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Case Study 01: P2P Networks Rocks, Music Industry Rolls

Stands for "Peer to Peer." In a P2P network, the "peers" are computer systems which are
connected to each other via the Internet. Files can be shared directly between systems on the
network without the need of a central server. In other words, each computer on a P2P network
becomes a file server as well as a client.
The only requirements for a computer to join a peer-to-peer network are an Internet connection
and P2P software. Common P2P software programs include Kazaa, Limewire, BearShare,
Morpheus, and Acquisition. These programs connect to a P2P network, such as "Gnutella," which
allows the computer to access thousands of other systems on the network.
Once connected to the network, P2P software allows you to search for files on other people's
computers. Meanwhile, other users on the network can search for files on your computer, but
typically only within a single folder that you have designated to share. While P2P networking
makes file sharing easy and convenient, is also has led to a lot of software piracy and illegal music
downloads. Therefore, it is best to be on the safe side and only download software and music
from legitimate websites.

A peer-to-peer (P2P) network in which interconnected nodes ("peers") share resources

amongst each other without the use of a centralized administrative system


John Fanning, Shawn Fanning

and Sean Parker

Initial release


Operating system Cross-platform

Available in



Media player


Napster is the name given to two music-focused online services. It was originally founded as a
pioneering peer-to-peer file sharing Internet service that emphasized sharing audio files,
typically music, encoded in MP3 format. The original company ran into legal difficulties over
copyright infringement, ceased operations and was eventually acquired by Roxio. In its second
incarnation Napster became an online music store until it was acquired by Rhapsody from Best
Buy on December 1, 2011.

Later companies and projects successfully followed its P2P file sharing example such as Gnutella,
Freenet, Kazaa, and many others. Some services, like LimeWire, Scour, Grokster, Madster, and
eDonkey2000, were brought down or changed due to similar circumstances.
BitTorrent is a protocol for the practice of peer-to-peer file sharing that is used to distribute
large amounts of data over the Internet. BitTorrent is one of the most common protocols for
transferring large files, and peer-to-peer networks have been estimated to collectively account
for approximately 43% to 70% of all Internet traffic (depending on geographical location) as of
February 2009. In November 2004, BitTorrent was responsible for 35% of all Internet traffic. As
of February 2013, BitTorrent was responsible for 3.35% of all worldwide bandwidth, more than
half of the 6% of total bandwidth dedicated to file sharing.
Programmer Bram Cohen, a former University at Buffalo graduate student in Computer Science,
designed the protocol in April 2001 and released the first available version on 2 July 2001, and
the final version in 2008. BitTorrent clients are available for a variety of computing platforms
and operating systems including an official client released by Bittorrent, Inc.
As of January 2012, BitTorrent is utilized by 150 million active users (according to BitTorrent,
Inc.). Based on this figure, the total number of monthly BitTorrent users can be estimated at
more than a quarter of a billion.

Higher speed

Enable to transfer bigger file

Problem with streaming file


Speed depends on no. of peers

1. How can P2P file-sharing networks make money if they do not sell music?
Many P2P file-sharing networks obtain revenue from advertising. They can also use a
subscription or a pay-for-download business model in conjunction with offering P2P file sharing.
2. Into which category or categories of e-commerce do P2P file-sharing networks fall?
P2P file-sharing networks fall primarily into the P2P category of e-commerce. However, many
P2P file sharing networks can also be considered as advertising networks which may be
characterized as B2B: they make money from selling access to its users to advertisers.
3. What social issues are raised by P2P file-sharing protocols and programs such as
BitTorrent? Is the record industry justified in attempting to shut them down? Why or why
The primary social issue raised by P2P file-sharing networks is copyright infringement. You will
have students taking both sides on the issue of whether the record label industry is justified in
attempting to shut down P2P file-sharing networks.
4. Will the Supreme Courts decision inhibit the development of P2P technology or the
Internet itself, as proponents of P2P services have claimed?
As with the previous question, you will have students taking both sides of the issue. Students
who claim that the Supreme Courts decision will inhibit the development of P2P technology can
point to the fact that few new P2P networks have been created in the United States since the
Supreme Courts decision. Students who feel that the decision will not inhibit the development
of P2P technology can point to the fact that outside the United States, P2P networks continue to
flourish. Also, the decision does not prohibit use of P2P networks for lawful purposes and
therefore, incentive still remains for inventors and entrepreneurs to invest in this technology.
This is particularly true if they can couple the technology with a legal, revenue-producing
business model.

