What is e-Commerce?
The History of e-Commerce.
The year was 1455. A somewhat shady businessman and goldsmith, working in a borrowed workshop with borrowed money from what could have been considered a medieval loan shark, had been experimenting with screw presses as a way to print written material. By 1452, he had printed a few German poems on his new machine, but these had not attracted much attention. Then, in 1455, he had a “Eureka!” moment: Johannes Gutenberg printed a Bible.
Gutenberg's printing press revolutionized Western society in a way he never could have anticipated. It could even be argued that the transition from the Dark Ages to the Renaissance began on the day Johannes Gutenberg printed that first Bible. Within a few decades – a short span of time for that era – radical thinkers like Martin Luther and Erasmus saw their tracts disseminated by the hundreds of thousands, a feat that would have been impossible before the printing press. With knowledge no longer limited to an elite class of theologians and aristocrats, Europe's middle class gradually became literate. Ideas spread quickly now, and being a writer became a viable career option.
The First Step Towards e-Commerce: Birth of the World Wide Web
Fast forward some 540 years to France, where an Englishman named Tim Berners-Lee working at the European Organisation for Nuclear Research (CERN) was faced with a problem. CERN was a meeting place for scientists from all over Europe, and in the early 1980s, these scientists all came to CERN with different types of computers, each working on different operating systems, each with different data protocols. As Berners-Lee described in the BBC documentary series Virtual Revolution, if someone wanted to transfer information from one machine to another, they practically had to write it on the back of a envelope, walk to another computer, and enter the information manually.
In 1989, Berners-Lee wrote a proposal for his boss to review, an idea for a system that would enable everyone to share information with ease. He proposed using networking technology along with another existing technology called hypertext to link all the different documents together in a way that made them easy to search and easy to read. His boss returned his proposal with the words “Vague but exciting” written across the top and gave Berners-Lee permission to work on the project during his spare time. With the help of Belgian colleague Robert Cailliau, the world's very first website went live on 6 August 1991.
Little did Berners-Lee and Cailliau realize at the time that they had initiated a revolution as grand in its ability to transform Western civilization as Gutenberg's printing press. Like Gutenberg, Berners-Lee and Cailliau were working with existing technologies – Gutenberg started with screw presses, which had been around since the Roman era; Berners-Lee and Cailliau started with networking technologies that had been around since the 1960s. However, just like Gutenberg's press, the new organisation of existing technologies into the World Wide Web turned out to have far greater implications for society than the two computer scientists at CERN ever could have imagined.
Overcoming Early Hurdles to Online Commerce: One Grateful Dead Arm Wrestles with Capitalist Tycoons
One important difference between Sir Timothy Berners-Lee and Johannes Gutenberg was that the former was strictly a scientist, while the latter was one of the modern era's first entrepreneurs. Gutenberg always intended for his invention to make him money; Berners-Lee never did.
At about the same time that Berners-Lee was making the first website live in France, there was a quiet, little-known battle playing out halfway around the world on America's West Coast.
The battle lines had been drawn up decades earlier, when the counterculture of the 1960s flourished in San Francisco. One of the icons of the counterculture movement was Stewart Brand, who was the publisher of The Whole Earth Catalog, which might best be described as the hippie's guidebook to life.
Brand was a fan of personal computers and of the emerging Internet, as the Internet seemed to be a place without government, without aristocrats, without haves-and-have-nots. Therefore, in 1985, he took the Whole Earth online, founding with Larry Brilliant the Whole Earth 'Lectronic Link, or WELL.
The WELL quickly became the Internet's first large social network. One of the earliest members was none other than Grateful Dead member John Perry Barlow. He wrote a “Declaration of the Independence of Cyberspace,” stating that the denizens of this new online world would be free citizens, living outside of government control and nasty capitalist agendas. Truly, it seemed that cyberspace might be the place where the egalitarian, love-in dreams of the counterculture movement might finally be realized.
Meanwhile, up the coast from the WELL, a thirty year-old entrepreneur named Bill Gates and his company, Microsoft, had just launched the first-ever edition of Microsoft Windows. Already, Gates was doing something that Barlow, Brand, and others like them thought was antithetical to their new movement: He was selling software. Before Microsoft, software was something that computer hobbyists wrote and traded between one another for free. Bill Gates was one of the first – if not the first – software developer to insist that software should be paid for, not shared indiscriminately.
The clash between idealists like Barlow and pragmatists like Gates had begun. From the friction of these two ideas, ecommerce as we know it today, in which some products and services are sold, while others are given away for free, would gradually emerge.
Dot-Com Bubble, Dot-Com Bust: The Internet Boom of the 1990s
By the mid-1990s, there was nothing new about exchanging money via a computer network. Primitive business transactions had occurred across computer networks by the 1960s.
However, because the early days of the Internet were ruled mostly by scientists and idealists, the original backbone of the Internet in the United States, the NSFNET, strictly prohibited any commercial transactions. Banks could use computer networks to transfer money, but the idea of “selling online” was frowned upon. Cyberspace, after all, was supposed to be a utopia free from material concerns.
In 1991, the first commercial Internet service providers came online, which didn't stick to such strict restrictions. In 1994, the first true “ecommerce” purchase was made: A Pizza Hut pizza with mushrooms, pepperoni, and extra cheese was ordered online in Santa Cruz, California. By 1995, NSFNET was officially decommissioned, opening the doors to broader commercial traffic in the United States at last.
