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EARTHLINK INC.
As the second largest Internet Service Provider (ISP), behind America Online (AOL), Earthlink Inc. serves more than 4.8 million consumers and small businesses. The company offers its members dial-up services; broadband access such as digital subscriber line (DSL), cable, and wireless; domain registration; Web design; Web hosting; and various other services aimed at helping enterprises with their e-business efforts.
access. In August of that year, Earthlink broadened its service area dramatically when it signed a deal with UUNET Technologies. The alliance allowed Earthlink to use UUNET dial-up access numbers to provide national service in 98 U.S. cities. The company also became the first ISP to offer unlimited dial-up access for a flat rate of $19.95 per month, allowing members to surf the Web without time constraints. Earthlink continued its expansion and in July of 1996 partnered with PSINet to offer dial-up access across the United States and Canada. The firm also teamed up with industry giant Microsoft Corp. and began distributing its Internet Explorer browser to members. Earthlink, in turn, was included on Microsoft’s Windows 95 operating system desktop. Along with capturing a large portion of individual accounts, the company also began to focus on providing services to businesses as well. In late 1996, it began to offer nationwide integrated services digital network (ISDN) and frame relay services, which provided higher-speed access to the Internet. In January 1997, Earthlink went public with a membership of nearly 300,000 North American-based individuals and businesses. The firm launched its online mall later that year, promoting the e-business efforts of many e-tailers such as BarnesandNoble.com, NetGrocer, and Travelocity by offering links to their Web sites at the online mall. The company also kept pace with ever-changing Internet technologies and began offering 56K-flex modem lines, which were twice as fast as 28.8K modems. Earthlink and Charter Communications also initiated a partnership to provide high-speed Internet access through cable modems—an emerging technology at the time—to Charter’s customers in California.
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EARLY HISTORY
Earthlink Network was founded in 1994 by Sky Dayton. Dayton had developed the idea for Earthlink when he became frustrated with his ISP after unsuccessful attempts to log on to the Internet. In 1993, he set plans in motion to create an ISP whose major focus would be providing customer service. Dayton sought out investors Reed Slatkin and Kevin O’Donnell and secured $100,000 in funding for his new business. Offering technical support by phone, Dayton had secured his first customer by July 1994. Earthlink’s first member logged on to the Internet using one of the start-up’s 10 modems. Earthlink became increasingly popular as use of the Internet by businesses and consumers grew quickly. In 1995, the firm teamed up with Netscape Communications Corp. in a deal that provided Earthlink members with Netscape’s Navigator, an Internet browser. Dayton also launched Earthlink Software, an innovative package that set up computers for Internet
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GROWTH VIA STRATEGIC ALLIANCES AND EXPANDED SERVICES
Working toward its goal of becoming the largest independent ISP, Earthlink forged several strategic alliances in 1998. In February, the firm teamed up with Sprint Corp. in a deal that combined the two companies’ Internet services and gave Sprint a stake in Earthlink. It also positioned Earthlink as a major player in the Internet services market and gave the firm access to Sprint’s large customer base. By April, Earthlink had signed on its 500,000th member. In another deal, Earthlink’s Internet software became the default on Apple Computer’s newly launched iMac computer. The alliance with Apple—one of the most successful in Earthlink’s history—solidified the firm’s commitment to expansion through original equipment manufacturer (OEM) channels. In similar deals, Packard Bell and NEC Ready Computers named Earthlink the default ISP on their computers in late 1998, just in time for the upcoming holiday season. The partnerships secured more member signups than any other marketing promotion in Earthlink’s history to date. Finally, an agreement with CompUSA, a major U.S. computer retailer, secured Earthlink as the chain’s official ISP and also gave Earthlink access to CompUSA’s customers and exposure in the store’s promotional materials. By the end of the year, Earthlink’s customer base had reached 1 million. The ISP experienced continued growth into the following year. In March of 1999, Earthlink launched TotalCommerce, which offered small businesses the opportunity to set up online storefronts. It also continued to promote its Click-n-Build Web site creation tool that allowed members to build Web pages. Additionally, members had an opportunity to create a personal start page, which loaded automatically each time they logged on to their accounts. These pages could be personalized with links to various retail sites, investment information pages, and a variety of other online products and services. Along with helping its members to create a presence on the Web, the company also began to offer high-speed access options. For example, utilizing Sprint’s DSL network, Earthlink began offering its customers alternatives to basic dial-up access. It also teamed up with UUNET to offer nationwide DSL access to consumers—the first such offering in the industry. The firm continued to secure lucrative OEM partnerships as well, including being named the official ISP of Micron Millenna computers. Phoenix Technologies also added an Earthlink icon to its new computers. Earthlink entered the new millennium with a mission of becoming the largest ISP in the world. To facilitate this, Earthlink merged with Mindspring En-
