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The Open Commerce Handbook

CHAPTER One

Why the Handbook?

Traditional eCommerce has or rather had a problem, which was this: most of the people using it were basically unhappy about something a lot of the time for a lot of different but equally valid reasons. With more than 75 percent of shopping carts being abandoned, many solutions were offered for this problem, but most of these so-called solutions were just rehashed ideas that hadn’t worked that well in the first place. Of course, giving up on commerce in general didn’t seem like a reasonable, or lucrative plan, but neither did mucking along in the same ineffectual manner as we had before. Fortunately for everyone, just when things were looking a bit dark, Open Commerce came in, and considerably brightened the picture.

Which is why we believe that the future of commerce is open and will be fundamentally different from traditional eCommerce. As such, we created the idea of this handbook as a living document that will grow and deepen with additional chapters and expand to cover emerging challenges and future opportunities. It will never really be finished just as the evolution of Open Commerce will never end, but only evolve. We hope the handbook will be an excellent resource for enterprise clients as well as small and medium-size businesses. Whether you are a new entrant to the digital goods space, or an eCommerce veteran eager to expand into Open Commerce monetization models, we hope you’ll find the information herein as interesting as it is useful.

This Open Commerce Handbook will be available in an easily accessible online format. It is a living artifact, which is why our current plans are to keep each section current and the evolving discussion topical.

The Open Commerce Handbook will cover many business success factors including:

Monetization strategies

Creating a roadmap for success

Defining Open Commerce opportunities

Outlining platforms

Best practices

Case studies

Now that we’ve gotten the why part sorted, let’s begin with the what part. So, what exactly is Open Commerce?

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Open Commerce is, to put it simply, what happens when you eliminate the boundaries between consumer desire and deliverability. Open Commerce is a powerfully personalized platform that removes obstacles between what people want, and what people can get. It is a transactional experience that is as frictionless

as it is social, and painless as it is gratifying. How did we get here and what are the

opportunities inherent in this “win, win, win” environment? The answer, as with so

much of our wirelessly connected lives, is that when the sky becomes the limit, the

solution becomes the cloud.

One important distinction from traditional eCommerce, is that Open Commerce can be used as a tool that enables consumers to make purchases and access content directly from the source provider, without having to go through any third-party intermediary at any time, or on any platform. The critical next evolutionary step from eCommerce, Open Commerce provides a seamless experience to the consumer. Open Commerce means no more hassling with pop-up windows or site redirects; in

fact, shoppers may not even need to open up a Web browser. The ability to purchase products and services frictionlessly, without being bounced all over the internet to do it, is what makes Open Commerce so exciting.

Open Commerce is, to put it simply, what happens when you eliminate the boundaries between consumer desire and deliverability.”

The transition to Open Commerce from more traditional eCommerce platforms will indeed be transformative, but as with the introduction of all new technologies, it can be a bit confusing. Our goal here is to provide a clear overview of just what Open Commerce is, and outline what it can do for your business in order to equip you with the information you need to make an informed decision about what strategy will be best for your company.

To understand where we are headed, it is useful to take a quick look back at how we got here in the first place. In the early days, humans bartered with their immediate neighbors. You’ve got something I want, I’ve got something you want, and so we come to an arrangement. The introduction of currency allowed the exchange of services to expand to a much wider geo-economic sphere. By trading our goods and services not only for other goods and services but for a permanent placeholder (that is, currency) that could in turn be traded for other goods and services, trade was no longer restricted to our closest neighbors. Spices and silks could caravan from East to West. Iron and bronze could move from the mountains from which they were mined to kingdoms far away. This trend continued through the ages of exploration and industrialization and into the 20th century. The advent of jet technology yielded an explosion in international shipping and opened the market for the exchange of goods overnight. What had taken a steamship a month to transport, now took an airplane a day.

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3 But this, of course, was not the end. In the digital age, much of what

But this, of course, was not the end. In the digital age, much of what a plane does has become obsolete. As more and more goods and services have moved from the realm of the physical world to the virtual one, many transactions are now entirely digital. Instead of shipping an album as a CD, for example, consumers can simply download the music they want digitally. For products like this, what had taken a plane a day to deliver, now takes a connected digital device a matter of minutes, or even seconds.

