INTRODUCTION

Over the past couple of years, the Internet has become a darling of the media, constantly receiving attention and often featured as the cover story in magazines. Much of this growth has been fueled by the enormous popularity of the World Wide Web, the graphical portion of the Internet. The attention has caught the eye of most major corporations, many of which have rapidly produced and published Web sites. A recent study by Forrester Research revealed that nearly three-quarters of the Fortune 1000 are planning on-line transactions via their Web sites by 1997 (CyberAtlas, 1996). These companies have the money, personnel and resources to quickly assemble and implement an Internet strategy. Unfortunately, many of today's small businesses do not have the resources to rapidly respond to the opportunities created by the growth of the Internet. Many small business owners do not have the time to invest in acquainting themselves with the Internet. In order to facilitate small businesses establishing a presence on the Internet, the following is a brief introduction to the Internet and the growing marketplace for electronic commerce, most of which is developing via the World Wide Web. This document intends to filter through the mountains of information available today on and about the Internet. Filtering allows us to provide time stressed and resource strapped small business owners with a quick and useful introduction to electronic commerce on the Internet.

RAPID GROWTH

The Internet is a wide range of networks around the world connected to each other. This allows for the communication and dissemination of information in new and exciting ways. The Internet has been around since the early seventies, when scientists and academics would use it to collaborate with one another on research. Since 1988, the number of hosts (computer servers where information is stored which can be accessed through the Internet) connected to the Internet has doubled every year, and this trend is predicted to continue through the end of the decade (Sandberg, 1996). One example of this growth can be seen in the growing number of host computers, which in January, 1993 was 1,313,000. The latest count in January, 1996 showed 9,427,000 computers connected, a jump of over 8 million in three years. (Network Wizards, 1996) According to Internet Info, between January and July in 1996 the number of commercial domains (.com) on the Internet increased from 170,892 to 419,360, an increase of 248,468 or 145.4%. Most of the rapid growth of the Internet has been fostered by the introduction of the graphical browser Mosaic (World Wide Organization, 1996). Developed at the National Center for Supercomputer Applications (NCSA) in Illinois, Mosaic enabled users to experience the graphic rich portion of the Internet known as the World Wide Web. Until this point, all communication and information on the Internet was text based. The World Wide Web opened up a whole new world of opportunities with these graphical capabilities. The developers of Mosaic soon left the NCSA to form Netscape Communications Corp., perhaps the hottest company in the country during the latter half of 1995 and the first half of 1996. Netscape soon released their own browser, Navigator, which was immensly popular and quickly became the dominant browser. Currently Netscape's Navigator is estimated to have an 84% share of the browser market (Dataquest, 1996). In December 1995, Microsoft Corporation realized how important the Internet was becoming and completely overhauled their company strategy. Sensing the threat to their core businesses posed by Netscape, Microsoft has launced an all out offensive to gain a foothold in the Internet markets. The introduction of their own browser, Explorer, has not gained much of the market, (approximately 7% according to Dataquest, a neutral third party measurement) however Microsoft is one of the most respected companies in the world, and most observers expect a long and nasty fight with Netscape for control of the Internet market.

ELECTRONIC COMMERCE ON THE INTERNET

Electronic Commerce, the delivery of and payment for goods through electronic means, is a recent development conducted over the Internet for only the past couple of years. There is still apprehension among consumers and the media surrounding electronic commerce and security; however, last year's estimates of electronic commerce transactions range from $250 to $543 million dollars (Sandberg, 1996). Sales for 1996 are expected to top $800 million dollars (Hilzenrath, 1996). The convenience, ease, and improved security will continue to drive a market that analysts estimate will reach $6 billion by the year 2000 (CyberAtlas, 1996). The major impediment to electronic commerce has been concerns over security when consumers use their credit card to make a purchase over the Internet.

SECURITY DEVELOPMENTS

Commerce has been slow to gain widespread acceptance on the World Wide Web (WWW) due to the perceived security flaws and potential for credit card theft. Recently, numerous advances have been made in encryption technology (encryption is the transformation of data into an unreadable form. The information then needs to be decrypted, which reverts encrypted data back into a readable form ( RSALabs, 1996), which has begun to ease consumers' worries. In February 1996, Visa and MasterCard jointly announced a new security specification, SET - Secure Electronic Transactions, developed to address consumers' concerns. Netscape Communications has recently upgraded their security software, Secure Sockets Layer (SSL), from 32 bit key encryption to 128 bit key encryption, using encryption and authentication technology developed by RSA Data Security (Netscape, 1996b). This improved encryption strength will make it much more difficult for unscrupulous individuals to steal information sent over the Internet. The 128 bit keys will require a greater effort, and extremely powerful computers to break, the security behind them being many times more powerful than any other security previously available. The 128 bit encryption is so strong, Netscape had to get U.S. government approval to allow American citizens and companies to utilize it, and they have not made it available for foreign countries to use. These security developments are improving the perception of the World Wide Web as a legitimate marketplace with consumers.

Financial companies have also been developing initiatives in electronic commerce. According to a July 24th article in the Wall Street Journal, "MasterCard International and GTE Corp. are expected to announce plans to provide a new service to verify the identities of merchants and consumers on the Internet in an effort to enable widespread commerce over the global computer network" (WSJ, 7/24/96). A similiar security initiative was announced previously by Visa International and Internet start-up VeriSign Inc. Both alliances will provide certificates for users to safely identify themselves on-line. VeriSign, a certificate authority, is a spinoff of RSA Data Security (the leading developer of encryption algorithims). VeriSign produces certificates (Digital ID's) which provide an electronic means of verifying someone's identity, also known as authentication. VeriSign's certificate technology is offered in varying levels, with the higher Digital ID levels providing greater assurance as to the user's identity. Verisign's Digital certificates use public key encryption, which involves two related keys - a public key and a private key. The public key in this case is made available to anyone who is interested in communicating with the owner of the key pair. The public key is used to verify messages signed with the private key or to encrypt messages which can only be read with the private key. In order for this system to work, the private key must remain secured from unauthorized use (Verisign, 1996).