At the same time, Microsoft released the first version of Internet Explorer, taking Tim Berners-Lee's World Wide Web and introducing it to the masses for the first time. Internet Explorer was not the first GUI web browser – that honor belongs to Marc Andreesen, who developed MOSAIC in 1993 – but because Internet Explorer was packaged with new Microsoft Windows systems, Internet Explorer was introducing millions of people to the World Wide Web who had never heard of it before.
For some savvy entrepreneurs who could see that the population of cyberspace was about to explode, it was as if gold had been discovered online. By the end of 1995, an online gold rush had begun.
One of the early prospectors was a New York City hedge fund analyst with a love for computers named Jeff Bezos. As he states in the third episode of the BBC's Virtual Revolution series, although not many people were online yet, the rate of growth was so phenomenal that within a few years he knew the web would be ubiquitous. Looking for a way to capitalize on what was sure to be an incredible business opportunity, he moved from New York City to the Seattle, Washington, area, writing a business plan for a new company he would call “Amazon” during the road trip. Amazon, which today is the world's largest online retailer, started in Bezos' garage as he packed up books on a desk he made out of a spare door he found in his new home.
Bezos was not the only one who realized the commercial potential of the web. As he started to ship books from his garage, software developer Pierre Omidyar was working on a site called Auction Web to find out if people would by each other's used stuff. In no time, he sold a broken laser printer for a little less than US$15. By the end of 1996, Auction Web had become eBay and had sold US$7.2 million worth of stuff.
Traditional retailers also started investigating the possibility of becoming online retailers during this time period. One of the first major retailers to join these online retailers was Macys, the American department store giant. In 1996, they launched their first website. Gradually, Macys started to experiment with selling items online later that same year. Macys would be followed by a number of other traditional retailers.
Online retailers Bezos and Omidyar, along with other Internet entrepreneurs, like young Yahoo! founders Jerry Yang and David Filo, started to attract the attention of American venture capitalists. The venture capitalists, who were from a generation that didn't understand the technologies underpinning the Internet revolution, yet they knew that something very special was happening. Despite their lack of understanding, or perhaps because of it, they started throwing money at every new idea for a website that sounded even halfway promising. Their investments excited Wall Street, igniting the speculative dot-com bubble.
During the bubble, commercial websites sprang up at an unprecedented rate, each trying out new ways of making money online. All this time, however, these websites were little more than interesting ideas – few of them had figured out a way to monetize the services they were offering. Web users, who originally started using the Internet in an era when everything was offered freely, didn't think they should have to pay for anything.
As dramatically as the bubble had risen, it burst in 2000.
Rising from the Ashes of the Dot-Com Explosion: Google Offers a New Model for Making Money Online
Only the strongest companies survived the dot-com crash of 2000. Amazon.com was one of them; in 2001, the company posted its first profit. eBay.com was another.
A third company that emerged victorious after the crash was a lesser known, newer company named Google. Started by a couple of Stanford Ph.D. students, Google was a search engine that first started attracting major attention in 1998, when PC Magazine noted that it managed to return very useful results.
Google was already on its way to becoming the world's most popular search engine for the now enormous World Wide Web when, in 2003, came its first big monetary breakthrough: Using the AdSense technology it had recently acquired, Google managed to turn its visitors into commodities. Other websites had already thought of the idea of monetizing sites by selling advertising, but until Google, no one had successfully used small, unobtrusive, and highly-targeted text ads that matched the context of the page. It was a revolution that transformed into a money-making model behind numerous popular websites today, from Facebook to Flickr and Hulu to the Huffington Post.
Although it seems so normal to us now, Google was one of the first companies to realize that eCommerce didn't have to be just about selling things online; free information and free software could still be provided along the lines of the WELL's original utopian ideas, but the users of these freebies would themselves become the website's products.
The Web at 21
Sir Timothy Berners-Lee's “Vague but exciting” idea turns twenty-one in 2012. Curiously, the man who invented a platform that has created some of the richest people on Earth has never actually profited from the World Wide Web himself.
Meanwhile, business marketing online experts and entrepreneurs continue to look for ways to take e-Commerce into the next era. It turns out that Jeff Bezos' original thought – something growing this fast is bound to be ubiquitous one day – was absolutely true. When the dot-com bubble burst in 2000, less than a third of Americans were online; ten years later, two-thirds of that nation's citizens reported making a purchase online.
Help Write the Next Chapter in the History of e-Commerce
If you are a business marketing online professional, an e-Commerce site owner, or an eBay merchant, you need to be at the PeSA Internet Conference 2012. The conference provides business marketing professionals and online retailers a chance to learn new skills, hear about the latest ecommerce innovations, and network with some of Australia's key online players. Held at the Gold Coast Convention Centre in Queensland.
Some of the speakers at this year's Internet Conference will include:
- Gabby Leibovich, co-founder of CatchOfTheDay, Scoopon, and GroceryRun
- Deborah Sharkey, the Managing Director of eBay Australia and New Zealand
- Ahmed Fahour, Managing Director and CEO of Australia Post
- John Lawson, the business marketing online expert and award-winning social media strategist
Don't miss the chance to be a part of the next chapter of the Internet revolution. One day, it might be your own name that's featured in the history of ecommerce!
PeSA is devoted to promoting the highest levels of professionalism, fairness, honesty, and integrity with respect to online trade, while fostering an atmosphere of participation, creativity, responsibility, and philanthropy among its attendees.
We dislike "get rich quick" & "theorists." We are attracted to facts and best practices. PeSA's charter is to assist the Australian e-commerce industry with vital information and provide the opportunity to network with industry peers.