5. Why do people older than 21 tend to use legitimate downloading sites whereas younger
people tend to use illegal sites?
Young, tech-savvy males in the 14-21 age group are responsible for the bulk of illegal music
downloads. It might be that this demographic is least likely to have the kind of disposable
income required for legitimate music downloads, but most likely to have access to sites and
networks that allow them to acquire the music illegally. For example, college students with
access to extremely fast Internet connections are likely candidates to download music illegally.
On the other hand, people older than 21 may not have as easy access to these sites and, generally
speaking, may have more money available to spend on legitimate music downloads.
6. What difference would it make if the existing music labels disappeared for lack of
revenue? What legitimate function do the music labels perform in the creation and
distribution of original music?
The music labels perform the legitimate function of compensating artists for their creative
efforts. Illegal downloads of music directly threaten a music labels ability to support the artists
belonging to it, harming both the labels and the creators of the music. If illegal downloading
continues unchecked and existing music labels disappear for lack of revenue, it would force the
industry to pursue a new digital business model that somehow gave more incentives to
consumers for obtaining music legally.

Case Study 02: and the Search for a Business Model that
Works is one of the leading online travel booking portals launched in 1988. Priceline is
not a direct supplier services but they bring buyers and sellers together to facilitate their
transactions. Priceline brought a new concept and business model which uses a simple and
persuasive consumer proposition called Name Your Own Price. Priceline offers a compelling
value proposition to customers, allowing them to save money by trading off flexibility about
brands, products features, and/or sellers in return for lower prices. Vendors can gain additional
revenue by selling products.
Business Model
A business model is a set of planned activities designed to result in a profit in a marketplace and
describes the basic framework of a business. It is the method of doing business by which a
company can generate revenue to sustain itself. Business Models are never as simple as seems.
In relation with business areas, business models have been defined and categorized in many
different ways:
Priceline Business model Elements


Hiding the name of suppliers

Hiding the name of providers
Powerful technology

How Priceline Works

At Priceline, consumers can enter a bid for travels, hotels, rentals cars and home financing
Priceline, then queries its database
The company determines if it can fulfill the customers offer.

Important Rules for Customers

The customer must accept
Any major airline
Ticket cannot be refunded
Ticket cannot be changed
Leaving any time of the day
Accept at least one shop
1. What are the core components of Pricelines business model?
The core components of Pricelines business model are its value proposition and revenue model.
Priceline offers a compelling value proposition for both consumers and vendors. It allows
consumers to save money by trading off flexibility about brands, product features and/or sellers
in return for lower prices. On the vendor side, it allows sellers to gain additional revenue by
selling products they might not otherwise be able to sell by accepting below-retail price offers
without disrupting their existing distribution channels or retail pricing structure. Priceline
primarily utilizes a transaction fee revenue model, receiving a fee for enabling or executing a
transaction. Other elements of Pricelines business model include:

realistic market opportunity-- at this time it appears primarily limited to the travel
services markets, based on Pricelines failed attempts to extend its business model to
other markets

competitive environment, although Priceline initially was able to claim first mover

competitive advantages, which include Pricelines strong brand name and its patented
Name Your Own Price business model

market strategy, which has taken a number of turns and is now focused on selling to the
travel services consumer

