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Books about internet business and e-commerce

Books about business on the internet -- and indeed the business of the internet -- reviewed on this page are:

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Evan I. Schwartz (1999), Digital Darwinism: Seven Breakthrough Business Strategies for Surviving in the Cutthroat Web Economy, Penguin, London and New York.

You might ask what I, a lily-livered academic, was doing reading this volume which, as you can tell from the title, is a hard-nosed business book. Well, it's quite a thoughtful book about how websites rise and fall, and gain attention, and about how the Web is changing how people do things in the world, and I'm interested in those topics.

It's well-written, and kicks off with some amusing stories about websites which did mad things to gain attention, losing shedloads of money in the process, but then, having got noticed, were bought up for millions of dollars by big companies. The Darwinism theme is used quite elegantly, although, of course, you're not sure how much of a Darwin expert the author is -- he could have read most of this 'survival of the fittest' stuff on the back of a cereal packet.

Most of the book is devoted to a chapter on each of Schwartz's "Seven Breakthrough Business Strategies for Surviving in the Cutthroat Web Economy". Personally, I found the first one the most engaging, and then the book becomes slightly more dull with each new chapter, although overall it remains quite interesting.

Since you can see what the seven strategies are on the website www.digitaldarwinism.com, I'm hardly giving away secrets by listing them here. [The seven principles are copyright Evan I. Schwartz 1999]:

1: Build a Brand That Stands For Solving Problems

This chapter is of most interest to web developers generally. It argues that whatever you do on the Web, if you want it to be a real success, it must have a point and address a specific need. It reminds us to look at everything from the user's point of view (a familiar but important point). Funnily enough, the chapter criticises the fabulously successful website Yahoo, which, it is argued, has added tons of features to its site -- news, email, auctions, puppy training, whatever -- without pausing to wonder what problem all of these features are meant to be a solution for.

2: Allow Your Prices to Fluctuate Freely with Supply and Demand

Tells you to copy Priceline.com and let shoppers name their own price for certain end-of-line items, basically.

3: Let Affiliate Partners Do Your Marketing For You

Tells you to copy Amazon.com and set up an affiliates programme (so that a site which refers a customer to your e-commerce site is rewarded with a percentage of the profits).

4: Create Valuable Bundles of Information and Services

Ironically, considering point one above, this chapter tells you to copy Yahoo and bung every bloody feature you can possibly think of onto one site.

5: Sell Custom-made Products Online, Then Manufacture Them

Very boring manufacturing chapter. Tells you to copy Sevencycles.com and make things to order.

6: Add New Value to Transactions Between Buyers and Sellers

Even more boring chapter telling you to copy some models of business-to-business services.

7: Integrate digital commerce with absolutely everything

Rather obvious chapter telling you to thoroughly mix your e-commerce business up with your regular business. Examples of stupid companies who failed to do this help this chapter to seem less obvious.

So, overall, we have found that if you are the kind of person who reads the first couple of chapters of a book and then ends up skimming the rest, then this book is just right for you, since that is exactly how it should be read.

Others may be disappointed that their dogged insistence on reading all of the words becomes gradually less rewarding, but still. If you have a Web-based business then the whole thing may be wonderfully exciting for you. If you're just interested in the Web, read the first couple of chapters. This book is definitely a lot better than a big pile of other internet business books.


 

Jason Olim, with Matthew Olim and Peter Kent (1998), The CDnow Story: Rags to Riches on the Internet, Top Floor, Colorado.

My shelves are full of books on how to make money on the Internet. They tell you how it can be done, what possibilities it offers, how you have the potential to exploit online trading. Like most "How to..." books, they tell you how it could be done. And basically, they all say the same thing. This is email - send out lots of messages. These are newsgroups - advertise in them, but not too much. Create a database of customers. Build a user-centred web site. It's all good advice; but it's theory, not practice. Because none of these books have been written by people who run successful businesses in the on-line world.

The CDnow Story is different, because it's been written by two young men who have actually done it. Jason and Matthew Olim are the famous twins who founded the world's biggest online music store from the basement of their parents' house. They started in 1994 with an investment of $1500 Jason had saved up to buy a guitar. Within three years, they had a turnover of sixteen million dollars. It's now well known that even big businesses have had problems making money on the Internet. So what was it that made CDnow so successful? Well, a combination of factors - plus a lot of hard work.

To start with, there was a clear vision and a new idea: an online record-ordering service with its own database of reviews and information. Second, they hit the Internet just at the moment the number of users went into exponential increase during 1994. They chose an item that was easily ordered and posted. They didn't become involved in production and distribution, but left that to others. And despite all their claims to the contrary, they started with a reasonable knowledge of computer programming.

