are utilizing AI to better tailor merchandise offerings and to push both streaming entertainment and shopping suggestions to consumers on a predictive and personalized basis.

Cybersecurity and Regulation: The global regulatory environment for the internet, online advertising, social media and ecommerce is more daunting than ever. Governments are attempting to keep up with complex technological advances (such as AI) and privacy issues while addressing anti-trust and competitive concerns and disastrously failing to protect businesses and consumers to any reasonable degree against online fraud and exploitation. Major regulatory acts have been passed in a few areas, particularly in consumer privacy. This puts internet-based companies in a position of continually attempting to meet evolving government requirements while evading potential fines that can run into the billions of dollars or Euros.

One of the biggest, and most poorly addressed, issues is losses and treats relating to cybersecurity, ranging from hackers and fraudsters to online financial fraud, malware, exploitation of children, ransomware and even potential threats from hidden back doors and network/system entry points that could bring down a region’s entire energy, water or transportation infrastructure, or disable military communications and command systems. Unfortunately, AI is empowering fraudsters to generate emails, mimic voices, steal identities and scam both consumers and businesses on a global basis.

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