terprises, an ISP formed in 1994 by Charles Brewer who, like Dayton, was frustrated with current ISP offerings. After the $1.3 billion deal was completed, Earthlink—which formally changed its name from Earthlink Network to Earthlink Inc.—served more than 3 million members and operated as the secondlargest ISP in the United States. A few months later, Earthlink broadened its subscriber base once again with the purchase of OneMain.com, a leading ISP that served 762,000 dial-up, broadband, and Web hosting members in rural and suburban areas. Building upon that deal, Earthlink partnered with Hughes Network Systems in November 2000 to offer high-speed satellite broadband services to those in rural areas. Believing broadband services were essential to remaining competitive in the ISP industry, Earthlink sought out rival AOL, looking to forge key technology partnerships. In December 2000, AOL agreed to allow Earthlink to use AOL and Time Warner cable lines to offer high-speed services to its members. Despite Earthlink’s position as the second-largest ISP in the country, its membership base of 4.8 million was still far behind AOL’s nearly 29 million users. Although revenues grew 32 percent in 2000 to reach $986.6 million, the firm had yet to record positive net income. Nevertheless, Earthlink management continued to focus its efforts on offering high-speed access and converting regular dial-up members to broadband services. The ISP industry, which had been experiencing considerable merger and acquisition activity for the past several years, continued to consolidate, prompting speculation concerning Earthlink’s future. In a March 2001 BusinessWeek Online article, Earthlink CEO Garry Betty commented: ‘‘I could speculate all day about who would buy a company like Earthlink. Our story is that we’ve been successful providing the basics better than the competition.’’ While Earthlink’s future remains uncertain, the company pledges to continue to develop shareholder value in the future while pursuing strategic alliances that fit in with company plans to remain a leader among ISPs.
FURTHER READING: ‘‘Earthlink Beats Wall Street Q4 Forecasts.’’ Futures World News. May 21, 2001. ‘‘Earthlink, DirectPC in Two-Way Satellite Internet Deal.’’ Newsbytes. November 18, 2000. Earthlink Inc. ‘‘Earthlink History.’’ Atlanta, GA: Earthlink Inc., 2000. Available from www.earthlink.com. Hillebrand, Mary. ‘‘Earthlink Broadens Base, Buys OneMain.com.’’ E-Commerce Times. June 9, 2000. Available from www.ecommercetimes.com. Shook, David. ‘‘Street Wise.’’ BusinessWeek Online. March 26, 2001. Available from www.businessweek.com.
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SEE Bandwidth; Broadband Technology; Connectivity, InALSO: ternet; Internet Access, Tracking growth of; Internet Service Providers (ISPs); UUnet.com
EBAY
eBay was founded in 1995 by Pierre Omidyar, who wanted to set up an auction site for sellers of obscure and collectible items. After the site proved popular, eBay was incorporated in May 1996. All of the inventory, ordering, shipping, and payments were handled by sellers and buyers who registered on the eBay site. The company’s revenue came from commissions on items that were sold and from listing fees. In 1998 Margaret C. ‘‘Meg’’ Whitman became eBay’s CEO, joining the company after working at FTD Inc., Walt Disney Co., and Hasbro Inc. eBay was both popular and profitable, having transformed auctions into highly charged classified ads. Last minute bidding frenzies were common on the timed auctions. By providing feedback from buyers and sellers, eBay had succeeded in establishing an online community. Customer loyalty was a key factor that allowed the site to maintain a dominant position in the auction market. Tips and gossip were shared on chat boards, and many people came to earn their living by selling items on eBay. After Whitman joined eBay, she revamped the site to make it easier for users to participate. She sought ways to make it safer for customers to purchase items. Whitman revamped the payment process by allowing customers to use credit cards instead of personal checks or money orders. She also began expanding eBay beyond its core model of collectibles. eBay acquired art auctioneer Butterfield & Butterfield in 1999 and used the Los Angeles area as a test market for local auctions of items that were difficult to ship, such as cars and furniture. As Whitman told Newsweek in 1999, ‘‘We are enabling a kind of commerce that didn’t exist to any extent before, and that’s person-to-person commerce.’’
