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Electronic Commerce Eighth Edition Chapter 6 Online Auctions, Virtual Communities, and Web Portals
Learning Objectives <ul><li>In this chapter, you will learn about: </li></ul><ul><li>Origins and key characteristics of th...
Auction Overview <ul><li>Business use of the Web </li></ul><ul><ul><li>Improve existing processes </li></ul></ul><ul><ul><...
Origins of Auctions <ul><li>From Babylon to the Roman Empire to Buddhists </li></ul><ul><li>Common activity of 17th centur...
English Auctions <ul><li>Bidders publicly announce successively higher bids </li></ul><ul><ul><li>Stop at highest bid </li...
English Auctions (cont’d.) <ul><li>Reserve price (reserve) </li></ul><ul><ul><li>Seller’s minimum acceptable price </li></...
English Auctions (cont’d.) <ul><li>English auction seller drawback </li></ul><ul><ul><li>May not obtain maximum possible p...
Dutch Auctions <ul><li>Open auction  </li></ul><ul><ul><li>Bidding starts at a high price </li></ul></ul><ul><ul><ul><li>D...
Dutch Auctions (cont’d) <ul><li>Advantages </li></ul><ul><ul><li>Seller obtains close to highest private valuation </li></...
First-Price Sealed-Bid Auctions <ul><li>Sealed-bid auctions </li></ul><ul><ul><li>Bidders submit bids independently </li><...
Second-Price Sealed-Bid Auctions <ul><li>Second-price sealed-bid auction </li></ul><ul><ul><li>Same as first-price sealed-...
Open-Outcry Double Auctions <ul><li>Open-outcry double auctions </li></ul><ul><ul><li>Sealed bid or open outcry </li></ul>...
Sealed-Bid Double Auctions <ul><li>Double auction </li></ul><ul><ul><li>Buyers, sellers submit combined price-quantity bid...
Reverse (Seller Bid) Auctions <ul><li>Reverse auction  ( seller-bid auction ) </li></ul><ul><ul><li>Multiple sellers submi...
Electronic Commerce, Eighth Edition
Online Auctions and Related Businesses <ul><li>Online auction business is rapidly changing </li></ul><ul><li>Three auction...
General Consumer Auctions <ul><li>eBay </li></ul><ul><ul><li>Registration required, seller fees, rating system </li></ul><...
General Consumer Auctions (cont’d.) <ul><li>eBay (cont’d.) </li></ul><ul><ul><li>Minimum bid increment </li></ul></ul><ul>...
Electronic Commerce, Eighth Edition
General Consumer Auctions (cont’d.) <ul><li>eBay’s success </li></ul><ul><ul><li>No specific audience </li></ul></ul><ul><...
General Consumer Auctions (cont’d.) <ul><li>Lock-in effect </li></ul><ul><ul><li>Economic structure of markets </li></ul><...
Specialty Consumer Auctions <ul><li>Specialized Web auction sites </li></ul><ul><ul><li>Meet special-interest market needs...
Electronic Commerce, Eighth Edition
Consumer Reverse Auctions and Group Purchasing Sites <ul><li>Reverse bid </li></ul><ul><ul><li>Visitor describes desired i...
Consumer Reverse Auctions and Group Purchasing Sites (cont’d.) <ul><li>Priceline.com </li></ul><ul><ul><li>Considered a se...
Electronic Commerce, Eighth Edition
Consumer Reverse Auctions and Group Purchasing Sites (cont’d.) <ul><li>Group purchasing site </li></ul><ul><ul><li>Similar...
Consumer Reverse Auctions and Group Purchasing Sites (cont’d.) <ul><li>Well-suited product types </li></ul><ul><ul><li>Bra...
Business-to-Business Auctions <ul><li>Evolved to meet specific existing need </li></ul><ul><ul><li>Excess inventory dispos...
Business-to-Business Auctions (cont’d.) <ul><li>Emerging business-to-business Web auction models </li></ul><ul><ul><li>Dir...
Business-to-Business Auctions (cont’d.) <ul><li>Large-company model example </li></ul><ul><ul><li>Ingram Micro’s Auction (...
Business-to-Business Auctions (cont’d.) <ul><li>Gordon Brothers Group (1903) example </li></ul><ul><ul><li>Liquidation bro...
<ul><li>International Securities Exchange (ISE) </li></ul><ul><ul><li>New York Stock Exchange, Chicago Board of Trade </li...
Business-to-Business Reverse Auctions <ul><li>Examples: Owens Corning, U.S. Navy, General Services Administration </li></u...
Business-to-Business Reverse Auctions (cont’d.) <ul><li>If suppliers do not agree to participate: </li></ul><ul><ul><li>Im...
Electronic Commerce, Eighth Edition
Auction-Related Services <ul><li>Entrepreneurs encouraged by eBay and other auction site growth </li></ul><ul><li>Provide ...
Auction-Related Services (cont’d.) <ul><li>Auction escrow services  </li></ul><ul><ul><li>Buyers’ common concern: seller r...
Auction-Related Services (cont’d.) <ul><li>Auction escrow services (cont’d.) </li></ul><ul><ul><li>Examples: Escrow.com, e...
Auction-Related Services (cont’d.) <ul><li>Auction directory and information services </li></ul><ul><ul><li>Example: Aucti...
Auction-Related Services (cont’d.) <ul><li>Auction directory and information services (cont’d.) </li></ul><ul><ul><li>Exam...
Auction-Related Services (cont’d.) <ul><li>Auction software </li></ul><ul><ul><li>Target: sellers </li></ul></ul><ul><ul><...