management team, which appears to have stabilized for the time being

organizational development

2. Do you think Priceline will ultimately succeed or fail? Why?

a. Students who take the position that Priceline will ultimately succeed could cite the following:
Priceline will ultimately succeed because it has one of the strongest brand names in the discount
travel services market. Its long-term viability looks strong because it is the dominant player in
its niche market. There will always be customers seeking to pay as little as possible for air travel
and customers willing to forfeit such conveniences as choosing their own departure times, flying
direct, or earning frequent-flier miles. Priceline has a loyal core of users; brand loyalty could help
Priceline fend off competitors. Also, Priceline has proven that its business model works in the
travel services market, and its strategy of focusing primarily on this market is enabling it to
achieve profitability.
b. Students who take the position that Priceline will ultimately fail could cite the following:
Priceline will ultimately fail because its rivals offer a simpler way to buy airline tickets.
Priceline's tickets are nonrefundable; consumers agreeing to purchase tickets through the site
are locked into buying flights before they know the travel schedule, and often end up flying at
inconvenient times with multiple transfers. While some believe that Priceline presents an
opportunity for customers to make trade-offs, these trade-offs appear to be far too numerous for
the long haul. Furthermore, Priceline seems to depend, at least to some extent, on customers
overbidding in order to make a profit. Relying on the lack of sophistication of customers would
seem to be a shaky premise on which to build a business model. Priceline has had to retreat from
markets for non-perishable goods, and its non-extensibility into other markets makes it a poor
market risk. They have also experienced customer service problems, which hurt their image and
may drive customers away.

The competition is also intensifying: Hotwire, Expedia, Travelocity and Orbitz all pose a
challenge to Priceline, as do the airlines and hotel owners themselves. The proliferation of
discount airlines such as Southwest, Jet Blue, and Spirit offer additional competition. All of these
competitors offer a far simpler way to purchase airline tickets than does Priceline at a
competitive price.
3. How has Priceline (and similar online services) impacted the travel services industry?
These companies have impacted the travel services industry by introducing a price sensitivity
signal into the industry that segments the market. Consumers, by revealing their flexibility on
issues such as brand, scheduling, type of aircraft, departure time, and number of connections,
are signaling that they are sensitive to price. The simple fact is that all consumers aren't created
equal. Some have strong brand preferences, while others are sensitive to price and care little
about brands. Pricelines initial and continuing success in the airline industry points out the
flaws in the airline industrys post-deregulation yield management systems. It has also created
a brand new distribution channel: Priceline users can buy specially priced tickets from all of the
major U.S. carriers. This demonstrates that the industry values the incremental revenues it can
earn on seats that would have otherwise gone unsold through traditional distribution channels
and by using the traditional yield management systems.
4. Follow up on developments at Priceline since September 2008 when this case study was
prepared. Has its business model and/or strategy changed at all, and if so, how? Who are its
strongest competitors? Is it profitable or operating at a loss?
For further updates to the Priceline case study, students should visit the Securities and Exchange
Commissions Web site,, which contains SEC filings of public companies, including
financial statements, and should then follow the directions to see a list of reports filed by
Priceline. Find Pricelines most recent 10-Q or 10-K report and examine the financial results
reported. Students can also visit the Priceline Web site, read the press releases on the site, and
conduct a search for articles in the popular business press (Forbes, Fortune, Wall Street Journal,
etc.) for up-to-date articles on the developments at Priceline.

Case Study 05: PayPal Has Company

PayPal is the largest and most popular of online payment systems, currently holding more than
100 million active accounts in 25 currencies. The payment system was conceived in 1998 and
the company launched as Confinity. Its electronic payments system was first offered in 1999,
and in 2000 the company was acquired by Corporation. The corporation renamed
Confinity as PayPal, and made an initial stock offering on Nasdaq in 2001. Failing to make its
own electronic payments system pay, eBay acquired PayPal in 2002 for US$1.5 billion.
PayPal headquarters are located in San Jose, California, USA, but the company also has
operations in India, Ireland, Germany, Israel and China.
PayPal provides a secure wallet system of transferring funds for both senders and receivers.
Both must open an account with PayPal and provide details of a credit, debit or bank account,
which is drawn on if insufficient funds remain in the PayPal wallet ('float') to honor a transaction.
Access to the account is through email address and password.
PayPal is one of the great success stories of the web, and an example of first-mover advantage.
In the face of stiff competition, and despite many websites set up to complain of PayPal practices,
the company's net total payment volume has grown steadily, particularly from eBay purchases:
US$30 billion from that source in 2008, for example, 51% of total revenues. Operating income in
the 2012 fiscal year was $14.07 billion up, from 11.65 billion in 2011. The net income, however,
was was $2.61 billion, down from $3.23 billion in 2011.