But even this process is not entirely seamless. All too often, eCommerce requires some hoop-jumping to get to the desired product. The restraint of domain exclusivity means that purchasing something from Company X requires a purchaser to go through Company X’s eCommerce solution. Meanwhile, the restraint of browser exclusivity means that you can’t buy anything online without first launching a browser and then navigating to an eCommerce site.

This is where Open Commerce comes in. Open Commerce is such a revolutionary solution because it leaves behind the constraints of eCommerce 1.0 for the potential of a more dynamic, intuitive, and frictionless commerce-as-content arena, a place where seamless experience drives frictionless consumption.

As commerce has evolved, our desire for goods and services has remained constant. But as our goods have shifted from tangible to virtual, our potential access to them has expanded exponentially. By opening the non-physical marketplace, we’ve eliminated the boundaries and limitations found in the physical marketplace and replaced it with a “marketspace”— a place where everything is available,

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everywhere, all of the time.

And, thanks to the liberation of Open Commerce, you don’t even have to open a

browser to get there.

How Open Commerce Makes Consumption Frictionless

Open Commerce represents the celebration of access, and the elimination of barriers between buyers and sellers. Since accessibility is the lifeblood of Open Commerce, walled gardens are necessarily being eradicated and digital brands are rapidly gaining direct access to a global audience of eager consumers. It’s helpful to consider Open Commerce an evolutionary improvement over

Virtual goods appeal to a youthful, global and burgeoning buyer base.”

traditional eCommerce, not a repudiation of the older model.

One expression of that improvement is readily apparent in the distinct non-physicality of Open Commerce. After all, in a platform where goods become virtual, and services digital, the constraints of proximity and inventory become irrelevant. In our burgeoning age of Open Commerce, there is no such thing as distance, there is only connected and disconnected, open platforms and closed platforms. And, as technology continues to deliver us more connected consumers, the question of how to create a seamlessly social and frictionless transactional experience has become paramount for operators of digital businesses.

The Internet’s ability to create a category of electronic goods, content and

experiences that could uniquely be delivered in a digital context eliminated the constraints and limitations endemic to the physical marketplace. What started as basic downloadable software has evolved into a richly social ecosphere of games, digital music and video as well as numerous online services.

The digital age has also evolved our idea of ownership. Since “owning” a non- physical object is distinctly different than owning a physical object, we have also witnessed the growth of virtual ownership models where customers rent, subscribe,

and lease content and services. The defining factor of digital content “ownership” is

experiential access rather than physical storage, and so the attendant concept of permanent ownership has evolved to accommodate this (virtual) reality. Having explored the frictionless nature of Open Commerce, let’s examine the potential that truly frictionless commerce provides in a global context.

The Digital Goods & Content Market is Growing Rapidly & Open for Business

The market for digital goods and content is massive, under-penetrated, and expanding. More people are making e-commerce purchases, and they are spending more than ever with each purchase. We define digital goods and content as any goods or products that are stored, delivered and used in an electronic format. In the

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early days of online commerce, sellers provided shoppers with digital items within email attachments or via secure links to complete the transaction. Today, as Open Commerce has grown more ubiquitous, access has replaced ownership and the SaaS model has become more popular.

There are myriad examples of digital goods and content including: e-books, music files, downloadable software, digital images, Web templates, e-manuals, virtual gifts on social networking sites, virtual goods for an online game sessions and any other item that can be electronically stored and used in one or more files. Virtual goods appeal to a youthful, global and burgeoning buyer base.

Current market estimates suggest that this segment of digital commerce represents tens of billions of dollars of spend, with all major sub-segments expected to experience double-digit growth over the next four years. Accordingly, the double- digit year-over year increases in sales are driven by three coterminous factors: A higher average spend per sale; a large increase in buyers; and an expanding number of products available.

Now that we understand a little bit more about the enormous opportunity for Open

Commerce in general, let’s turn to some of the business challenges and hurdles

involved in entering or ramping up in the space.

What are the Challenges and Barriers to Entry?