for an item. Sellers paid eBay a small commission for listing items, from $.25 to $2 per item. They could pay an additional $50 for additional promotion on the eBay site. When an item was sold, eBay received a percentage ranging from slightly more than one percent to five percent of the selling price. According to the company’s 1998 IPO prospectus, revenue for 1997 totaled $5.7 million. Net sales for the first half of 1998 were $14.9 million, with gross profits of $13.2 million. Earnings from operations for the first six months of 1998 were $2.8 million, and the company managed to earn net income of $348,000. During that period the number of registered users increased from 340,000 to more than 850,000. At the time of the IPO, founder and chairman Pierre Omidyar owned 42 percent of the company, and venture capital firm Benchmark Capital had a 21.5percent interest after investing $5 million. When eBay held its IPO in September 1998, investors quickly bid up the initial offering price of $18 to more than $54. After the stock settled down to around $47 a share, analysts noted that the valuation reflected consumer excitement over online auctions and investor awareness of the potential for profit. At the time, most Internet ventures were losing money. Just before its IPO, eBay entered into a threeyear agreement with America Online (AOL). In exchange for $12 million in payments to AOL, eBay became the exclusive online trading community for AOL. By October 1998 eBay’s community had grown to more than 1 million registered users, and some 700,000 items were listed on eBay in more than 1,000 categories.
eBay
ENJOYED GROWTH AND EXPANSION, 1999-2000
Throughout 1999 and 2000 eBay grew by adding new categories, forming strategic partnerships, and making acquisitions. Following the acquisition of Kruse International in May 1999, eBay launched a new automotive category later in the year. Kruse was an Indiana-based automotive auction house that sold some 130,000 collectible cars each year through more than 40 events. In March 2000 eBay launched a cobranded automotive site with AutoTrader.com, called eBayMotors.com, that sold only used and collectible cars. In May 1999 eBay also acquired Billpoint, a company that facilitated person-to-person credit card payments over the Internet. In March 2000 eBay formed a strategic partnership with Wells Fargo & Co. to develop an online person-to-person payment platform. The partnership involved Wells Fargo taking a 35-percent equity interest in Billpoint. Later in 2000 eBay and Wells Fargo launched Electronic Check, a new payment option for eBay buyers and sellers.
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BECAME PUBLIC COMPANY IN 1998
In September 1998 eBay went public with an initial public offering (IPO) that raised more than $60 million. Potential investors were attracted by the fact that eBay would not have any money invested in inventory. Items that were auctioned over eBay remained the property of the seller, who received payment directly from the buyer. At no point would eBay take possession of an item to be sold or payment
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In 1999 eBay formed strategic partnerships with Warner Bros. and Juno Online Services, among others, and expanded its partnership with AOL. The agreement with Warner Brothers gave that company’s online users a way to bid on entertainment merchandise featured on different areas of eBay. Links to Warner Brothers’ online properties were added to eBay’s site. eBay’s agreement with Juno Online Services made eBay the exclusive provider of online trading services on JunoLand, Juno’s online community site, and on Shop@Juno, the company’s online shopping channel. eBay expanded its arrangement with AOL by launching four new co-branded sites on several AOL brands. eBay’s high-flying stock price enabled it to acquire the prestigious art and antiques auction house Butterfield & Butterfield in May 1999 for $260 million. The acquisition was designed to accelerate eBay’s entry into higher-priced items and to enhance its position in middle-tier items priced from $500 to $5,000. During 1999, eBay also rolled out more than 30 regional Web sites in U.S. cities nationwide. While items on the regional Web sites were available internationally, the sites made it easier to buy and sell items that required a physical pick-up, or which were expensive to ship. eBay introduced a new service in 1999 called Personal Shopper. Designed to retain shoppers in niche markets where items were not always for sale, Personal Shopper provided potential buyers with email alerts when an item in a category they were interested in came up for auction. In November 1999 eBay, together with collectible and hobby publisher Krause Publications, launched eBay Magazine. Two books, The Official eBay Guide and eBay for Dummies, also were published in 1999. Internationally, eBay purchased alando.de AG, Germany’s largest online trading company in 1999. In early 2000 eBay Japan was launched, with NEC Corp. taking an equity stake and promoting the site. Unfortunately, eBay launched its Web site five months after Yahoo! opened Yahoo! Japan in September 1999. While eBay charged a commission for each transaction, Yahoo! did not. As a result, by mid2001 Yahoo! held 95 percent of the online auction market in Japan, while eBay only had a three-percent share. If eBay had any problems in 1999, the most persistent involved its servers going down. In mid-1999 the company experienced its worst outage to date when software problems and a lack of server redundancy put the company offline for more than a day. As a result, eBay lost more than $5 million and 20 percent of its market value. After expending capital to rebuild its information technology (IT) infrastructure, eBay reported strong financial results for the first quarter of 2000, beating analyst’s expectations.