Swot Analysis
Strengths: PayPal became popular because of its1. Simplicity: opening an account can be accomplished in a few minutes (though PayPal approval
takes longer).
2. Commission charges are modest, comparable to other Internet Payment Service providers
(IPSPs) at low transaction volumes.
3. Online merchants do not need an Online Merchant Account, which can be difficult and/or
expensive to acquire.
4. Though still carrying the stigma of small business, PayPal is now accepted by larger
5. Viral marketing: anyone receiving PayPal cash has to open an account.
Weaknesses: Loss of confidence by emerchants, who allege1. Being the target of many scams,
PayPal's fraud detection can be heavyhanded, freezing accounts for long
2. PayPal's arbitration system is not
always adhered to, hitting the
emerchant with unwarranted chargebacks.
3. Support is rudimentary: telephone,
no emails, rapid turnover in poorlytrained staff.
4. Funds drawn from a bank account
cannot be recovered (unlike credit
card transactions).
5. No limit to the funds that can be
transaction (again unlike credit card
transactions, which is generally
restricted to $50).
6. Primitive download of e-goods:
system doesn't always work.
PayPal is expanding to:
1. Accept payment via mobile text
2. Be accepted in more markets: 190 in
3. Allow software companies develop
4. Operate outside the USA, notably

Threats: Threats come from increasingly sophisticated scams, litigation, and competition from
other Internet Payment Service Providers1. PayPal has been forced to install costly anti-fraud software (e.g. acquisition of Fraud Sciences
for $169 million in 2008), though these have proved worthwhile: losses were $171 million in
2008, only 0.29% of total payment volume. {2}
2. Competition comes from:
a. Google checkout.

d. Facebook credits system.

b. Mobile payment with Netbanx, etc.

e. Amazon payment services.

c. Yahoo small business.

f. Other IPSPs.

3. Litigation: PayPal has had to settle many claims, generally out of court. A few sums that were
disclosed: {1}
a. Alleged violations of the Electronic Funds Transfer Act in May 2002: US$ 9.25 million
b. Failure to show clients' rights and liabilities more accurately: US$150,000 in March 2004 to
the state of New York.
c. Illegal charging for currency conversion: PayPal and Israel Credit Cards-Cal Ltd. paid NIS16
million in June 2011.
1. What is the value proposition that Paypal offers consumers? How about merchants?
The value proposition that Paypal offers both consumers and merchants is its ease of use. It
offers both a simple way to perform monetary transactions over the Web. For merchants,
conducting a transaction via PayPal is slightly less costly than via credit cards; for consumers,
using PayPal also minimizes the number of entities that have access to your credit or debit card
information (only PayPal is privy to this information, not each individual seller).
2. What are some of the risks of using PayPal when compared to credit cards and debit
Because PayPal relies on the existing credit card and checking payment systems so heavily, the
same kinds of fraud and theft that plague those systems are prominent on PayPal. In fact, PayPal
reportedly suffers relatively high levels of fraud related to the credit card system. This is because
PayPal is an obvious target for online fraud.
PayPals consumer protections are also scant compared to credit cards and debit cards. In the
event of fraud, it isnt a guarantee that you will receive your money back as it generally is with
the other payment systems. For example, credit card companies can retrieve funds from
fraudulent merchants by reverse-crediting their merchant bank accounts, but because PayPal
uses the customers bank account by default, it is much more difficult to recover stolen funds.
3. What strategies would you recommend that PayPal pursue in order to maintain its
growth over the next five years?
Students should emphasize that PayPal should try to both eliminate the risks associated with
their payment system as well as continue the positive aspects of their growth into new areas.
PayPal has had some success expanding into the micropayments market via iTunes Music Store
and Napster. Because eBay currently makes up such a large portion of PayPals revenue, it is
critical that they continue to explore new payment opportunities.
PayPal must also continue to strengthen their consumer protections to avoid losing customers
in the long term. If PayPal can become at least as safe as competing payment methods, the
combination of ease of use and acceptable safety will make it an attractive option going forward.