Electronic Commerce, Eighth Edition
Auction-Related Services (cont’d.) <ul><li>Auction software (cont’d.) </li></ul><ul><ul><li>Target: buyers </li></ul></ul>...
Auction-Related Services (cont’d.) <ul><li>Auction software (cont’d.) </li></ul><ul><ul><li>Example: Cricket Sniping Softw...
Electronic Commerce, Eighth Edition
Auction-Related Services (cont’d.) <ul><li>Auction consignment services </li></ul><ul><ul><li>Target: people and small bus...
Auction-Related Services (cont’d.) <ul><li>Auction consignment services (cont’d.) </li></ul><ul><ul><li>Key to success  </...
Virtual Communities: Web Portals and Social Networks <ul><li>Money-making Internet and Web approaches </li></ul><ul><ul><l...
Mobile Communications Technology <ul><li>Cellular-satellite communications technology </li></ul><ul><ul><li>Internet linki...
Electronic Commerce, Eighth Edition
Mobile Communications Technology (cont’d.) <ul><li>Apple iPhone </li></ul><ul><ul><li>Includes touch screen controls </li>...
Mobile Business <ul><li>Revenue models for mobile business </li></ul><ul><ul><li>Requires interconnection </li></ul></ul><...
Mobile Business (cont’d.) <ul><li>Wherify Wireless generating revenue </li></ul><ul><ul><li>Mobile technology convergence ...
Intelligent Software Agents <ul><li>Intelligent software agents  ( software robots ,  bots ) </li></ul><ul><ul><li>Program...
Intelligent Software Agents (cont’d.) <ul><li>Intelligent software agent development leaders </li></ul><ul><ul><li>MIT Med...
Virtual Communities <ul><li>Virtual community  ( Web community, online community ) </li></ul><ul><ul><li>Gathering place f...
Virtual Communities (cont’d) <ul><li>Virtual learning community </li></ul><ul><ul><li>Distance learning platforms (Blackbo...
Early Web Communities <ul><li>1985 (predates the Web) </li></ul><ul><ul><li>WELL (“whole earth ‘lectronic link”) </li></ul...
Early Web Communities (cont’d.) <ul><li>1995: Tripod virtual community </li></ul><ul><ul><li>Offered free Web page space, ...
Web Community Consolidation <ul><li>Consumer virtual community success as money-making proposition </li></ul><ul><ul><li>M...
The Second Wave of Electronic Commerce: Social Networking <ul><li>As the Internet and Web grew: </li></ul><ul><ul><li>Expe...
The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Friendster: Jonathan Abrams (2002) </li></ul><...
The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Web logs (Blogs) </li></ul><ul><ul><li>Web sit...
The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Retailers embracing blogs </li></ul><ul><ul><l...
The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Social networking Web sites for shoppers </li>...
The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Idea-based social networking </li></ul><ul><ul...
Revenue Models for Social Networking Sites <ul><li>1990 </li></ul><ul><ul><li>Virtual communities, search engine sites, We...
Revenue Models for Social Networking Sites (cont’d.) <ul><li>Advertising-supported social networking sites </li></ul><ul><...
Electronic Commerce, Eighth Edition
Electronic Commerce, Eighth Edition
Revenue Models for Social Networking Sites (cont’d.) <ul><li>Mixed-revenue and fee-for-service social networking sites </l...
Revenue Models for Social Networking Sites (cont’d.) <ul><li>Fee-based social networking </li></ul><ul><ul><li>2002 to 200...
Revenue Models for Social Networking Sites (cont’d.) <ul><li>Microlending Sites </li></ul><ul><ul><li>Function as clearing...
Electronic Commerce, Eighth Edition
Revenue Models for Social Networking Sites (cont’d.) <ul><li>Internal virtual communities </li></ul><ul><ul><li>Company-ba...
Summary <ul><li>Look at how companies using the Web to do entirely new things </li></ul><ul><ul><li>Running auctions, crea...
Summary (cont’d.) <ul><li>Ways sellers and buyers can protect themselves </li></ul><ul><li>New approaches to making money ...