In the second quarter of 2000 eBay announced several wireless agreements as part of its eBay Anywhere strategy. The strategy was designed to make eBay accessible from any Internet-enabled mobile device. eBay partnered with 2Roam to format its content and deliver it to virtually any mobile device on any carrier network. Specific agreements also were announced with OracleMobile, a subsidiary of Oracle Corp., and with Sprint PCS. A mid-2000 report from Nielsen/NetRatings found that eBay users spent an average of one hour and 42 minutes on the site and viewed 256 pages, making eBay the ‘‘stickiest’’ Web site on the Internet. At the time eBay had more than 12 million registered users. It also was in mid-2000 that eBay acquired Half.com for more than $300 million in stock. Half.com was a fixed-price, person-to-person trading marketplace. The addition of a fixed-price alternative expanded eBay’s trading platform and increased its potential to attract a wider customer base. After the acquisition, Half.com and eBay continued to operate independently and to promote each other. In November 2000 eBay announced that it would begin to license its auction technology to enable other firms to create their own applications. The eBay application program interface (API) initially was made available to selected licensed partners and developers. By February 2001 some 20 to 30 other sites and developers were enrolled in the program or had expressed an interest in joining. FairMarket, which hosted private label auctions for 70 companies including J.C. Penney, Dell Computer, and CompUSA. Using API, FairMarket linked its merchants, manufacturers, and distributors directly to eBay auctions. It took its customers’ merchandise out of their inventory systems, prepared it for auction, massaged the bids, and got the information back to the fulfillment systems. FairMarket also would supply the backoffice capabilities that eBay did not supply. Another licensee, GoTo Auctions, became the first application to be certified for eBay’s API program. GoTo Auctions’ ChannelFusion Network allowed users to sell items on six different auction sites, including eBay, Amazon.com, and Yahoo! Auctions. For 2000, eBay reported revenue of $431.4 million and net income of $48.3 million. The company was debt free and had no interest expense.
eBay
EBAY COULDN’T BE BEAT IN 2001
In January 2001 eBay launched eBay Premier, a new site for art, antiques, and rare collectibles available at www.ebaypremier.com. The site grew out of the previously existing eBay Great Collections site and was the result of the connections eBay had made in the art world. In March 2001 eBay Premier hosted
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an online auction of Marilyn Monroe memorabilia, including the famous ‘‘Red Velvet’’ nude photos from 1949, in conjunction with a live auction at Butterfield & Butterfield. Although bidding for the photos failed to reach the necessary minimum and they were not sold, other items were sold in the $15,000 to $20,000 range. eBay reported that close to 60 percent of the bids were placed through eBay Premier, as were about 20 percent of the items that sold. In January 2001 eBay announced that it would acquire a majority interest in Korea’s largest auction Web site, Internet Auction Co. Ltd., for about $120 million. The South Korean company had about 2.8 million registered users. About one-third of South Korea’s citizens were online, making the country the sixth-largest Internet market in the world. At the time eBay was reported to be the number one online auctioneer in the United States, the United Kingdom, Germany, Canada, and Australia. It also operated sites in France and Japan. At the end of January 2001 eBay raised its listing fees. The announcement came after Yahoo! Auctions began charging listing fees after being a free auction service since its inception. The fee increases on eBay were the company’s first since December 1996. Analysts indicated that the fees could boost eBay’s revenue by as much as five percent in 2001. In early 2001 eBay attempted to address the problem of spamming that its registered users were experiencing. Through data mining, e-mail addresses were being harvested from the eBay system and used for unsolicited commercial mailings, or spam, by noneBay sellers. For example, bidders on software subsequently received spam e-mail offering them pirated software. To help protect its users from spam, eBay changed its e-mail policy to gain more control over online contacts between eBay users. The company announced that any users not involved in a particular auction would only be able to contact each other by sending messages through the eBay system. Sellers would still be able