These improved security developments have moved electronic commerce over the Internet closer to reality; however, the major validation for electronic commerce has been the actions of the leading computing companies. IBM recently (June 11) rolled out a completely integrated electronic commerce offering, World Avenue, said to be available in the fall of 1996 (Wilder, 1996). IBM will offer businesses a complete, integrated solution for setting up an electronic shop on the Web. Similarly, GE Information Services (GEIS) announced on June 12 they were launching a new service named TradeWeb. GE's service is an Internet- based electronic data interchange service offering small businesses a way to conduct electronic commerce. GEIS is targeting the small businesses which comprise the 60% of trading communities that do not participate in electronic commerce today (WSJ, 6/13/96). Also making news on June 13, 1996 was the announcement that Microsoft purchased E-shop, one of the first electronic commerce software firms. Microsoft plans to integrate E-shop's software into their Internet merchant server products in the third quarter of this year (Wilder, 1996).

WHO'S SELLING?

For any size business, putting your wares on the Web can pay enormous dividends in marketing bang for your buck. One small hot sauce store in Pasadena, California, Hot Hot Hot, has customers as far away as Switzerland, Brazil, New Zealand, other foreign countries and their first order over the Web came from the east coast of the United States (Carlton, 1996). The store owners estimate that reaching all these customers with a mailer would have cost them nearly fifty thousand dollars a month, however by using the Web they are paying only one hundred dollars each month to reach their global customers. Internet sales are now accounting for one-fourth of their store's revenue (Carlton, 1996).

One merchant on the Web, Virtual Vineyards, has been conducting secure electronic commerce (using a secure server) since 1994, and expects sales of over $1 million this year. VirtualVinyards has been growing 20% per month since they opened for business, and sees no signs of a slowdown. The use of a secure server and encryption technology ensures consumers that the transaction is safe from theft. NECX Direct, an online distributor of retail computer products, saw online sales double a day after they moved to a secure server (Electronic Buyers News, 09/04/95, p.56). Any other concerns about security impeding the progress of electronic commerce are summarily dismissed by the Sharper Image Inc.'s chairman Richard Thalheimer, "We're already selling on the Web. We don't think there's a security problem, and apparently our customers don't either. Our sales have tripled in the last three months, and we're going to be making from 2.0 to 5 million [this year on Web sales]" ( CyberAtlas, 1996).

CUSTOMER DESCRIPTION

The Internet/World Wide Web user market, is currently estimated between 9.0 and 23.0 million users (CyberAtlas, 1996, a breakdown of where these users originate can be found in Appendix 3). One caveat with this new communications medium is that because it is so new, the trends and interests of its users are hard to determine. It is clear however, based upon the current and projected sales, that shopping over the Internet is beginning to gain acceptance, and electronic commerce will grow substantially over the next few years. According to the Georgia Tech Graphic Visualization & Usability Center's 5th WWW User Survey, conducted from April 10, 1996 through May 10, 1996, the average age of a typical WWW user is 33 years old, and the estimated household income is $59,000. One other interesting note from this survey was the responses about reasons for using the WWW, where "the only notable change is in shopping which went from 11.1% in the fourth survey to 14.2% in the fifth." Netscape Communications Corporation commissioned Griggs Anderson Research to survey nearly 20,000 Netscape Navigator users, and found that 39% of Navigator users have used their credit card number to make a Web purchase (Netscape, 1996).

SUMMARY

It is the hope of the author to make the complex world of electronic commerce over the Internet readily available and understandable to the small business owner. Many business owners spend long hours tending to their businesses and have limited time to invest exploring opportunities for their businesses. This paper does not profess to be the answer to all questions regarding electronic commerce. Hopefully, someone with no knowledge of electronic commerce over the Internet can come away with a little understanding of the pieces which make up electronic commerce. That knowledge can help him/her to make an educated decision about pursuing an electronic commerce strategy, and possibly help to expand a business. The accompanying resources will help individuals to perform more research and determine what is best for their business. This market is in an early stage, yet it is growing rapidly. Everyone should take some time to determine if the Internet is right for their business, as it can open your company up to the world.

REFERENCES

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CyberAtlas (1996), "The Internet Research Guide." [URL: http://www.cyberatlas.com]

Dataquest (1996), "Dataquest Keeps Score in the Internet Browser Market."
[URL: http://www.dataquest.com/insight/in-i001.html]

Hilzenrath, David S. (1996), "Attention Web-Mart Shoppers!," Washington Post, July 31, C1.

Jurgenson, Barbara (1995), "NECX Direct Secures Sales - On-line purchases now use protected server," Electronic Buyers News, Sept. 4, 56.

Netscape (1996), "Netscape Navigator Users Demographic Profile."
[URL: http://home.netscape.com/ads/demographics.html]

Netscape (1996 b), "On Internet Security."
[URL: http://home.netscape.com/info/security-doc.html]

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[URL: http://digitalid.verisign.com/brw_intr.htm]

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[URL: http://interactive2.wsj.com]

Wall Street Journal Inteactive Edition (1996), "Technology Briefs - MasterCard, GTE Plan On-Line Verification Service," July 24. [URL: http://interactive2.wsj.com]

Wilder, Clinton (1996), "E-Commerce Emerges," Information Week, June 17.
[URL: http://techweb.cmp.com]

World Wide Web Organization (1996), "A Little History of the World Wide Web."
[URL: http://www.w3.org/pub/www/History.html]