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Transcript of "Chapter 6"

  1. 1. Electronic Commerce Eighth Edition Chapter 6 Online Auctions, Virtual Communities, and Web Portals
  2. 2. Learning Objectives <ul><li>In this chapter, you will learn about: </li></ul><ul><li>Origins and key characteristics of the seven major auction types </li></ul><ul><li>Strategies for Web auction sites and auction-related businesses </li></ul><ul><li>Virtual communities and Web portals </li></ul>Electronic Commerce, Eighth Edition
  3. 3. Auction Overview <ul><li>Business use of the Web </li></ul><ul><ul><li>Improve existing processes </li></ul></ul><ul><ul><li>New items </li></ul></ul><ul><ul><ul><li>Running auctions </li></ul></ul></ul><ul><ul><ul><li>Creating virtual communities </li></ul></ul></ul><ul><ul><ul><li>Operating Web portals </li></ul></ul></ul><ul><li>Online auctions provide business opportunity </li></ul><ul><ul><li>Charge buyers and sellers </li></ul></ul><ul><ul><li>Sell targeted advertising </li></ul></ul><ul><li>Strength of Internet </li></ul><ul><ul><li>Brings people together: common narrow interest </li></ul></ul>Electronic Commerce, Eighth Edition
  4. 4. Origins of Auctions <ul><li>From Babylon to the Roman Empire to Buddhists </li></ul><ul><li>Common activity of 17th century England </li></ul><ul><ul><li>Sotheby’s (1744), Christie’s (1766), colonial auctions </li></ul></ul><ul><li>Auction: seller offering item for sale </li></ul><ul><ul><li>Bids: price potential buyer willing to pay </li></ul></ul><ul><ul><li>Bidders: potential buyers </li></ul></ul><ul><ul><li>Private valuations: amounts seller willing to pay </li></ul></ul><ul><ul><li>Auctioneer: manages auction process </li></ul></ul><ul><ul><li>Shill bidders: bidder who seller or auctioneer employees </li></ul></ul><ul><ul><ul><li>May artificially inflate price </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  5. 5. English Auctions <ul><li>Bidders publicly announce successively higher bids </li></ul><ul><ul><li>Stop at highest bid </li></ul></ul><ul><ul><ul><li>Item sold to highest bidder (at bidder’s price) </li></ul></ul></ul><ul><li>Also known as: </li></ul><ul><ul><li>Ascending-price auction </li></ul></ul><ul><ul><li>Open auction (open-outcry auction) </li></ul></ul><ul><ul><ul><li>Bids publicly announced </li></ul></ul></ul><ul><li>Minimum bid </li></ul><ul><ul><li>Beginning price </li></ul></ul><ul><ul><li>If not met: item removed (not sold) </li></ul></ul>Electronic Commerce, Eighth Edition
  6. 6. English Auctions (cont’d.) <ul><li>Reserve price (reserve) </li></ul><ul><ul><li>Seller’s minimum acceptable price </li></ul></ul><ul><ul><li>Not announced </li></ul></ul><ul><ul><li>If not exceeded: item withdrawn (not sold) </li></ul></ul><ul><li>Yankee auction </li></ul><ul><ul><li>Multiple item units offered for sale </li></ul></ul><ul><ul><ul><li>Bidders specify quantity </li></ul></ul></ul><ul><ul><li>Highest bidder allotted bid quantity </li></ul></ul><ul><ul><li>Remaining items allocated to next highest bidders </li></ul></ul><ul><ul><ul><li>Until all items distributed </li></ul></ul></ul><ul><ul><li>Bidders pay lowest successful bidder price </li></ul></ul>Electronic Commerce, Eighth Edition
  7. 7. English Auctions (cont’d.) <ul><li>English auction seller drawback </li></ul><ul><ul><li>May not obtain maximum possible price </li></ul></ul><ul><li>English auction buyer drawback </li></ul><ul><ul><li>Winner’s Curse </li></ul></ul><ul><ul><ul><li>Psychological phenomenon </li></ul></ul></ul><ul><ul><ul><li>Caught up in competitive bidding excitement </li></ul></ul></ul><ul><ul><ul><li>Bidders risk bidding more than their private valuations </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  8. 8. Dutch Auctions <ul><li>Open auction </li></ul><ul><ul><li>Bidding starts at a high price </li></ul></ul><ul><ul><ul><li>Drops until bidder accepts price </li></ul></ul></ul><ul><li>Also called descending-price auctions </li></ul><ul><li>Seller offers number of similar items for sale </li></ul><ul><li>Common implementation </li></ul><ul><ul><li>Use a clock (price drops with each tick) </li></ul></ul><ul><ul><ul><li>If items remain: clock restarted </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  9. 9. Dutch Auctions (cont’d) <ul><li>Advantages </li></ul><ul><ul><li>Seller obtains close to highest private valuation </li></ul></ul><ul><ul><li>Quickly move large numbers of commodity items </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Sales or product interest generated: does not justify cost of operation </li></ul></ul><ul><ul><li>Customer confusion </li></ul></ul><ul><li>Successful examples </li></ul><ul><ul><li>Google initial public offering stock sale (2004) </li></ul></ul><ul><ul><li>LookSmart stock repurchase (2008) </li></ul></ul>Electronic Commerce, Eighth Edition