to obtain the e-mail addresses of bidders on their auctions, and winning bidders were able to contact sellers directly. All other contact would be channeled through a new ‘‘Contact an eBay Member’’ feature. Critics of the new policy said it was designed to stop offline sales between members. In December 2000, eBay announced that it would begin enforcing its ban on offline sales between members. eBay also provided its members with some protection against auction fraud. Some analysts believed that fraud and the threat of losing money online were the biggest inhibitors to the growth of e-commerce in the 21st century. eBay users were covered for up to $200 worth of losses through an automatic insurance plan. In addition, an escrow program was in place that
enabled users to hold their money in a neutral account until their transaction was completed. In March eBay’s unique audience grew by nearly 4 million to a total of more than 22.1 million unique users for the month. It moved up in the Nielsen/ NetRatings ranking from 15th to 11th in terms of unique visitors. While eBay’s number of unique visitors was comparable with that of Amazon.com, eBay did better in terms of the number of pages viewed and the time each person spent on its site. eBay ranked second among all Internet sellers, capturing 14.5 percent of all Internet shoppers. Amazon.com led with 15.1 percent. Analysts noted that combining eBay’s numbers with those of recently acquired Half.com would make eBay the top Internet e-tailer. In March eBay announced an alliance with Microsoft that would integrate eBay’s auction marketplace into selected Microsoft Web sites. Other new partnerships included an alliance with Artnet.com that made Artnet.com’s fine art pricing database available to eBay Premier customers. An alliance with Eppraisals.com gave eBay users access to professional art and antiques appraisers. During the second quarter eBay expanded offerings on Half.com, adding millions of new items across four main categories: computers, consumer electronics, sporting goods, and trading cards. eBay’s fixed-price formats, such as Buy it Now, also performed well. Buy it Now enabled buyers to instantly buy an auction item. eBay’s goal was to increase its annual revenue to $3 billion by 2005. The company had international operations in 18 countries. It completed its acquisition of the Paris-based online trading network iBazar S.A. in May 2001 for $112 million in stock. iBazar hosted online auction sites in eight European countries. In March eBay opened Web sites in Ireland, New Zealand, and Switzerland. The company’s best performing international units were Germany and the United Kingdom. Analysts were skeptical of eBay’s $3 billion target, because it would require the company to grow 50 percent each year. For the first half of 2001 eBay again beat analyst expectations in both quarters. Quarterly net revenue was $147.4 million in the first quarter, a 90-percent increase from the same quarter in 2000, with quarterly net income of $21.1 million. In the second quarter revenue reached $180.9 million. As a result of its strong first-half financial performance, eBay raised its expectations for 2001 and projected that second-half revenue could reach $400 million. In June 2001 eBay launched a two-week pilot test of eBay Stores. Some 18,000 merchants signed up to sell musical instruments, jewelry, electronics, and collectibles. President and CEO Meg Whitman called eBay Stores ‘‘the next step in eBay’s evolution.’’ The
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storefronts combined fixed-price retailing with eBay’s auction system. eBay’s entry into storefronts followed that of Amazon.com and Yahoo!, whose storefronts gave merchants that were too small to establish their own Web sites a way to sell goods online. Other new initiatives included an agreement with luxury gift e-tailer Ashford.com to sell its leftover and closeout merchandise on eBay in both a fixed price and an auction format. eBay also formed a new alliance with Terra Lycos to integrate eBay auctions into the Lycos auction site and make eBay a featured advertiser on the Lycos network. The agreement gave eBay exposure to the 94 million unique visitors to Lycos sites each month. In mid-2001 eBay launched a new service involving newspaper classified ads. The eBay Seller Classifieds program gave sellers the opportunity to market their items to a wider range of potential buyers. Sellers who had items listed on eBay for auction were given the option of advertising their items in a branded eBay section in local newspaper classifieds. The program was first offered in the Minneapolis-St. Paul area, with plans for expansion into Florida’s St. Petersburg Times.
