E-Business 101 Parts 1 and 2: Taxonomy and Anatomy - Taxonomy - Classification of E-Businesses
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In a simple taxonomy, web-based businesses or their web sites may be classified according to the characteristics of their customer base, the two most prevalent classifications being "B2B" (business-to-business) and "B2C" (business to consumer). As its name implies, a B2B web-based business focuses primarily on selling goods and services to other businesses, as opposed to consumers. Chemdex.com, which provides researchers a one-stop shop for laboratory supplies, is an example of a B2B web-based business.
In contrast to B2B web-based businesses, B2C web-based businesses focus primarily on selling goods and services to consumers. Amazon.com which sells books, compact disks, electronic products, etc. directly to consumers is an example of B2C web-based business. Of course, there are web-based businesses that sell products to both consumers and businesses, Ladderman.com is one such example.
As will be discussed in more detail in a later article in this series, businesses with a Web presence need to address the issue of customer privacy. A web-based business targeted to consumers may face more stringent requirements with regard to privacy issues and a higher level of scrutiny by federal agencies (e.g., Federal Trade Commission) and state agencies. Furthermore, federal (e.g., 1998 Children's Online Privacy Protection Act) and state statutes limiting the collection and use of information from children may also come into play more for B2C oriented businesses than for B2B oriented businesses.
In a second taxonomy of web sites, businesses' web sites may be classified according to their level of visitor engagement. For example, a web site may be classified as "passive" if it merely provides information to visitors, but does not transact business, such as accepting orders or sell products or services. Many law firms, accounting firms, and other businesses operate passive web sites to provide information about the services and products they offer (e.g., Alderman.com, WalkerDigital.com). Thus, a passive web site has a relatively modest level of engagement with visitors to the web site and may act primarily as marketing tool for a business or as an information resource for people desiring to learn more about the business. A web site may be classified as "active" if the web site processes orders for products and services offered by the web site or otherwise has a higher or more sophisticated level of engagement with visitors to the web site. Amazon.com, Priceline.com and goSKInewengland.com are examples of active web sites. While the terms "passive" and "active" are used here as a matter of convenience, the level of engagement of a web-based business with consumers via a web site may be crucial in determining if personal jurisdiction can be exercised over the business by a court located in a different state from the business. This will be discussed in great length in a later Article.
In a third taxonomy, web-based businesses or their web sites may be classified according to their revenue models. For example, web-based businesses such as Yahoo.com, Excite.com and other web portals generate a majority of their revenue from advertising on their web sites. In contrast, web-based businesses such as Amazon.com generate the majority of their revenue from the sale of products via their web sites. Different revenue models create different tax and accounting issues for different web-based businesses and may require different types of agreements with visitors to web sites and content or product suppliers.
In a fourth taxonomy, web sites may be classified according to the business models underlying the web sites. For example, web-based businesses may be classified as having or operating: 1) An auction web site (e.g. Ebay.com); 2) a reverse auction web site (e.g., Priceline.com); 3) An exchange web site (e.g., Ace.Asia.com); 4) A trading hub web site (e.g., Amaxon.com); 5) A government agency web site (e.g., SEC.gov); 6) An educational institution web site (e.g., Yale.edu); 7) Web portals (e.g., Yahoo.com); 8) A gaming oriented web site (e.g., The-London-Casino.com); 9) A buying club web site (e.g., Shopucc.com); 10) A peer-to-peer organization web site (e.g., Napster.com), 11) A public service oriented web site (e.g., BBB.org); etc. Such distinctions may cause the web sites to fall within the governance of different international, federal or state regulations or have different concerns regarding intellectual property, privacy, taxation, etc. For example, Ebay and Yahoo have recently run into trouble with German and French laws regarding the auctions and sale of Nazi related paraphernalia on their web sites.
In yet another taxonomy, web sites may be classified according to the nature of the goods and services available from the web sites. This taxonomy may break down the goods offered by a web site into tangible goods (e.g., books, compact disks, etc.) versus intangible goods (e.g., electronic or digital versions of books, music, software, domain names, etc.). Such a distinction may be important in evaluating tax consequences relating to the sale or license of such goods, as well as the terms of the sale or license.
The foregoing taxonomies are useful because they help us, as lawyers, identify the issues that our clients may face.
Next: Anatomy - The Asset Structure of an E-Business >>
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