4. Why are cell phone networks a threat to PayPals future growth?

Cell phone networks represent a threat to PayPal because they might offer a payment alternative
that completely eliminates the credit card companies from transactions. Because of the ubiquity
of cell phones, these networks would have literally universal reach. While cell phone networks
are currently still linked to credit cards (they require a credit card to activate), the future goal is
to integrate them with the wireless providers billing service. These networks could potentially
offer low costs and ease of use that beat even PayPal, representing a clear threat to PayPals
future growth.

Case Study 07: Adware, spyware, ad bombs, ambush marketing, and

customer hijacking: invasion marketing techniques grow on the web
Zango, formerly ePIPO, 180solutions and Hotbar, was a software company that provided users
access to its partners' videos, games, tools and utilities in exchange for viewing targeted
advertising placed on their computers. Zango software is listed as adware by Symantec.
Computer security company McAfee said in 2005 "this program may have legitimate uses", but
described it as a "potentially unwanted program", and an "adware downloader". Zango was cofounded by Smith brothers - Keith Smith, who served as the CEO; and Ken Smith, who served as
the CTO. In April 2009 Zango ceased trading after its banks foreclosed. Hotbar, Seekmo, and
ZangoCash, formerly owned by Zango, as of April 2010 continue to operate as part of Pinball
Zango's consumer website asserted that the company was "committed to creating a content
economy built on a foundation of safe and ethical practices by protecting consumer privacy while
offering a fulfilling and high-value content experience." Zango content included sports, comedy,
dance, erotic videos, online games, and screensavers. Warner Bros. and others had provided
content, but WB terminated its business relationship with Zango after concerns were raised that
children viewing Warner Bros. content could be exposed to advertisements for pornography.
Adware, or advertising-supported software, is any software package which automatically
renders advertisements in order to generate revenue for its author. The advertisements may be
in the user interface of the software or on a screen presented to the user during the installation
process. The functions may be designed to analyze which Internet sites the user visits and to
present advertising pertinent to the types of goods or services featured there. The term is
sometimes used to refer to software that displays unwanted advertisements.
It is the name given to programs that are designed to display advertisements on your computer,
redirect your search requests to advertising websites, and collect marketing-type data about you
for example, the types of websites that you visit so that customized adverts can be displayed.
Adware that collects data with your consent should not be confused with Trojan spyware
programs that collect information, without your permission. If Adware does not notify you that
it is gathering information, it is regarded as malicious for example, malware that uses TrojanSpy behavior.
How Adware can impact you
Other than displaying advertisements and collecting data, Adware doesnt generally make its
presence known. Usually, there will be no signs of the program in your computers system tray
and no indication in your program menu that files have been installed on your machine. There
are two main ways in which Adware can get onto your computer:

Via freeware or shareware

Infected website

How to protect yourself against Adware

Often, Adware programs do not have any uninstall procedures and they can use technologies
that are similar to those used by viruses to penetrate your computer and run unnoticed.
However, because there may be legitimate reasons why Adware is present on your computer,
antivirus solutions may not be able to determine whether a specific Adware program poses a
threat to you. Kaspersky Labs products give you the option on whether to detect Adware and
how to react to it:

Adware removal
There can be many reasons why you suspect that an Adware program that has been
detected by Kasperskys antivirus engine may be a threat. In such cases, Kasperskys
antivirus software will help you to get rid of the Adware.