E-books
FURTHER READING: Ashman, Anastasia. ‘‘Two Auction Players Launch eBay Infrastructure.’’ Internet World. February 21, 2001. ‘‘Auction Brawl.’’ Business Week. June 4, 2001. ‘‘Auction Nation.’’ Time. December 27, 1999. ‘‘eBay’s Bid for Fixed Prices.’’ Business Week. June 26, 2000. Enos, Lori. ‘‘Can Anyone Catch eBay?’’ E-Commerce Times. June 19, 2001. Available from www.ecommercetimes.com. Mahoney, Michael. ‘‘eBay Beats Street, Raises 2001 Expectations.’’ E-Commerce Times. July 20, 2001. Available from www.ecommercetimes.com. Regan, Keith. ‘‘eBay Storefronts Arrive.’’ E-Commerce Times. June 11, 2001. Available from www.ecommercetimes.com. Ressner, Jeffrey. ‘‘Online Flea Markets.’’ Time. October 5, 1998. Saliba, Clare. ‘‘eBay Jumps into Newspaper Classifieds.’’ ECommerce Times. May 4, 2001. Available from www.ecommercetimes.com. Sausner, Rebecca. ‘‘Report: Yahoo! Retains Online Ratings Crown.‘‘ E-Commerce Times. May 1, 2001. Available from www.ecommercetimes.com. Schwartz, Vira Mamchur. ‘‘Bidding, Buying as Lifestyle.’’ Folio: The Magazine for Magazine Management. December 1, 1999. Virzi, Anna Maria. ‘‘eBay Buys Major Auto Auction House.’’ Internet World. May 24, 1999.
POSITIONED TO MAINTAIN LEADERSHIP POSITION
eBay was one of the first Internet companies to achieve profitability and figure out how to make online auctions work. It was first company to enter the online auction market, after which it experienced rapid growth. By mid-2001 eBay held a clear leadership position and its name was a household word. Little competition was to be seen on the horizon, although Amazon.com and Yahoo! were creating a niche in the online auction marketplace through new initiatives. With online auction sales increasing 149 percent in May 2001 to $556 million, eBay accounted for more than 65 percent, according to a study by Nielsen/NetRatings and Harris Interactive. As of mid-2001 eBay’s strategy was to expand its business into new markets and improve current services. The company’s goal was to expand its platform as quickly as possible in order to have more business transacted. eBay’s business model gave it almost unlimited capacity and advantages of scale over traditional auction houses. In auctions, the biggest market has a clear advantage over other competitors because sellers desire the liquidity that comes from having a bigger audience and more potential buyers. In addition to auctions, eBay has successfully expanded its platform to include fixed-price offerings, both through its acquisition of Half.com and through its eBay Stores program, as well as through its Buy it Now service.
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Wang, Nelson. ‘‘Auction Site eBay Files to Go Public with $64M IPO.’’ Internet World. July 27, 1998. ‘‘We Have Lift-Off: Amazon, Yahoo! and eBay Grow Up.’’ The Economist (US). February 3, 2001. ‘‘Wired for the Bottom Line.’’ Newsweek. September 20, 1999. SEE Auction Sites; Business-to-Consumer (B2C) ALSO: E-Commerce; FairMarket Auction Network; Omidyar, Pierre; Whitman, Margaret; Yahoo! Inc.
E-BOOKS
An electronic book, or e-book, is a book that is accessed electronically via a personal computer (PC), a specially designed e-book reader, or a handheld device like a Palm Pilot. In most cases, users download the text from an Internet site after paying with a credit card. Depending on the technology used, e-book purchasers quite often have the capability to highlight, bookmark, and annotate specific passages, as well as the ability to search an entire document. Despite many bold predictions in the late 1990s that e-books would soon render paper publications obsolete, e-book sales remained weak in both 2000 and 2001 as three main issues—incompatible formats, difficult-to-use reading devices, and uncertainty surrounding copyright laws—continued to plague the industry by undercutting both supply and demand.