New businesses face many challenges in delivering frictionless commerce. Some of these challenges are of the logistical, human and technological variety, but generally stem from: infrastructure, human resources, and technology fragmentation. Left unaddressed, these challenges will only be compounded as globalization continues to drive Internet and smartphone penetration and increase digital goods consumption. Despite the challenges, an ever-growing base of users and an ever- increasing catalog of digital goods prove that Open Commerce is gaining momentum for both buyers and sellers.

However, the more hours consumers spend online, the more they come to expect the frictionless delivery of commerce as content. The continued growth of games like Farmville, and Angry Birds as well as the popularity of virtual currencies and goods from Facebook and SecondLife has proven the clear demand for frictionless transactional experiences.

So, how do you deliver frictionless Open Commerce? First, you have to address the following three aforementioned challenges.

From an infrastructure perspective, many factors can dissuade new businesses from entering the space, including: platform constraints, international currency conversion and hedging complications. From a platform perspective, utilizing a

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closed, non-fluid operating system can also severely restrict necessary system modifications and updates.

Meanwhile, human resource concerns are equally valid. Many companies have struggled to find and hire talent with the required experience and skills to handle the enormous volume and granular complexity native to the global digital goods marketplace. One of the main advantages of hiring a third-party payment platform company vs. building one in-house, is that you can leverage the full-service expertise of account managers and customer service specialists that come with the full-service, third-party offering.

At the same time, as media spreads across various mobile, desktop, and tablet devices and becomes accessible via new, and constantly evolving channels, the complexities of providing a frictionless checkout experience, across device platforms, becomes quickly evident. Modern consumers want things that work on their tablet to work on their phone and to work on their computers without hiccup. And, since consumers don’t experience their digital lives in relation to device specific silos, their expectations for completely seamless experiential transactions is very high. Understanding how to meet and exceed these expectations is another reason that new entrants to the digital space often cite for choosing to partner with experienced Open Commerce brokers.

The Business Benefits of Open Commerce

“Open Commerce solutions work by

connecting the dots between the people, processes and platforms that drive online

sales revenue.”

Open Commerce solutions work by connecting the dots between the people, processes and platforms that drive online

sales revenue. Specifically, the best Open Commerce solutions provide marketing best practices, revenue optimization features and techniques that are built upon open cloud commerce platforms. Open Commerce solutions are perfect for fast-growth enterprise companies as well as divisions of larger enterprise companies looking to transition to a SaaS cloud channel. Ultimately, customizable open architecture results in increased sales and decreased time to market by delivering full-service white label eCommerce solutions, with complete integration.

Meanwhile, the nimbleness of the open platform means that as new solutions and best practices become apparent, sellers with Open Commerce architecture can quickly take advantage of these optimizations. By adopting the Open Commerce model early, businesses can secure an advance foothold in an enormous global marketplace that is quickly revolutionizing the idea of online purchasing. Businesses using Open Commerce platforms can actually deliver on the promise of commerce as an anywhere, anytime, anyplace reality.

From a technical standpoint, Open Commerce will further encourage internal company innovation and adaptability. As commerce becomes more distributed and

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social, business models will need to be flexible enough to change rapidly. When choosing between Open Commerce and older eCommerce solutions, it is important to remember that integrating your platform into static, inflexible and cumbersome solutions can stall sales and limit new monetization opportunities. On the other hand, Open Commerce platforms allow for rapid implementation, fluid integration, and seamless modifications. Small and medium sized businesses as well as fast- growth enterprise companies can all benefit from a technology platform that specializes in spotting and leveraging new market opportunities via commerce locations and transactional touch points. We have only begun to witness the hugely disruptive potential of online commerce to radically change the entire marketplace. Nothing but an Open Commerce, open architecture platform will be able to adapt, incorporate, and deliver solutions as rapidly as the market demands.

The best Open Commerce platform delivers the broad catalog of an eCommerce App store with both SaaS plug-ins and the total solutions of a full-service payment platform. For example, BlueSnap delivers pre-integrated plug-and-play architectural solutions that specialize in delivering opportunities like commerce locations and transaction methods to provide customers unrivaled flexibility.