  10. 10. First-Price Sealed-Bid Auctions <ul><li>Sealed-bid auctions </li></ul><ul><ul><li>Bidders submit bids independently </li></ul></ul><ul><ul><ul><li>Prohibited from sharing information </li></ul></ul></ul><ul><li>First-price sealed-bid auction </li></ul><ul><ul><li>Highest bidder wins </li></ul></ul><ul><ul><li>If multiple items auctioned: next highest bidders awarded remaining items </li></ul></ul><ul><ul><ul><li>At their bid price </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  11. 11. Second-Price Sealed-Bid Auctions <ul><li>Second-price sealed-bid auction </li></ul><ul><ul><li>Same as first-price sealed-bid auction </li></ul></ul><ul><li>Exception </li></ul><ul><ul><li>Highest bidder awarded item at second-highest bidder price </li></ul></ul><ul><li>Vickrey auctions </li></ul><ul><ul><li>William Vickrey: 1996 Nobel Prize in Economics </li></ul></ul><ul><ul><ul><li>Yields higher seller returns </li></ul></ul></ul><ul><ul><ul><li>Encourages all bidders to bid private valuation amounts </li></ul></ul></ul><ul><ul><ul><li>Reduces tendency for bidder collusion </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  12. 12. Open-Outcry Double Auctions <ul><li>Open-outcry double auctions </li></ul><ul><ul><li>Sealed bid or open outcry </li></ul></ul><ul><ul><li>Good for: items of known quality traded in large quantities </li></ul></ul><ul><ul><li>No item inspection before bidding </li></ul></ul><ul><li>Example </li></ul><ul><ul><li>Chicago Board of Trade: commodity futures and stock options </li></ul></ul><ul><ul><li>Buy and sell offers shouted by traders in trading pit </li></ul></ul><ul><ul><ul><li>Each commodity, stock option traded in own pit </li></ul></ul></ul><ul><ul><ul><li>Quite frenzied </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  13. 13. Sealed-Bid Double Auctions <ul><li>Double auction </li></ul><ul><ul><li>Buyers, sellers submit combined price-quantity bids </li></ul></ul><ul><li>Auctioneer </li></ul><ul><ul><li>Matches sellers’ offers </li></ul></ul><ul><ul><ul><li>Starting with lowest price and then goes up </li></ul></ul></ul><ul><ul><li>To buyers’ offers </li></ul></ul><ul><ul><ul><li>Starting with highest price and then goes down until all quantities offered are sold </li></ul></ul></ul><ul><li>Operation format </li></ul><ul><ul><li>Sealed bid or open-outcry </li></ul></ul><ul><li>Example: New York Stock Exchange </li></ul>Electronic Commerce, Eighth Edition
  14. 14. Reverse (Seller Bid) Auctions <ul><li>Reverse auction ( seller-bid auction ) </li></ul><ul><ul><li>Multiple sellers submit price bids </li></ul></ul><ul><ul><ul><li>Auctioneer represents single buyer </li></ul></ul></ul><ul><ul><li>Bids for given amount of specific item to purchase </li></ul></ul><ul><ul><li>Prices go down as bidding continues </li></ul></ul><ul><ul><ul><li>Until no seller is willing to bid lower </li></ul></ul></ul><ul><li>Used by consumers </li></ul><ul><li>Largest dollar volume </li></ul><ul><ul><li>Businesses: both buyers and sellers </li></ul></ul><ul><ul><ul><li>Buyer acts as auctioneer </li></ul></ul></ul><ul><ul><ul><li>Screens sellers before participation </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  15. 15. Electronic Commerce, Eighth Edition
  16. 16. Online Auctions and Related Businesses <ul><li>Online auction business is rapidly changing </li></ul><ul><li>Three auction Web site categories </li></ul><ul><ul><li>General consumer auctions </li></ul></ul><ul><ul><li>Specialty consumer auctions </li></ul></ul><ul><ul><li>Business-to-business auctions </li></ul></ul><ul><li>Consumer auctions </li></ul><ul><ul><li>Considered business-to-consumer e-commerce </li></ul></ul><ul><ul><li>E-commerce </li></ul></ul><ul><ul><ul><li>Considered Consumer-to-business </li></ul></ul></ul><ul><ul><ul><li>Bidders might be businesses </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  17. 17. General Consumer Auctions <ul><li>eBay </li></ul><ul><ul><li>Registration required, seller fees, rating system </li></ul></ul><ul><ul><li>Seller’s risk </li></ul></ul><ul><ul><ul><li>Stolen credit cards; buyer fails to conclude transaction </li></ul></ul></ul><ul><ul><li>Buyer’s risk </li></ul></ul><ul><ul><ul><li>No item delivery; misrepresented item </li></ul></ul></ul><ul><ul><li>Most common auction format: English auction </li></ul></ul><ul><ul><ul><li>Seller may set reserve price </li></ul></ul></ul><ul><ul><ul><li>Bidders listed: bids not disclosed (until auction end) </li></ul></ul></ul><ul><ul><ul><li>Continually updated high bid amount displayed </li></ul></ul></ul><ul><ul><ul><li>Private auction option </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  18. 18. General Consumer Auctions (cont’d.) <ul><li>eBay (cont’d.) </li></ul><ul><ul><li>Minimum bid increment </li></ul></ul><ul><ul><ul><li>Amount by which one bid must exceed previous bid </li></ul></ul></ul><ul><ul><li>Proxy bid </li></ul></ul><ul><ul><ul><li>Bidder specifies maximum bid </li></ul></ul></ul><ul><ul><ul><li>May cause bidding to rise rapidly </li></ul></ul></ul><ul><li>eBay stores </li></ul><ul><ul><li>Integrated into auction site </li></ul></ul><ul><ul><li>Sellers generate additional profits </li></ul></ul>Electronic Commerce, Eighth Edition
  19. 19. Electronic Commerce, Eighth Edition
  20. 20. General Consumer Auctions (cont’d.) <ul><li>eBay’s success </li></ul><ul><ul><li>No specific audience </li></ul></ul><ul><ul><li>Advertises widely ($800 million yearly: mass media outlets) </li></ul></ul><ul><li>Major determinants of Web auction </li></ul><ul><ul><li>Attracting enough buyers and sellers </li></ul></ul><ul><ul><ul><li>Creating markets in many different items </li></ul></ul></ul><ul><li>Yahoo! (closed in 2007) </li></ul><ul><li>Amazon.com (“Auctions Guarantee”: closed in 2006) </li></ul><ul><ul><li>Offered buyer protection through Escrow service </li></ul></ul><ul><li>Overstock.com (still active) </li></ul>Electronic Commerce, Eighth Edition