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ADVENT OF E-BOOK TECHNOLOGY
Although the concept of electronic publishing had existed for several decades, it wasn’t until the summer of 1998 that specific devices for reading ebooks, as well as e-books themselves, became available at the retail level. Both NuvoMedia Inc. and Softbook Press Inc. developed e-book readers at that time. Designed to offer users an experience as close to reading a print book as possible, the NuvoMedia Rocket eBook’s screen was roughly the same size as a page in a traditional paperback book. Specific buttons allowed users to select either a landscape or portrait format, view the next or previous page, and pull down various menu options. The hardware appliance was designed to allow users to download texts from various online sites. While the Softbook reader offered many of the same features as the Rocket, its screen was nearly double in size, and the only way to import texts was to use a telephone line or Ethernet connection to link to a Softbook Press information center. In 1999, the two firms sold a total of roughly 10,000 ebook readers and offered less than 5,000 titles. Gemstar International Group Ltd. paid $400 million to buy both NuvoMedia and Softbook Press in January of 2000, planning to use advertising campaigns and licensing agreements to generate a higher demand for the e-book readers. That same month, Barnesandnoble.com and Microsoft announced their intent to work together to develop an e-book reader for PCs. Another e-book hardware maker, Glassbook, revealed plans to do the same. Popular author Stephen King released a new novella as an e-book in March, in conjunction with publisher Simon & Schuster. Problems with security measures allowed Internet users who had paid for the book to download multiple unauthorized copies. Publishers continued experimenting with e-book technology despite such problems. In fact, Simon & Schuster also began publishing novels by Mary Higgins Clark as e-books in May. The first Spanish language e-book made its way online in June. Two months later, Stephen King circumvented traditional publishers by offering a new novel, Ride the Bullet, on the Internet for $1 per chapter. More than 40,000 readers downloaded the first chapter within 15 hours of its release. At roughly the same time, Adobe Systems Inc. acquired Glassbook, and in November Franklin launched its palm-sized reader known as eBookman.
were finally finding a mainstream audience. Andersen Consulting predicted that e-book sales would exceed $2.3 billion by 2005, compared to less than $5 million in 2000. However, skeptics pointed out that King’s novel might not have generated such interest if a print version had been available as well. Along with meager demand, the e-book industry also contended with limited supply. E-book availability was growing at a much slower pace than e-book reading device makers had anticipated. In March of 2001, the number of e-books compatible with the industry’s leading platform—Gemstar’s RocketBook— had only reached a few thousand. Afraid that e-book sales might undercut traditional sales—particularly on new blockbuster releases likely to make the bestseller lists—many publishers only offered electronic versions of classics like Moby Dick, The Iliad, and Romeo and Juliet. Concerns regarding the impact e-book sales would have on traditional sales represented only a minor problem for the industry, however. Three others factors contributed more significantly to the supply and demand problems experienced within the ebook industry. One of the most pressing problems had to do with incompatible formats. By the end of the twentieth century, three main e-book players had emerged as industry leaders: Gemstar, Adobe, and Microsoft. According to a November 2000 article in The Atlantic Online, the fact that each firm was trying to position its format as the industry standard undercut the e-book industry as a whole. ‘‘E-books are software, and the future of reading is presently being held hostage in a computer ‘standards war’ where competing companies try to ensure that their proprietary technology becomes the toll-taker at the gate. Most publishers and retailers now offer every e-book title in at least two incompatible formats, sometimes three, and it may not stop there.’’ Uncertain as to which format would eventually dominate the industry and hesitant to commit to a format that might soon be rendered obsolete, many publishers entered the e-book industry more slowly than they otherwise might have. At the same time, and for similar reasons, consumers balked at the idea of paying hundreds of dollars for an e-book reading device that could read only one format. Another reason e-book readers were not selling well as the twentieth century came to an end had to do with the technology itself. The e-book reading devices simply were unable to compete with the convenience of a print book. Readers used to stuffing a paperback into a beach bag or setting a novel on the edge of the tub were unwilling to do the same with an expensive electronic device. Also, many e-book readers were difficult to read in the bright sun, some had to be held at a certain angle for optimal viewing, and all ran on a battery that required recharging.