While we are on the subject of flexibility it’s important that we turn now and

examine the advantages of dynamic new and emerging pricing models available through the adoption of Open Commerce solutions.

New Pricing Models in Open Commerce

One of the biggest benefits of Open Commerce is its customizable pricing architecture. Today, in order to best

Open Commerce evolved from broader social Web dynamics that simplified content-rich platforms into seamless social activities.

promote services and target a wider range of buyers, digital goods and content providers require the flexibility to create varied pricing models. These sellers often employ several unique pricing models with multiple conditions starting and ending at different points in time. The capability to support flexible pricing models requires sellers to track, report and analyze a multitude of data from disparate sources. Common examples of dynamic pricing models and the associated complexities are:

Trial Periods, Subscriptions and Pay-per-Use or Time-Based models.

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The reason this matters to your business is that dynamic subscription

models can make you more money: flexible pricing functionality allows you to build an almost infinite catalog of recurring charge offerings as well as an effectively infinite choice of payment levels, customizable payment periods, and free trials. In fact, a dynamic pricing platform empowers businesses to compete within every type of market, both demographically and geographically. The

platform’s flexibility

8 The reason this matters to your business is that dynamic subscription models can make you

also allows companies with all types of budgets to tailor subscription offerings and leverage free trials and

reduced-charge bonus programs to engage customers. Ultimately, dynamic pricing encourages deeper engagement and customer brand stickiness.

Prior to the rise of Open Commerce, traditional subscription models offered

customers a fixed benefit on a fixed schedule for a fixed cost. The old model

obviously worked, but it wasn’t very adaptable. That’s why the next generation of

pricing models will blend fixed fee schedules with ad hoc charges, which will allow for a more balanced pricing schema: by engaging customers in a frictionless and embedded Open Commerce experience, premium content and services can be sold on an as-needed basis. From a consumer perspective this is gratifying because, by monetizing specific features, buyers will enjoy a richer content experience and will not need to pay for content and functionality that they are not using. The à la carte

menu benefits sellers with huge upsell engagement opportunities while benefiting buyers with a more customized experience.

Dynamic subscription pricing will also allow for dynamic charges for a given time period, incremental charges for premium features and coupon application for upgrades during pre-designated calendar periods. Even better, dynamic pricing

models allow sellers to establish a pricing timeline and pricing funnel that can be

modified throughout a customer’s purchasing cycle to take advantage of peak

consumption patterns.

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At the end of the day, it is clear that shoppers are demanding and expecting simple-to-use processes that match their true usage patterns. As Open Commerce becomes more fluid, and barriers between desire and deliverability evaporate, dynamic pricing will create more frictionless eCommerce, strengthen engagement and drive conversion rates.

What are the Catalysts & Drivers for the Monetization of Digital Goods?

Technology advances as well as improvements in Open Commerce solutions are fueling the explosive growth of the digital goods and content markets. From the growing ubiquity of broadband, to the steady penetration of smartphones, to improvements in network capacity and e-marketing capabilities, virtual goods are enjoying an ever-wider audience and distribution network: always-connected consumers have an insatiable appetite for the right content, delivered immediately, and without the friction of traditional commerce processes.

Two-thirds of current Internet users have paid to access or download some type of digital content in their online lifetime. [1] With a hyper-connected generation of children growing into insatiable digital consumers, the continued sales of digital experiences and information shows overwhelming signs of growth from increasingly connected social gaming and networking platforms.

How the Social Web Encouraged More Open Commerce

Perhaps more than anything, hyper-connected, experience-rich social networks taught consumers to expect a lot from their online experiences. Consequently, Open Commerce evolved from broader social Web dynamics that simplified content-rich platforms into seamless social activities. In the social Web, communities continue to dominate brands and drive the need for technologies that can support distributed services as well as the growth of virtual ownership subscriptions versus purchases.