  21. 21. General Consumer Auctions (cont’d.) <ul><li>Lock-in effect </li></ul><ul><ul><li>Economic structure of markets </li></ul></ul><ul><ul><ul><li>Based against new entrants </li></ul></ul></ul><ul><ul><li>Markets become more efficient </li></ul></ul><ul><ul><ul><li>As number of buyers and sellers increases </li></ul></ul></ul><ul><ul><li>Example: Japanese general consumer auction </li></ul></ul><ul><ul><ul><li>Yahoo! dominates (97%) </li></ul></ul></ul><ul><ul><ul><li>eBay maintains low market share (3%) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  22. 22. Specialty Consumer Auctions <ul><li>Specialized Web auction sites </li></ul><ul><ul><li>Meet special-interest market needs </li></ul></ul><ul><ul><li>No need to compete with eBay </li></ul></ul><ul><li>Early Web auction sites (first wave) </li></ul><ul><ul><li>Featured technology items </li></ul></ul><ul><ul><ul><li>Doug Salot: Haggle Online (now uBid) </li></ul></ul></ul><ul><li>Other specialized auction sites (second wave) </li></ul><ul><ul><li>JustBeads.com, StubHub </li></ul></ul><ul><ul><li>Cigarbid.com, Golf Club Exchange, Winebid </li></ul></ul><ul><ul><ul><li>Strong market segments; readily identifiable products </li></ul></ul></ul><ul><ul><ul><li>Desired by people with high disposable incomes </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  23. 23. Electronic Commerce, Eighth Edition
  24. 24. Consumer Reverse Auctions and Group Purchasing Sites <ul><li>Reverse bid </li></ul><ul><ul><li>Visitor describes desired items or services </li></ul></ul><ul><ul><li>Site routes visitor to participating merchants </li></ul></ul><ul><ul><ul><li>Reply to visitor by e-mail </li></ul></ul></ul><ul><ul><ul><li>Offer item at particular price </li></ul></ul></ul><ul><ul><li>Buyer accepts </li></ul></ul><ul><ul><ul><li>Lowest offer </li></ul></ul></ul><ul><ul><ul><li>Offer best matching buyer’s criteria </li></ul></ul></ul><ul><li>All these types of sites now closed </li></ul>Electronic Commerce, Eighth Edition
  25. 25. Consumer Reverse Auctions and Group Purchasing Sites (cont’d.) <ul><li>Priceline.com </li></ul><ul><ul><li>Considered a seller-bid auction site </li></ul></ul><ul><ul><li>Visitor states desired airline ticket, car rental, hotel room price </li></ul></ul><ul><ul><ul><li>If sufficiently high price: transaction completed </li></ul></ul></ul><ul><ul><li>Many transactions come from inventory </li></ul></ul><ul><ul><ul><li>Priceline operates more as a liquidation broker </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  26. 26. Electronic Commerce, Eighth Edition
  27. 27. Consumer Reverse Auctions and Group Purchasing Sites (cont’d.) <ul><li>Group purchasing site </li></ul><ul><ul><li>Similar to consumer reverse auction </li></ul></ul><ul><ul><li>Seller posts item with price </li></ul></ul><ul><ul><li>Individual buyers enter bids </li></ul></ul><ul><ul><ul><li>Agreement to buy one unit (no price provided) </li></ul></ul></ul><ul><ul><ul><li>Site can negotiate with item’s provider for better price </li></ul></ul></ul><ul><ul><li>Posted price decreases </li></ul></ul><ul><ul><ul><li>As number of bids increases (only if number of bids increases) </li></ul></ul></ul><ul><ul><li>Result: buyers force seller to reduce price </li></ul></ul><ul><ul><ul><li>Like consumer reverse auction </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  28. 28. Consumer Reverse Auctions and Group Purchasing Sites (cont’d.) <ul><li>Well-suited product types </li></ul><ul><ul><li>Branded products, well-established reputations </li></ul></ul><ul><ul><ul><li>Produces buyer confidence of good bargain </li></ul></ul></ul><ul><ul><li>High value-to-size ratio </li></ul></ul><ul><ul><li>Non-perishable </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Difficulty attracting sellers’ interest </li></ul></ul><ul><ul><li>Well-suited companies </li></ul></ul><ul><ul><ul><li>Find no advantage, fear sites cannibalize product sales, reluctant to offend current distributors </li></ul></ul></ul><ul><li>Group purchasing sites fell apart </li></ul>Electronic Commerce, Eighth Edition
  29. 29. Business-to-Business Auctions <ul><li>Evolved to meet specific existing need </li></ul><ul><ul><li>Excess inventory disposal (manufacturing) </li></ul></ul><ul><li>Two traditional methods </li></ul><ul><ul><li>Large companies </li></ul></ul><ul><ul><ul><li>Liquidation specialists find buyers for unusable items </li></ul></ul></ul><ul><ul><li>Small companies </li></ul></ul><ul><ul><ul><li>Liquidation broker firms find buyers for items </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  30. 30. Business-to-Business Auctions (cont’d.) <ul><li>Emerging business-to-business Web auction models </li></ul><ul><ul><li>Direct descendants of traditional methods </li></ul></ul><ul><ul><li>Large-company model </li></ul></ul><ul><ul><ul><li>Business creates its own auction site </li></ul></ul></ul><ul><ul><li>Small-company model </li></ul></ul><ul><ul><ul><li>Third-party Web auction site instead of liquidation broker </li></ul></ul></ul><ul><ul><ul><li>Resembles consumer online auctions </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  31. 