Choosing not to detect Adware

For cases where Adware programs are detected, but youre confident that these are
programs that you have consented to, you may decide that the programs are not harming
your devices or data. Kaspersky products let you disable the option to detect these
programs or let you add specific programs to a list of exceptions so that the antivirus
engine will not flag this Adware as malicious.

Any software that covertly gathers user information through the user's Internet connection
without his or her knowledge, usually for advertising purposes. Spyware applications are
typically bundled as a hidden component of freeware or shareware programs that can be
downloaded from the Internet; however, it should be noted that the majority of shareware and
freeware applications do not come with spyware. Once installed, the spyware monitors user
activity on the Internet and transmits that information in the background to someone else.
Spyware can also gather information about e-mail addresses and even passwords and credit
card numbers.
Spyware is similar to a Trojan horse in that users unwittingly install the product when they
install something else. A common way to become a victim of spyware is to download certain
peer-to-peer file swapping products that are available today.
Because spyware exists as independent executable programs, they have the ability to monitor
keystrokes, scan files on the hard drive, snoop other applications, such as chat programs or word
processors, install other spyware programs, read cookies, change the default home page on the
Web browser, consistently relaying this information back to the spyware author who will either
use it for advertising/marketing purposes or sell the information to another party.
Effects and behaviors
A spyware program is rarely alone on a computer: an affected machine usually has multiple
infections. Users frequently notice unwanted behavior and degradation of system performance.
A spyware infestation can create significant unwanted CPU activity, disk usage, and network
In some infections, the spyware is not even evident. Users assume in those situations that the
performance issues relate to faulty hardware, Windows installation problems, or another
Moreover, some types of spyware disable software firewalls and anti-virus software, and/or
reduce browser security settings, which further open the system to further opportunistic
infections. Some spyware disables or even removes competing spyware programs, on the
grounds that more spyware-related annoyances make it even more likely that users will take
action to remove the programs.

Keyloggers are sometimes part of malware packages downloaded onto computers without the
owners' knowledge. Some keyloggers software is freely available on the internet while others
are commercial or private applications. Most keyloggers allow not only keyboard keystrokes to
be captured but also are often capable of collecting screen captures from the computer.
Remedies and prevention
As the spyware threat has worsened, a number of techniques have emerged to counteract it.
These include programs designed to remove or block spyware, as well as various user practices
which reduce the chance of getting spyware on a system.
Anti-spyware programs
Many programmers and some commercial firms have released products dedicated to remove or
block spyware. Programs such as PC Tools' Spyware Doctor, Lavasoft's Ad-Aware SE and Patrick
Kolla's Spybot - Search & Destroy rapidly gained popularity as tools to remove, and in some cases
intercept, spyware programs. On December 16, 2004, Microsoft acquired the GIANT AntiSpyware
software, rebranding it as Windows AntiSpyware beta and releasing it as a free download for
Genuine Windows XP and Windows 2003 users. (In 2006 it was renamed Windows Defender).
How Anti-Spyware Software Works
Anti-spyware programs can combat spyware in two ways:
1. They can provide real-time protection in a manner similar to that of anti-virus protection:
they scan all incoming network data for spyware and blocks any threats it detects.
2. Anti-spyware software programs can be used solely for detection and removal of spyware
software that has already been installed into the computer. This kind of anti-spyware can
often be set to scan on a regular schedule.

Claria Corporation
Claria Corporation (formerly Gator Corporation) was a software company based in Redwood
City, California with products many considered spyware. It was established in 1998 by Denis
Coleman. Its name was often used interchangeably with its Gain advertising network, which it
claimed serviced over 40 million users. Claria exited the adware business at the end of second
quarter 2006, and eventually shut down completely in October 2008. However, its software still
remains installed on millions of PCs.
The "Gator" (also known as Gain AdServer) products collected personal information from its
unknowing users, including all websites visited and portions of credit card numbers to target
and display ads on the computers of web surfers. It billed itself as the "leader in online behavioral
marketing". The company changed its name to Claria Corporation on October 30, 2003 in an
effort to "better communicate the expanding breadth of offerings that [they] provide to
consumers and advertisers", according to CEO and President Jeff McFadden.