Indeed, social networking has severely blurred the lines between where one site stops and another begins, and further confused the experience of domain exclusivity. For a perfect example, just watch how Facebook users seamlessly interact with software that is owned and published by thousands of distinct publishers all fully embedded within the ‘single’ experience of the facebook.com domain

Unfortunately, traditional eCommerce has not evolved to accommodate the more seamless nature of the social Web. For example, before the introduction of Open Commerce, a person trying to purchase additional credits for a Facebook game would frustratingly witness both domain exclusivity and browser exclusivity. This former restrictiveness required potential customers to open a fresh browser

window to access a payment process that already was owned and / or managed by

the game’s developer.

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Where the earliest innovations in eCommerce eliminated friction by allowing consumers to interact in realtime online, the continuing slow pace of innovation is arguably now the greatest source of friction in online transactions. Realistically, those Facebook users will become exasperated (and therefore less likely to pay) when they cannot purchase new credits without leaving their application. And, those Microsoft Office users will continue to come up with revenue-free alternatives when they cannot seamlessly purchase additional capabilities or licenses. The failure of traditional eCommerce systems to provide this level of convenience and to adapt to evolving consumer needs, represents a significant barrier to optimizing product revenue potential.

Finally, then, the experience of the new consumer for digital goods and services has fundamentally changed. It has changed because consumers today experience their online world in the context of social networks, not just through the search-and- discovery paradigm of search engines. Instead of relying on algorithms to define their online experience, the new consumer is searching, sharing and purchasing based on their trusted social graph. As a consequence of this behavioral shift, the experience of consuming paid goods and services needs to mirror the path they took to find it.

Pushing the Like Button

Social media is the key arena in which Open Commerce offers definite advantages over traditional eCommerce. The seamlessness of Open Commerce is crucial to the social media experience, which aims to give users the feeling of real connectivity unfettered by technological hurdles. Social media has played, and will continue to play, a critical part in driving the sale of digital goods and content. More than 72 percent of the Internet population is active on one or more social media sites. The demographic of social media broadband users is aged between 20 to 29 and overlaps nicely with the major demographic for digital games and content.

In the U.S. alone, social gaming is poised to grow at 46 percent CAGR from 2009 to 2014 to a $4 billion market in 2014. The ever-increasing penetration of social networks has created super distribution channels for e-marketers and sellers and led to the explosion of the digital content marketplace. Unsurprisingly, nearly 65 percent of marketers are looking for new subscribers to funnel in from social media subscription channels. [2] The global penetration of social networks is staggering. 84 percent of U.S. Internet users are active on one or more social media sites, as are 95 percent of Brazilians, 56 percent of Germans, 73 percent of French, 80 percent of Spaniards and 82 percent of Portuguese. [3]

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11 *Source: InSites Consulting [2] These numbers are projected to grow in the coming years, and

*Source: InSites Consulting [2]

These numbers are projected to grow in the coming years, and offer a powerful incentive for the utilization of Open Commerce as a way to integrate into the social media world. As with any new market opportunity, it is worth noting that some recent studies have shown that certain monetization challenges have stymied the capitalization of a portion of this market. At the same time, the growing adoption

and increased flexibility of the Open

Commerce platform should improve monetization, but it’s still too early to

know how quickly, or how effectively this transition will take place.

Globalization is a positive force for increasing the number of buyers, but it also has complicated the payment-processing environment for sellers.

Is it Too Late to Join the Party?

Absolutely not. Despite the impressive size of the current market, it appears to be still largely untapped. This is great news for traditional eCommerce businesses wanting to enter the digital goods space by taking advantage of Open Commerce platforms. To date, only 24 percent of the global population has made any type of online purchase; and from that subset of shoppers, physical goods made up a majority of their purchases. [4] Nevertheless, electronic payments back in 2010 represented a still noteworthy $905 billion globally. Electronic payment avenues included credit cards like Visa, MasterCard and PayPal, as well as cash escrow-based

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payment providers such as Alipay, TenPay and M-Pay. The shift to electronic payments is expected to continue on an upward trajectory and is estimated to constitute almost 70 percent of all payment transactions by 2015, representing a jump from only 47 percent in 2006.

We’re Not in Kansas Anymore

Globalization is a positive force for increasing the number of buyers, but it also has complicated the payment-processing environment for sellers. For example, the introduction of exotic cards used in local markets as well as ex-cash escrow payment models like PayPal have widened the market opportunity for Open Commerce solutions while adding another layer of complexity for merchants looking to enter the space.