31. Business-to-Business Auctions (cont’d.) <ul><li>Large-company model example </li></ul><ul><ul><li>Ingram Micro’s Auction (1997) </li></ul></ul><ul><ul><ul><li>Computer and VAR equipment distributor </li></ul></ul></ul><ul><ul><ul><li>Auctions surplus items to established customers </li></ul></ul></ul><ul><ul><ul><li>Removes liquidation brokers from value chain (disintermediation) </li></ul></ul></ul><ul><li>Smaller firm example </li></ul><ul><ul><li>Sell excess inventory using independent third-party auction site </li></ul></ul><ul><ul><li>Dove Bid site (Ross-Dove Company) </li></ul></ul><ul><ul><ul><li>Traditional liquidation broker </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  32. 32. Business-to-Business Auctions (cont’d.) <ul><li>Gordon Brothers Group (1903) example </li></ul><ul><ul><li>Liquidation broker </li></ul></ul><ul><ul><li>Helps others launch liquidation Web sites </li></ul></ul><ul><ul><li>Separate subsidiary created </li></ul></ul><ul><ul><ul><li>Dot-com company failures (2001) </li></ul></ul></ul><ul><ul><ul><li>Sells entire Web sites, software, hardware, intellectual property </li></ul></ul></ul><ul><li>Temporary employment example </li></ul><ul><ul><li>Hospitals (and other companies) </li></ul></ul><ul><ul><li>BidShift </li></ul></ul><ul><ul><ul><li>Sells software to employers to operate shift auctions </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  33. 33. <ul><li>International Securities Exchange (ISE) </li></ul><ul><ul><li>New York Stock Exchange, Chicago Board of Trade </li></ul></ul><ul><ul><li>Fully electronic options exchange </li></ul></ul><ul><ul><li>Threatens existing physical securities exchanges </li></ul></ul><ul><ul><ul><li>Lower fees attract most lucrative large trades </li></ul></ul></ul><ul><ul><ul><li>Existing exchanges: introducing electronic trading </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  34. 34. Business-to-Business Reverse Auctions <ul><li>Examples: Owens Corning, U.S. Navy, General Services Administration </li></ul><ul><ul><li>Acquire billions of dollars worth of materials, supplies </li></ul></ul><ul><ul><li>Agilent, BankOne, Bechtel, Boeing, Raytheon, Sony </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Suppliers compete on price alone </li></ul></ul><ul><ul><ul><li>Cut corners on quality, miss delivery dates </li></ul></ul></ul><ul><ul><li>Replaces trusting relationships with a bidding activity </li></ul></ul><ul><ul><ul><li>Pits suppliers against each other (backward step) </li></ul></ul></ul><ul><li>Advantages </li></ul><ul><ul><li>Useful for nonstrategic commodity items </li></ul></ul>Electronic Commerce, Eighth Edition
  35. 35. Business-to-Business Reverse Auctions (cont’d.) <ul><li>If suppliers do not agree to participate: </li></ul><ul><ul><li>Impossible to conduct reverse auctions </li></ul></ul><ul><li>If high degree of competition among suppliers: </li></ul><ul><ul><li>Reverse auctions provides efficient way to conduct, manage price bidding </li></ul></ul>Electronic Commerce, Eighth Edition
  36. 36. Electronic Commerce, Eighth Edition
  37. 37. Auction-Related Services <ul><li>Entrepreneurs encouraged by eBay and other auction site growth </li></ul><ul><li>Provide various kinds of auction-related services </li></ul><ul><ul><li>Escrow services </li></ul></ul><ul><ul><li>Auction directory and information services </li></ul></ul><ul><ul><li>Auction software </li></ul></ul><ul><ul><ul><li>Sellers and buyers </li></ul></ul></ul><ul><ul><li>Auction consignment services </li></ul></ul>Electronic Commerce, Eighth Edition
  38. 38. Auction-Related Services (cont’d.) <ul><li>Auction escrow services </li></ul><ul><ul><li>Buyers’ common concern: seller reliability </li></ul></ul><ul><ul><ul><li>Buyers protect interests in high-value items </li></ul></ul></ul><ul><ul><li>Independent party holds payment until: </li></ul></ul><ul><ul><ul><li>Buyer receives item </li></ul></ul></ul><ul><ul><ul><li>Buyer is satisfied item is as expected </li></ul></ul></ul><ul><ul><li>May take delivery of item from seller </li></ul></ul><ul><ul><ul><li>Perform buyer inspection (qualified to do so) </li></ul></ul></ul><ul><ul><li>Charge fees </li></ul></ul><ul><ul><ul><li>Percent of item’s cost; subject to minimum fee </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  39. 39. Auction-Related Services (cont’d.) <ul><li>Auction escrow services (cont’d.) </li></ul><ul><ul><li>Examples: Escrow.com, eDeposit, Square Trade </li></ul></ul><ul><ul><li>May sell auction buyer’s insurance </li></ul></ul><ul><ul><ul><li>Protect buyers from nondelivery and quality risks </li></ul></ul></ul><ul><ul><li>Avoid escrow fraud </li></ul></ul><ul><ul><ul><li>Determine if licensed, bonded (licensing agency) </li></ul></ul></ul><ul><ul><ul><li>Avoid offshore escrow companies entirely </li></ul></ul></ul><ul><ul><li>Other buyer protections </li></ul></ul><ul><ul><ul><li>Check seller’s rating </li></ul></ul></ul><ul><ul><ul><li>Use Web site listings of unreliable sellers </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  40. 40. Auction-Related Services (cont’d.) <ul><li>Auction directory and information services </li></ul><ul><ul><li>Example: Auctionguide.com </li></ul></ul><ul><ul><ul><li>Guidance for new auction participants </li></ul></ul></ul><ul><ul><ul><li>Helpful hints and tips </li></ul></ul></ul><ul><ul><ul><li>Directories of online auction sites </li></ul></ul></ul><ul><ul><li>Example: AuctionBytes </li></ul></ul><ul><ul><ul><li>Publishes e-mail newsletter </li></ul></ul></ul><ul><ul><ul><li>Online auction industry articles </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  41. 