Ambush Marketing
Ambush marketing is a marketing strategy wherein the advertisers associate themselves with,
and therefore capitalize on, a particular event without paying any sponsorship fee.
The word "ambush" as used in the expression ambush marketing, means "an attack from a
hidden position" and is derived from the old French verb embuschier, having the meaning "to
place in a wood." The term "ambush marketing" was coined by marketing strategist Jerry Welsh,
while he was working as the manager of global marketing efforts for the American Express
Company in the 1980s.
Types of ambush marketing
Direct forms of ambush marketing encompass means for a non-sponsor to directly connect
themselves to an event.

Indirect ambush marketing often involves the use of imagery and themes in advertising that
evoke a mental association with an event, but without making specific references to the event
itself or its trademarks.
Impacts of Ambush marketing

Increasing cost of sponsorships

Transgression on the intellectual property rights

Limitation to freedom of expression

Customer Hijacking
Customer hijacking is a self-executing program downloaded onto client computers that permit
a company to hijack customers of affiliate marketing sites, and redirect affiliate commission to
Q-1: Do you believe ISPs who host adware sites should be held legally responsible for these
adware Web sites? Do you think the ad sponsors who pay firms like Zango should be held
responsible? Why or why not?
Although it is possible that ISPs (Internet Service Providers) have no responsibility for the
adware that they facilitate, but it is believe that they do bear some responsibility because they
make money providing Internet service to these sites. Similarly, the ad sponsors who pay firms
like Zango are contributing to Zangos livelihood, and consequently are at least partially
responsible for Zangos transgressions.
Q-2: Do these programs result in greater targeting of advertising, or are they just as mass
market in nature as television ads?
Many of these programs are not at all targeted, and companies may want to reconsider their
participation in them. Analysts are saying that as advertisers become increasingly intrusive
online, consumer behavior begins to reflect their distaste for these methods. Consumers will
react to the ubiquity of these ads just as they do with television: using their remote control (or
mouse) to eliminate advertising they don't find relevant or entertaining. Consumer rejection of
this type of mass marketing online has proven that allowing consumers to surf the Web without
these pernicious interruptions and providing them with targeted, relevant offers are the keys to
successful online marketing. Moreover, these types of aggressive marketing techniques are
increasingly the subject of congressional hearings and newspaper commentary. While these
techniques may "work," they also cause controversy and embarrassment for the firms that use
these techniques. In the long run, these techniques may reduce the level of social trust in the
Web and in e-commerce activities in general.

Q-3: What type of industry or government regulations might be needed to control these
forms of advertising?
Industry or government regulations that might be needed to control these forms of advertising
might include allowing consumers to opt out from being tracked online. These options should
be readily available and easy to access. Another regulation that might be helpful would be
requiring a marketing company who purchases a users e-mail address from another company
to send that user one (and only one) e-mail that invites the user to subscribe or to opt-in to email, pop-up, or pop-under advertising. This e-mail should also provide the address of the
referrer so that the consumer knows how their name was acquired. The consumer should be
able to request that the selling company not release their information to any other company
without consent. E-mail recipients should always be informed of how to register complaints and
how to unsubscribe. Advertising network firms and advertising list management companies like should be required to do the unsubscribing for any consumer who requests it.
Q-4: In what ways does adware contribute to a more efficient marketplace? Does it increase
consumer choice, speed product search, or increase the efficiency of matching buyers and
E-mail and other forms of marketing communication contribute to market efficiency by
informing consumers about products, prices, and quality. However, when marketing
communication begins to confuse customers, divert customers from intended destinations, or
misinform them, it begins to decrease market efficiency and reduce consumer welfare.
Customers end up buying the wrong things for the wrong prices.