Consumers did not flock to buy on the Internet in 1996, but growing numbers of technology companies and savvy Fortune 1000 computer chiefs began to integrate Internet technologies into their computing infrastructures.
In the business-to-business sphere, not everything was buying and selling. Companies began to communicate critical information--price lists, inventory levels, engineering documents--across the public Internet and private intranets or to key suppliers and customers.
Many used electronic data interchange (EDI), direct computer-to-computer communications without human intervention, using standard forms. Through the year, EDI networks and software vendors like GE Information Services, Harbinger, and Premenos pushed EDI onto the Internet, with a growing focus on smaller firms. GEIS and Netscape Communications formed joint venture Actra to build electronic commerce software for the Net.
Big vendors muscled into e-commerce. Microsoft in June bought eShop for its commerce software, admitting that internal efforts weren't moving fast enough, then unveiled its eShop-based Merchant Server software in October.
VeriFone, maker of countertop gadgets that authorize credit card transactions in retail stores, pushed several e-commerce initiatives. Its merchant cash-register software to accept payments is being integrated into merchant server software from Microsoft, Netscape, and Oracle. VeriFone also moved aggressively in smart cards, unveiling cheap smart-card readers for the home and for merchants.
Another far-reaching development was the emergence of e-commerce service offerings. Many ISPs set up one-stop shops where a company could have a commercial Web site built, hosted, and maintained. Among the agencies offering such services were AT&T BBN, PSINet, UUNet Technologies, and hot start-up USWeb.
Software vendors also recognized the Net as a distribution channel for their own wares. Microsoft, then the Software Publishers Association issued similar guidelines for vendors and resellers about how to sell software online. Two key elements: rights clearinghouses (announced by LitleNet, CyberSource, and Softbank Net Solutions) and secure containers to make the software tamper-proof (announced by Portland Software and InterTrust Technologies).
Today's electronic distribution buzz concerns computer software, but the big bonanza will be distributing music and video over the Net using the same technologies.
For consumers, the biggest hurdle remained sending credit card numbers across the Net. In February, Visa and MasterCard merged their dueling efforts to make card transactions secure, but creating the Secure Electronic Transactions protocol is taking longer than they expected.
Also on the consumer side, efforts were launched to assure consumers that online merchants are legitimate and won't sell their personal data to other vendors. The biggest push came from eTrust, a joint project of the Electronic Freedom Foundation, a civil liberties group, and industry consortium CommerceNet, but similar efforts are under way from shop.org and the Better Business Bureau.
Finally, spending on Web advertising accelerated throughout the year, even though the biggest ad spenders in other media--consumer product companies--still largely remain on the sidelines.
Predictions for 1997
"Real EDI on the Internet will take off in 1997, electronic commerce for the masses of businesses. We'll see a lot more forms-based interfaces and low cost of entry to get into trading communities, shifting the focus from traditional EDI--which is high-end and expensive--to a much more dynamic model."
--Allen Bonde, analyst, Yankee Group
"Mondex's smart cards got a huge boost of credibility when Mastercard bought in, but I don't foresee a huge leap in transactions because of that. I don't see any big discontinuity in sales, either business to business or on the consumer side. Next year, I think we'll start seeing the beginnings of new kinds of organizations. The virtual company is the first general idea, but you're going to see the virtual company taken to further and further extremes: remote access, telecommuter access, outsourcing agreements. Even basic email is a profound alteration in how productive units can organize themselves."
--Torrey Byles, analyst, Giga Group
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