41. Auction-Related Services (cont’d.) <ul><li>Auction directory and information services (cont’d.) </li></ul><ul><ul><li>Example: PriceWatch </li></ul></ul><ul><ul><ul><li>Advertiser-supported site </li></ul></ul></ul><ul><ul><ul><li>Advertisers post current selling prices </li></ul></ul></ul><ul><ul><ul><li>Computer hardware, software, electronics </li></ul></ul></ul><ul><ul><li>Example: PriceSCAN </li></ul></ul><ul><ul><ul><li>Similar price-monitoring service </li></ul></ul></ul><ul><ul><ul><li>Also includes books, movies, music, sporting goods </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  42. 42. Auction-Related Services (cont’d.) <ul><li>Auction software </li></ul><ul><ul><li>Target: sellers </li></ul></ul><ul><ul><ul><li>Helps manage online auctions </li></ul></ul></ul><ul><ul><li>Example: AuctionHawk and Vendio </li></ul></ul><ul><ul><ul><li>Seller management software and services </li></ul></ul></ul><ul><ul><ul><li>Automate tasks </li></ul></ul></ul><ul><ul><ul><li>Create attractive page layouts </li></ul></ul></ul><ul><ul><ul><li>Manage hundreds of auctions </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  43. 43. Electronic Commerce, Eighth Edition
  44. 44. Auction-Related Services (cont’d.) <ul><li>Auction software (cont’d.) </li></ul><ul><ul><li>Target: buyers </li></ul></ul><ul><ul><ul><li>Helps manage online auctions </li></ul></ul></ul><ul><ul><li>Sniping software </li></ul></ul><ul><ul><ul><li>Observes auction progress until last second </li></ul></ul></ul><ul><ul><ul><li>As auction expires: places bid high enough to win (unless bid exceeds sniping software owner’s limit) </li></ul></ul></ul><ul><ul><ul><li>Snipe: act of placing winning bid at the last second </li></ul></ul></ul><ul><ul><ul><li>Almost always wins out over human bidder </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  45. 45. Auction-Related Services (cont’d.) <ul><li>Auction software (cont’d.) </li></ul><ul><ul><li>Example: Cricket Sniping Software site </li></ul></ul><ul><ul><ul><li>Created in 1997 by David Eccles </li></ul></ul></ul><ul><ul><li>Companies offer sniping service </li></ul></ul><ul><ul><ul><li>Sniping software runs on company Web site </li></ul></ul></ul><ul><ul><ul><li>Customer enters instructions on site </li></ul></ul></ul><ul><ul><ul><li>Company may offer subscriptions </li></ul></ul></ul><ul><ul><ul><li>Company may offer mixed-revenue model </li></ul></ul></ul><ul><ul><li>Sniping software and services business information </li></ul></ul><ul><ul><ul><li>AuctionBytes Web site </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  46. 46. Electronic Commerce, Eighth Edition
  47. 47. Auction-Related Services (cont’d.) <ul><li>Auction consignment services </li></ul><ul><ul><li>Target: people and small businesses </li></ul></ul><ul><ul><ul><li>Want to use online auction </li></ul></ul></ul><ul><ul><ul><li>Do not have skills, time to become a seller </li></ul></ul></ul><ul><ul><li>Auction consignment services </li></ul></ul><ul><ul><ul><li>Take item and create online auction for that item </li></ul></ul></ul><ul><ul><ul><li>Handle transaction </li></ul></ul></ul><ul><ul><ul><li>Remit proceeds balance (after deducting fee) </li></ul></ul></ul><ul><ul><li>Main auction consignment businesses </li></ul></ul><ul><ul><ul><li>AuctionDrop, ePowerSellers, iSold It </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  48. 48. Auction-Related Services (cont’d.) <ul><li>Auction consignment services (cont’d.) </li></ul><ul><ul><li>Key to success </li></ul></ul><ul><ul><ul><li>Convenient locations for customer drop off </li></ul></ul></ul><ul><ul><ul><li>Open own stores, franchise stores </li></ul></ul></ul><ul><li>Electronic commerce first wave </li></ul><ul><ul><li>Online auction business made possible by the Web </li></ul></ul><ul><li>Electronic commerce second wave </li></ul><ul><ul><li>Online auction business created opportunities </li></ul></ul><ul><ul><ul><li>For even more entirely new types of business </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  49. 49. Virtual Communities: Web Portals and Social Networks <ul><li>Money-making Internet and Web approaches </li></ul><ul><ul><li>Virtual communities </li></ul></ul><ul><ul><li>Web portals </li></ul></ul><ul><li>For on-demand Internet services: </li></ul><ul><ul><li>Three key required elements </li></ul></ul><ul><ul><ul><li>Cellular-satellite (mobile) communications technology </li></ul></ul></ul><ul><ul><ul><li>Electronic marketplaces </li></ul></ul></ul><ul><ul><ul><li>Software agents </li></ul></ul></ul><ul><ul><li>All exist today </li></ul></ul><ul><ul><ul><li>Not yet integrated </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  50. 50. Mobile Communications Technology <ul><li>Cellular-satellite communications technology </li></ul><ul><ul><li>Internet linking capability </li></ul></ul><ul><ul><ul><li>Notebook computers, personal digital assistants (PDAs), mobile phones </li></ul></ul></ul><ul><li>WAP </li></ul><ul><ul><li>Allows HTML-formatted Web pages to display on small-screen devices </li></ul></ul><ul><ul><li>Example: Palm Treo and other smart phones </li></ul></ul><ul><li>Another approach </li></ul><ul><ul><li>Possible by increased screen resolution </li></ul></ul><ul><ul><ul><li>Display normal Web page on the device </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  51. 51. Electronic Commerce, Eighth Edition
