Information Technology Reference
In-Depth Information
Invasion of Consumer Privacy
Online consumers are more at risk today than ever before. One of the primary factors causing
higher risk is
online profiling
—the practice of Web advertisers recording online behavior for
the purpose of producing targeted advertising.
Clickstream data
is the data gathered based
on the Web sites you visit and the items you click. From the marketers' perspective, the use
of online profiling allows businesses to market to customers electronically one to one. The
benefit to customers is personalized, more effective service; the benefit to providers is the
increased business that comes from building relationships and encouraging customers to
return for subsequent purchases. However, what may be considered as one person's relevant
ad can be viewed by others as a manipulative and potentially harmful marketing technique.
For example, the Center for Digital Democracy and the U.S. Public Interest Research Group
accused General Mills, MasterFoods USA, and Pepsi of targeting youths with online ads that
contributed to their obesity.
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clickstream data
The data gathered based on the Web
sites you visit and the items you
click.
Lack of Internet Access
The
digital divide
is a term that describes the difference between people who do and do not
have the access or the capability to use high-quality, modern information and communica-
tions technology such as computers, the Internet, telephone, and television to improve their
standard of living. For example, it is estimated that of the roughly 1 billion Internet users
worldwide, only 20 million (2 percent) are in the less-developed nations. The lack of universal
Internet access makes it impossible to conduct e-commerce with many of the world's people.
The digital divide exists not only between more and less developed countries but within
countries between economic classes, the educated and uneducated, and those who live in
cities and those who live in rural areas. Obviously, those who lack Internet access form a
barrier to further e-commerce expansion.
Return on Investment
Often the investment required for a large firm to establish and operate a B2B or B2C Web
site can be in the millions of dollars. For example, Starwood Hotels and Resorts Worldwide
plans to move its 700 hotels to a new Web-based reservation system at an estimated cost of
between $10 million and $60 million with annual cost savings of $15 million. Using the
low-cost estimate, the payback period is $10 million/$15 million or .67 years, while the high-
cost estimate yields a payback period of four years, not nearly as economically attractive. The
example illustrates a common problem with determining return on investment—it is difficult
to forecast project costs and benefits.
Legal Jurisdiction
Companies engaging in e-commerce must be careful that their sales do not violate the rules
of various county, state, or country legal jurisdictions. For example, New York and six other
states forbid the possession of stun guns and similar devices. The New York state attorney
general received a tip that such guns were being sold to New Yorkers through eBay. A sub-
sequent investigation led to the arrest of 16 sellers allegedly responsible for the sale of more
than 1,100 stun guns and Tasers. Other examples of illegal sales are sales to those who would
not be able to obtain cigarettes or wine because of their age.
Taxation
United States businesses and consumers must be aware of taxation issues when conducting
e-commerce. Based on U.S. Supreme Court rulings (Quill Corp. vs. North Dakota), Internet-
based merchants must apply sales tax only when buyers live in a state where the company has
physical facilities, or “nexus.” Most businesses want to avoid the complexity of dealing with
the nonstandard rules of the more than 7,500 taxing districts nationwide. To avoid this
complexity of paying sales taxes, businesses set up their Internet sales operations as legally
separate companies with no physical presence outside of where their computers and ware-
houses are located. This leaves it up to the consumers to voluntarily remit the sales taxes; but
because it is almost impossible to enforce this practice, few people pay them. Thus, despite