Selling in a global marketplace also has made merchants aware that 75 percent of buyers will abandon a cart for many reasons. It also helped sellers understand that selling in local language and currency at checkout is mandatory. Besides having to deal with translations and conversions, today’s sellers also must deal with the attendant requirements of currency hedging, fluctuation, added value added tax (VAT) and sales tax issues as well as international credit laws. Add fraud and piracy on top of an already complex situation and the benefits of working with a full- service, global and Open Commerce platform quickly become evident.

Despite the complexity of navigating in a global market, analysts predict that as Internet access becomes more widespread, the purchase of digital goods and services will continue to experience dramatic increases. As the purchasing audience expands, the challenge won’t be finding the audience, but rather reducing friction in the monetization of digital content via well-integrated Open Commerce solutions. Such sophisticated platforms will need to optimize revenue while driving both customer acquisition and retention. The opportunity for sellers to tap into this market quickly is contingent on their ability to either build adequate in-house systems, add outside payment functionality to current systems, or to outsource the eCommerce payment solutions to established and third-party global payment platforms.

Digital content sellers and buyers are converging and will continue to converge in a monetized marketplace that includes social games, videos, music, SaaS subscriptions, as well as myriad online services. Buyers will access this expanding marketplace via growth in delivery channels from eCommerce offerings, to mobile commerce pathways powered by broadband penetration and ubiquitous smartphone adoption. At the same time, as buyers enter the digital marketplace from international channels, sellers will need to be prepared to accept electronic payments, alternative payments, exotic cards and mobile payments. Sellers also have the payment platform infrastructure to monitor and deal with fraud, risk management, exchange rates, VAT and sales taxes and so forth. The market will experience traffic growth through traditional online marketing channels and traffic generation efforts

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powered by social media, affiliate marketing, coupons and email marketing campaigns.

Replacing the Walled Garden with an Open Commerce Marketplace

The key to the advantage of Open Commerce is that it takes the seamless functionality of the App Store and breaks it out of the “walled garden” model. While a good fit for Apple, a walled garden model is not always practical for other businesses to grow new offerings on top. As the Internet becomes more mobile and tablets proliferate, the manner in which people interact with, produce and consume content changes. The boundaries between content and commerce also have changed, with immersive online experiences driving frictionless commerce touch points within social games and online services.

As consumers become more accustomed to dynamic buying arrangements, the purchase process has become a fluid transaction within the larger content experience.

Open Commerce offers a flexible platform that allows buyers to purchase anything, anywhere, from any application, on any device, at any time, via any dynamic business model.

Simplicity is the key to monetizing Open Commerce, so it is instructive to look at the

13 powered by social media, affiliate marketing, coupons and email marketing campaigns. Replacing the Walled Garden

Apple App store model as an example of the revolutionary simplification and distribution of the digital goods and content industry. By delivering a simple, accessible and frictionless one- step purchasing experience, the App Store demonstrated the enormous demand for digital content consumption.

Frictionless online retailing requires the collection of consumer credit card and personal data, secure storage of

this data and the ability to make this data easily available for future purchasing. The App Store succeeded by marrying a seemingly endless

content marketplace with a shopper’s

unique financial identity to allow for hassle free and effortlessly repeatable microtransactions. What the App Store achieved within a walled garden,

BlueSnap is working to make possible

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to everyone else. BlueSnap gives sellers a completely open, frictionless integrated application that delivers everything from storefront to back-end payment processing for games, software, videos, eBooks and API capabilities that can embed into any application.

