A Decade of E-Commerce

PALO ALTO, Calif. — According to research by VeriSign, e-commerce was born on
August 11, 1994, when a CD by Sting was sold by NetMarket. To celebrate, the Internet
infrastructure and technology company hosted a panel discussion with Net honchos to reminisce and,
more important, to imagine the next 10 years of shopping online.

Panelists Stratton Sclavos, chairman and CEO of VeriSign, joined Yahoo COO Dan
Rosensweig, Morgan Stanley Managing Director Mary Meeker, Merchant E-Solutions Executive Vice President
Charles Jadallah and CNET Networks Chairman and CEO Shelby Bonnie in a conversation about what’s working
and what still needs work.

When you look at e-commerce statistics, Meeker noted, the channel is still in its infancy.
By her analysis, the value of online sales is only 2.1 percent of total retail sales. If you subtract
sales on eBay, she said, e-commerce represents just 1.7 percent of all commerce.
There’s most room for growth in international sales, she added.

“About 15 percent of transactions are now cross-border, and the ability for that to go to 20 or 30
percent and be truly global is underappreciated,” she said.

While consumers’ fears about providing credit card information online, formerly a top barrier to the
growth of e-commerce, have waned, security is as much of an issue as ever, thanks to the rise of phishing
exploits.

About 2 million people have taken the phishing bait. But VeriSign’s Sclavos said that authenticating Web
sites and individuals, which is what his company does, can help.

“We’re beginning to see real efforts to make
authentication online stronger,” he said. The goal would be to have authentication methods in place so that,
when someone gave up personal information, such as an account number and password to a phisher, the phisher
still wouldn’t be able to use it. “Our kids will be much more ready to adopt this than our generation is,”
he said.

“Authentication is a must-have but too hard to do,” Sclavos said.

If they have to choose, customers will
always choose ease of use over security. He said that in the next 10 years, we’ll move from proprietary,
one-off forms of authentication to an open model. That will allow business partners to share not only
authentication but also the cost.

“Authentication has to be ubiquitous and mobile, so you can carry it
with you. We’re finally getting to a pain point with consumers where the momentum is clearly there.

Such a system of universal authentication also would ease the shopping process, according to Jadallah, who
predicts the checkout process and ease of use will improve dramatically.

Instead of having to enter
the card number, name and address for each purchase, the experience will be similar to that in a store, where
one simply swipes a card.

There’s a flip side to e-commerce, Jadallah noted, which is making it easier for physical stores
to do business. For example, restaurants now dial into the electronic payment network to authorize a sale,
a process that takes at least a couple of minutes. “Why not plug it into the Internet?” he asked. “That’s
the next wave.”

Yahoo’s Rosensweig said that online shopping adds the most consumer value by offering a breadth of
product information. He said Yahoo’s Launch music service is beginning to benefit by the amount of user-generated
content and the ability to track and understand users. “All you see now is the easy stuff,” he said.

He and CNET’s Bonnie agreed that adding social networking to user reviews and comments will make sites
even more useful for consumers — and for retailers, who can aggregate user data, then match it with users’
networks to offer such things as music recommendations that are much more likely to hit the mark.

The challenge, Bonnie said, is finding a way to harness user recommendations and social networks to offer
people things they didn’t know about. “Metadata and creating smarter connections will take us to a whole new
level of personalization,” he said.

Bonnie said that just as reviews have a big impact on conversion rate, video will dramatically change the
game, making the shopping experience more like that of a physical store.

“Personalization will be surprising and effective,” Meeker said. “Stuff will get to you when you want it,
and you will really want it. And services will come into play: You’ll be able to get five people to bid on
coming to mow your lawn on Wednesday.”

Meeker said the importance and quality and magnitude of consumer reviews is very important in the decision
process.

VeriSign did 1 billion lookups in 2000 and 14 billion in 2004, Sclavos said. As that number goes even higher,
“We’ll have to be like the phone networks and the electric grids and step it up for the next phase.” He said
that the Internet is hitting another inflexion point. “Usage is escalating faster than anyone would have imagined.
Usage is now driving more complexity into interactions between networks and applications.”

Meeker predicted that as the complexity of e-commerce and Internet use in general increases, we’ll see
more outages in the coming year. “But people will be more forgiving, because there’s more value to them.”

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