IT WAS JUST A FEW SHORT years ago that the Internet was viewed as a potential business Nirvana—a boundless realm of economic opportunity, unfettered by the borders, rules and limitations of real-world commerce. And your website was considered a sort of business Field of Dreams—If You Build It, They Will Come.

Reality, of course, has come crashing down on e-commerce. It turns out that the success of the online enterprise is dependent on the same old-fashioned business principles that apply to the street corner store—quality goods and services, focused sales and marketing, business efficiency and a positive customer experience. Thousands of online entrepreneurs have found out the hard way that executing e-commerce has the same requirements as running a real-world enterprise—and if you don’t know how to meet those requirements, you wind up with an order pad in your hand, reciting the daily specials.

The learning curve has been slow, but companies are now grasping the concept that an e-commerce website can be run—in fact, must be run—along the same principles that apply to a brick-and-mortar business. A rapidly growing selection of new technologies and digital strategies are now available to make websites more innovative, efficient and productive by emphasizing a positive customer experience, streamlining business processes and enhancing knowledge about the customer.

One key area of customer knowledge that technology now addresses is geography. Just about every real-world business process is geographically influenced, from store location to advertising to inventory distribution. Most business communication carries information concerning its origination point—a return address, a caller ID phone number—that impacts how a particular communication is prioritized and handled. But how do you determine the geographic start-point of an Internet contact?

You do it with a specialized piece of technology that is being rapidly adopted in a wide variety of online industries. It’s called geolocation—the science of determining where in the real world an Internet user is when he clicks into a website. An enterprise-level geolocation software solution instantly pinpoints the geographic location of the web visitor by mapping the 1.4 billion IP addresses on the Internet and tracing the path of the contact back to the originating IP. The best geolocation solutions, which supplement technology with hand-mapping by human experts, can determine the visitor’s location down to the country, state, region, city or even zip code levels, depending on the needs of the customer, which vary by application and industry.

Geolocation has proven a compelling business application in four general areas. For targeted online marketing, geolocation data allows online merchants to do just what real-world merchants do—target advertising, promotions and product marketing to consumers based on where they are located. No Miami department store would advertise fur parkas, but an online ad for parkas will still be seen in Miami—a waste of time and marketing dollars. With geo-targeting, website visitors are presented with ad content based on their real-world locations—Miami customers will see bathing-suit promotions while the ad for parkas is displayed only to customers in Anchorage. Furthermore, viewers can automatically be shown content that is customized to their local language, currency and customs—that same ad for parkas can be presented to Stockholm-based visitors in Swedish. The result is a more engaged and loyal customer who is far more likely to buy. Merchants and ad serving companies are reaping the rewards of that outcome.

Perhaps the most widespread use of geolocation at the moment is fraud detection. Financial Insights estimates that online credit card fraud will cost retail businesses as much as $60 billion a year by 2005, and banks are regularly flooded with fraudulent credit card and loan applications by online thieves—the U.S. Secret Service calls online fraud “the bank robbery of the future.”

But much of that crime has a detectable geographic element—the address provided by the customer or applicant doesn’t match his actual location. This is a particular danger signal for transactions originating overseas, which produce over 40 percent of all fraud incidents. Those crimes can’t be spotted using customer-provided registration data—a recent ClearCommerce study found that 70 percent of overseas-instigated frauds were executed using U.S.-issued credit cards and U.S. shipping addresses. But a substantial percentage of fraudulent transactions originate in a handful of nations—Yugoslavia, Nigeria and Romania, to name three—and from certain specific locations, the fraud rate is extraordinary. Last year, 25 percent of all online transactions originating in St. Petersburg, Russia were fraudulent.

Geolocation addresses this danger by instantly providing a “return address” to every attempted online transaction. If the customer or applicant registers with a mailing address in California but is geolocated in Utah—or Ukraine—the order can be red-flagged for further inspection before completion. And particularly fraud-prone locations can be blocked altogether. These measures can reduce online fraud at least 10 percent, and up to 25 percent on overseas transactions.

For regulatory compliance and rights management, geolocation is proving to be a tremendous revenue generator. The explosive growth of Internet gambling has attracted the eager attention of online gaming providers who must pay very strict attention to national laws and regulations. An online casino servicing a customer in an illegal location—like the U.S. —can be forced out of business. With geolocation, the casino knows where each online customer is, and whether the bet can be legally taken. And that means low-risk access to what could soon be a $10 billion market.

The same technology is making headlines in the professional sports industry. Major League Baseball is now providing live game video feeds online to desktop baseball fans all over the world. In order to protect local TV broadcast rights in the 26 major league cities, MLB.TV uses geolocation provider Quova, a Mountain View company that innovates this technology, to block viewers in certain cities from seeing certain games. With all the legal “bases” covered, MLB is able to access a whole new market of fans. And other providers of digital content, such as movies and music, are able to leverage geolocation solutions in similar ways to enable their own business models to produce new revenues.

A newly emergent application for geolocation is network security. IT security experts must execute a difficult balancing act in attempting to deny network access to external intruders while providing it to employees, partners and customers. Real-time geolocation data can be leveraged as a network watchdog to provide a first-alert intrusion alarm based on the geographic location of the potential intruder. At the same time, geo-data is also a valuable tool for authenticating rightful users and allowing them the ready access they need. And when a hacker or fraud purveyor does attempt to penetrate the network, geolocation data can be employed in a forensic role to investigate breaches and improve preparations for future attacks.

Successful e-commerce in the 21st century requires a digital strategy that includes the best available technology. A well-armed website can extend the reach and revenue opportunities of any enterprise by generating customer loyalty, providing market access and streamlining business processes – old-fashioned business principles that were the keys to success long before the Web ever existed. Geolocation, with its ability to target customers, prevent fraud and maximize new opportunities, is a technology that should be a weapon in the arsenal of every online enterprise.