E-books
SUPPLY AND DEMAND PROBLEMS
By the autumn of 2000, roughly 25,000 e-book reading devices had been sold, a number much lower than many analysts had predicted. Despite sluggish sales, several industry pundits cited the success of King’s online novel as an indication that e-books
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At the same time that book lovers proved reluctant to give up the convenience and familiarity of print books for the increased functionality offered by electronic readers, many publishers proved reluctant to make a significant investment in e-book technology due to concerns over copyright issues. While new laws like the Digital Millennium Copyright Act, which made it illegal to make or sell products designed to skirt copyright laws, had been put in place to help protect copyright holders, publishers remained uncertain as to how to best protect copyrighted material offered electronically. In addition, those unwilling to publish electronic versions of their copyrighted books also worked to prevent other companies from doing so. For example, when RosettaBooks secured permission from authors such as Kurt Vonnegut and Robert Parker to publish electronic versions of their books, Random House, copyright holder of the traditional print books written by those authors, filed suit. The litigation, formally launched in February of 2001, likely will have a significant impact on the e-book industry.
E-business Service Provider (eBSP)
FURTHER READING: Chenoweth, Emily. ‘‘Psst. Hey Little Girl, Wanna Try an EBook?’’ Inside.com. May 9, 2001. Available from www.thestandard.com. Garber, Joseph R. ‘‘Publish and Perish.’’ Forbes. October 16, 2000. Kafka, Peter. ‘‘Horror Story.’’ Forbes. August 21, 2000. Lombreglia, Ralph. ‘‘Exit Gutenberg?’’ The Atlantic Online. November 16, 2000. Available from www.theatlantic.com. Manes, Stephen. ‘‘Electronic Page-Turners.’’ Forbes. May 28, 2001. Morgan, Eric L. ‘‘Electronic Books and Related Technology.’’ Computers in Libraries. December 1999. Peek, Robin. ‘‘Jump-Starting Electronic Books.’’ Information Today. March 2000. Pike, George H. ‘‘A Book is a Book is E-Book.’’ Information Today. July 2001. Runne, Jen. ‘‘Why eBooks are Sputtering.’’ eMarketer. March 14, 2001. Available from www.emarketer.com. Wood, Christina. ‘‘The Myth of E-Books.’’ PC Magazine. July 1, 2001. SEE Barnesandnoble.com; Electronic Publishing; MicroALSO: soft Corp.
NEW TRENDS WITHIN THE E-BOOK INDUSTRY
Despite the industry’s supply and demand problems, many leading publishers continue to develop new e-book ventures, believing that jockeying for position now might pay off in the long run. For example, Time Warner founded iPicturebooks.com in February of 2001, offering roughly 200 e-books to children between six months and 10 years of age. Random House and Simon & Schuster also launched e-book initiatives aimed at youngsters. According to a May 2001 article in Inside.com, ‘‘The assumption—or hope— behind this foray into children’s e-books is that today’s computer-savvy kids will be more receptive to books on screen than adults are. To them, the thinking goes, it will be nothing to read a 200-page young adult novel or look at the illustrations in Eency Weency Spider in an electronic format.’’ Some industry experts believe that the future of e-books is in other niche markets, such as text books and reference publications. According to PC Magazine writer Christina Wood, ‘‘the Electronic Document Systems Foundation predicts that the likelihood of people reading novels or even magazines digitally in the future is low. The chance that they will read digital reference materials, professional journals, and reports, however, is good.’’ While the direction the ebook industry will take in the future is unclear—as is the impact e-books will have on the traditional book industry—authors, publishers, and readers will likely continue to influence and be influenced by e-book technology.
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E-BUSINESS SERVICE PROVIDER (EBSP)
E-business service providers (eBSPs) are companies that help other companies use e-business technology to improve operations. This might involve tasks like the design, construction, and operation of a company’s Web site or the streamlining of procurement processes for a business. The original e-business service upstarts, including Scient Corp., emerged in the late 1990s, believing that companies, particularly smaller businesses unable or unwilling to hire their own technology specialists, would find e-business technology crucial to long-term survival. Many established technology giants, such as IBM Corp., also turned their focus to e-business services. Initially, e-business service providers mainly were seen as firms that helped small businesses erect online storefronts. According to a September 2000 article in Money, ‘‘Not only do eBSPs host your site and provide templates and tools to help do-it-yourselfers build engaging electronic storefronts, but many also offer merchant accounts to facilitate secure creditcard transactions.’’ However, as more firms began to offer e-business services, the definition of an ebusiness service provider grew to include a wider range of e-business services than simply those related to storefront design, construction, and operation. The notion of what type of customer might seek ebusiness services also expanded to include more traditional, larger firms.