This book charts the development of their success - and they explain quite frankly where they think they made mistakes - and how they corrected them. There are many useful lessons to be learned from all this - even for those of us below the millionaire standard. One is the amazingly conservative nature of many businesses - even venture capitalists - when confronted with a profitable but new idea. Only one record distributor would touch them at the outset, and that was owned by a friend's father. [This company has now increased its turnover enormously, due to its contact with CDnow.]

Their experience reflects the breathtakingly rapid development of Web commerce in its early phase:

"From being a small company that nobody wanted to talk to in 1994, by 1995 we were swamped with requests from companies wanting to make more money from their Web sites by pushing traffic our way, and companies such as USA Today and AT&T were calling us to talk business."

They had to scratch around for money to begin with. The rules of electronic trading were being made up as they went along. And all the time they were in competition with huge companies with bottomless coffers - but who were too big to move quickly.

With the company in its current, fully-fledged, and successful condition, the account of their operations covers some very interesting topics for those interested in electronic commerce. They discuss the security of online shopping with credit cards which got off to such a bad start, but which they now claim is safer than in a shopping mall. They warn against the attractions and dangers of product diversification. They are surprisingly open in revealing their company's policies on cookies, external links, and the lessons of site log analysis. Having spent $3.6 million with Yahoo!, they have thoughtful reflections on customer retention, personalised accounts, and the effectiveness of advertising. They even discuss the new business model of affiliate programs, where people putting CDnow links onto their site are paid a commission on any sales.

En passant they offer some bracing observations on Web site design. This is in fact the only interface they have with their customers, since they won't take orders over the phone. So the driving factor in design is function [which confirms the advice given in the best design manuals]. They will have no truck with 'cool' design features, even when you think they might have been appropriate:

"we don't think that playing a sound as soon as someone enters our Web page makes a lot of sense. It's not cool. It just slows down the loading of the page, and can irritate the visitor. We do, however, provide hundreds of thousands of music clips that are available if you want them. We think that multimedia on the Web should be used to serve a purpose, not for its own sake."

If there is one important design message which emerges from this book, it's that Web sites, as Peter Kent puts it in a summative chapter, must be guided by what customers want, not designers: "CDnow understood the technological aspect [of design] right from the start...Graphic design came last; function was the primary concern."

They are very clear-headed and charitable towards their competitors, and even put forward the argument that with online sales still at only 0.7% of Internet users, the future lies in attracting new customers, not worrying about what Tower records might do next.

They end with some interesting reflections on the state of their own market sector - why for instance books and music have been the first products to be marketed successfully on the Internet. The reason they suggest is that people want a wide choice and detailed information about books and music - plus samples, which are not possible with wines, automobiles, or kitchen furniture. They even offer potential entrepreneurs hints on which categories of product are ripe for online sales.

If you're thinking of starting out in electronic commerce, this book would be a very wise first investment. They don't offer much detail on the hard economics of pricing, wages, costs and bank charges, but they will certainly inspire anyone with ambition, at the same time as providing valuable lessons on the application of rigorous self-criticism to the development of a commercial strategy.

OK, so it's an old story. The American Dream - or as the blurb puts it, "how two kids in a basement grabbed the on-line music business" - but this is an exhilarating account of Internet business methods which claims its force from genuine first-hand experience. It's also good value at £12.95.

Review by Roy Johnson of mantex.co.uk


 
 

James Wallace (1997), Overdrive: Bill Gates and the Race to Control Cyberspace, John Wiley, New York.

The tale of how a geeky (but not foolish) guy from Redmond decided that having control of everybody's computer operating systems was not really enough and that if he was truly going to succeed in the world he had better seize control over the internet too. Well, actually Mr Gates (for it is he) only decides that in the last quarter of this book, which covers the life of Microsoft from 1993 to early 1997. It's a very readable insight into the ways in which Microsoft operates and wields its power. Unfortunately all of the really naughty things that the company has done to steer the Web into a set of Microsoft standards -- such as making additions to HTML, the non-proprietary language of webpages, so that pages which use these features will only work well with Microsoft's own browser -- have happened since this book was completed. In that sense, the book is unable to fully document 'the race to control cyberspace', as the title says. On the other hand, Mr Wallace cannot be blamed for his lack of time travel ability, and the book is very good on the period it covers, showing how Microsoft blithely ignored the internet until suprisingly late in the day, and documenting its fights with the US Department of Justice (although it gives us too much superfluous information about the DoJ near the beginning of the book). Overall, a good bit of history, written well, and featuring a worthwhile examination of the early days of the popular Web.


 
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