Why Mobile-Commerce Will Also Drive Growth in Open Cloud Commerce

As the online purchasing medium has become more secure and normalized, a savvy base of buyers have begun to expect frictionless commerce offerings from their connected mobile devices. Tablet adoption, especially on devices like the iPad, is accelerating the monetization of digital content. Full service vendors like BlueSnap are experts at providing payment solutions on tablets because they are similar to traditional online purchases. While phone driven commerce also is encompassing the purchase of physical goods, a growing subset of mobile purchasing continues to service digital content and services. Faster wireless networks, large storage capacities, popular adoption of robust devices like the iPhone and Android, plus a pool of dynamic applications have all contributed to the growth of M-Commerce. The number of apps downloaded is forecast to explode from 11 billion in 2010 to 77 billion in 2014, translating to a 63 percent in Compound Annual Growth Rate (CAGR). [5] Meanwhile, worldwide revenue from mobile apps is projected to increase from 4.9 billion in 2010 to 37.5 billion by 2014, for a 66 percent CAGR. Evercore Partners estimated the M-Commerce market to be $22 billion in 2010, while the IDC Retail Insights Survey points out that 24 percent of all U.S. consumers are ready to use their phone for purchasing and shopping activities. [6]

14 to everyone else. BlueSnap gives sellers a completely open, frictionless integrated application that delivers everything

*Source: Evercore Partners [6]

Mobile digital goods, mobile point of sale payments, peer-to-peer payments, bill payments and M-Commerce will increasingly drive electronic transactions. In fact, total electronic mobile device payments are expected to grow to $733 billion by 2016 from only $167 billion in 2010, an impressive quadrupling of sales volume in

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only six year s. [7] In order to capitalize on the future potential of mobile transactions, large M-Commerce-oriented companies like Google and Amazon and payment card associations like MasterCard are rapidly deploying mobile payment applications for widespread use. The potential for mobile commerce is directly correlated to the increasing prevalence of mobile phones and consumer confidence in utilizing these devices for payments. While the market is huge and growing quickly, it too remains in the early stages of monetization. Worldwide, there are 4.0 to 4.5 billion mobile phones in use, while only around 250 million, or just 6 percent are Internet-enabled. However, industry research suggests that by 2015, the number of commerce-enabled smartphones will almost triple to more than 750 million devices across the globe.

Why Access is the New Ownership Model

A good way to think about the transition of physical to digital products comes from Peter Sheldon of Forester. Buying digital products used to be a lot like buying physical products, excepting the difference of delivery method. The emergence of digital content and services, however, has modified the concept of physical ownership to an expectation of digital access across multiple devices:

“Today’s digitally connected consumer is eschewing the traditional ownership model of buy, download, install, and use. Consumers want access to digital content and services across their connected devices, anytime, anywhere and are increasingly embracing virtual ownership models that provide access to vast libraries of content, services, and products under subscription, usage, and other ownership models. Business leaders charged with monetizing their firms’ catalog of digital content, software, or online services must find digital commerce solutions that allow flexibility to trial alternative business models while supporting fulfillment across multiple consumer touchpoints.” [8]

Another way to think about digital products is by analogy. Imagine buying a basketball and then expecting it to be wherever you wanted it to be whenever you wanted it: at home in the closet, in the car to take to practice, at the basketball court when you get there. Wherever, whenever, waiting for you: that is the digital model that cloud technology and Open Commerce offer. If e-Commerce was known for its limitations, then Open Commerce is a steadily improving platform that eliminates restrictions and replaces exclusivity with openness.

How Open Commerce Removes the Restrictions of eCommerce

Internationalization is truly a double-edged sword, one that offers enormous sales potential and enormous complexity. Having access to enormous borderless markets means that payments must be processed in local currencies and accounted for as currency converted revenues. To achieve the frictionlessness of Open Commerce, a merchant must offer payment types appropriate to international audiences and also accept payment that is natively processed in the preferred currency of the customer.

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When offered a familiar currency and payment method, customers are up to two times more likely to make a purchase.

Open Commerce also achieves innovation by moving sales out of domain and browser exclusivity and empowering the merchant to connect with multiple payment processors. A seamlessly internationalized experience fundamentally improves conversion rations.

Because of its inherent customization and flexibility, Open Commerce allows merchants to generate revenues via creative business models. A software publisher could take advantage of the less restrictive processing capabilities to lower initial

costs, increase audience size and then upsell functionality once the software has been installed. Likewise, a streaming music

Open Commerce also achieves innovation by moving sales out of domain and browser exclusivity and empowering the merchant to connect with multiple payment processors. A seamlessly internationalized experience fundamentally improves conversion rations.

site could offer a subscription service at a low

cost, with ‘premium’ content purchased on an

ad hoc basis.

The emergence of Open Commerce platforms means that merchants are no longer limited to a 1990s model and that new licensing models will support improved monetization

processes.

Leveraging Open Commerce Platforms for Digital Marketing Engagement

According to Peter O’Neill of Forrester, marketers are continuing to invest heavily in

digital channels and strategies. As goods and services migrate to the digital arena, it

has become even more important for companies to gauge, anticipate and surpass customer expectations. Companies that can deliver frictionless customer experiences ranging from content consumption to transactional interactions will be able to command customer loyalty while maintaining multiple monetizable touch points. O’Neill finds that digital marketing strategies means:

...

not just having the knowledge about the customer but also the processes

and the systems that create unique customer insights and deliver compelling interactions across the customer life cycle. So, across many B2B and B2C industries, marketing organizations are focusing investment on a range of digital media at the expense of more traditional vehicles.” [9]

As an engagement strategy and communication opportunity, frictionless and well- integrated Open Commerce solutions can be a powerful marketing tool that increases customer satisfaction while driving transactional volume. In fact, O’Neill suggests that the digital marketing focus is poised to increase in future quarters.

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“The fastest-growing investment areas within digital marketing are: online acquisition drivers such as display ads and search engine optimization; social and mobile marketing; Website design and development; eCommerce; and digital platforms. And even with increased spend levels, marketers still don't feel that they are spending enough on digital. Forrester's September 2011 Global Marketing Leadership Online Survey even showed that if they had incremental funds, marketers would increase digital further, with almost two-thirds indicating that digital would be their first choice to allocate any additional budget dollars.” [10]

O’Neill suggests that in such a hyper-competitive marketplace, it will be the businesses able to combine technology competence with marketing strategy and creative execution to deliver superior digital experiences across the customer life cycle that will see the most impressive results.

Summary

In Chapter One we defined Open Commerce as the next evolutionary stage of eCommerce. Next, we explained how an Open Commerce monetization platform removes barriers between desire and deliverability by providing frictionless, content-as-commerce experiences and then discussed how the new commerce liberates itself from domain and browser exclusivity. Moving along, we posited that one of the primary benefits of Open Commerce is its frictionless delivery across digital experiences and discussed the potential for frictionless commerce to grow.

Chapter One also delineated the rapid growth of the digital goods and service market as well as the business benefits and dynamic pricing models that open architecture platforms provide for businesses. We transitioned from business benefits to a discussion of how social networks are shaping consumer expectations and galvanizing the growth of Open Commerce. Next we outlined the global nature of the marketplace, discussed how Open Commerce can replace older walled garden models and outlined the paradigm shift from ownership to access, and looked at mobile as a growth-driver.

We concluded this chapter with an eye towards the flexibility and customization that Open Commerce provides, as well as with a discussion of how Open Commerce platforms can be leveraged for digital marketing and user engagement.

Now, as we transition into Chapter Two, our focus will shift away from defining the potential of the Open Commerce market towards a discussion of the best business practices for integrating an Open Commerce platform into the monetization strategy of digital content and services organizations.

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[2] InSites Consulting: “Social Media Around the World” , 2010. [3] InSites Consulting: “Social Media Around the World” , 2010. [4] www.Internetworldstats.com and “Trends in Online Shopping.” Nielsen [5] IDC Retail Insights Mobile Commerce Survey, 2010 [6] “Online Payments & Commerce Gateways.” Evercore Partners, January 7, 2011. [7] “Online Payments & Commerce Gateways.” Evercore Partners, January 7, 2011. [8] Market Overview: Digital Commerce Solutions 2011 [9] THE EMERGENCE OF THE DIGITAL MARKETING SERVICE PROVIDER: Peter O’Neill- Forrester [10] THE EMERGENCE OF THE DIGITAL MARKETING SERVICE PROVIDER: Peter O’Neill- Forrester [11] Market Overview: Digital eCommerce Solutions by Brian K. Walker [12] Market Overview: Digital eCommerce Solutions by Brian K. Walker