  52. 52. Mobile Communications Technology (cont’d.) <ul><li>Apple iPhone </li></ul><ul><ul><li>Includes touch screen controls </li></ul></ul><ul><ul><li>Easy to view; navigate normal Web page on small handheld device </li></ul></ul><ul><li>Web-enabled devices including other features </li></ul><ul><ul><li>Open doors to second wave of electronic commerce </li></ul></ul><ul><ul><li>Examples: </li></ul></ul><ul><ul><ul><li>Global Positioning Service (GPS) receivers </li></ul></ul></ul><ul><ul><ul><li>Integrating wireless Internet connectivity with GPS tools </li></ul></ul></ul><ul><li>Technology convergence provides opportunities for innovative businesses </li></ul>Electronic Commerce, Eighth Edition
  53. 53. Mobile Business <ul><li>Revenue models for mobile business </li></ul><ul><ul><li>Requires interconnection </li></ul></ul><ul><ul><ul><li>Mobile phones </li></ul></ul></ul><ul><ul><ul><li>Wireless Internet connected Notebook computers </li></ul></ul></ul><ul><ul><ul><li>Online marketplaces </li></ul></ul></ul><ul><ul><li>People switch among access modes seamlessly </li></ul></ul><ul><li>Interconnection between mobile devices has not occurred yet, but is close </li></ul><ul><li>Example: AvantGo </li></ul><ul><ul><li>Revenue earned by selling ads </li></ul></ul>Electronic Commerce, Eighth Edition
  54. 54. Mobile Business (cont’d.) <ul><li>Wherify Wireless generating revenue </li></ul><ul><ul><li>Mobile technology convergence with GPS </li></ul></ul><ul><ul><ul><li>Sell small mobile phone with five programmable buttons for outgoing calls </li></ul></ul></ul><ul><ul><ul><li>Phone continually reports its location to Wherify tracking center </li></ul></ul></ul><ul><ul><ul><li>Subscribers obtain location information (phone call or Internet) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  55. 55. Intelligent Software Agents <ul><li>Intelligent software agents ( software robots , bots ) </li></ul><ul><ul><li>Programs search the Web </li></ul></ul><ul><ul><li>Find items for sale meeting buyer’s specifications </li></ul></ul><ul><li>Software agents focus on particular product category </li></ul><ul><ul><li>Example: Best Book Buys </li></ul></ul><ul><li>Now developing software agents to: </li></ul><ul><ul><li>Track ratings of buyer and seller reputations </li></ul></ul>Electronic Commerce, Eighth Edition
  56. 56. Intelligent Software Agents (cont’d.) <ul><li>Intelligent software agent development leaders </li></ul><ul><ul><li>MIT Media Lab Software Agents Group </li></ul></ul><ul><ul><li>Carnegie Mellon Intelligent Software Agents Lab </li></ul></ul><ul><li>BotSpot Web site </li></ul><ul><ul><li>Good source: software agents information </li></ul></ul><ul><ul><li>Includes links to downloadable bot programs </li></ul></ul><ul><li>Simon (mySimon Web site) </li></ul><ul><ul><li>Best shopping agents currently available </li></ul></ul><ul><li>Major search engine sites have shopping agents </li></ul><ul><ul><li>Google product search page </li></ul></ul>Electronic Commerce, Eighth Edition
  57. 57. Virtual Communities <ul><li>Virtual community ( Web community, online community ) </li></ul><ul><ul><li>Gathering place for people and businesses </li></ul></ul><ul><ul><ul><li>Does not have physical existence </li></ul></ul></ul><ul><ul><li>Various forms of Internet existence </li></ul></ul><ul><ul><ul><li>Usenet newsgroups, chat rooms, Web sites </li></ul></ul></ul><ul><ul><li>People connect and discuss common issues, interests </li></ul></ul><ul><ul><li>Considerable social interaction </li></ul></ul><ul><ul><li>Relationship-forming activities </li></ul></ul><ul><ul><ul><li>Similar to physical communities </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  58. 58. Virtual Communities (cont’d) <ul><li>Virtual learning community </li></ul><ul><ul><li>Distance learning platforms (Blackboard) </li></ul></ul><ul><ul><li>Open-source software (Moodle and uPortal) </li></ul></ul><ul><li>Web portal sites </li></ul><ul><ul><li>Allow site visitors to interact with each other </li></ul></ul><ul><ul><ul><li>Combine search engines, directories, free e-mail, chat rooms, games </li></ul></ul></ul><ul><li>Fulfill individual social interaction needs </li></ul><ul><li>Help companies, customers, suppliers </li></ul><ul><ul><li>Plan, collaborate, transact business, interact </li></ul></ul>Electronic Commerce, Eighth Edition
  59. 59. Early Web Communities <ul><li>1985 (predates the Web) </li></ul><ul><ul><li>WELL (“whole earth ‘lectronic link”) </li></ul></ul><ul><ul><ul><li>Monthly fee to participate in forums and conferences </li></ul></ul></ul><ul><ul><li>1999 bought by Salon.com </li></ul></ul><ul><ul><ul><li>Monthly subscription fee or premium subscription </li></ul></ul></ul><ul><li>1995: Beverly Hills Internet virtual community site </li></ul><ul><ul><li>Offered webcams, free Web site space </li></ul></ul><ul><ul><li>Grew into GeoCities </li></ul></ul><ul><ul><ul><li>Revenue: advertising, pop-up pages </li></ul></ul></ul><ul><ul><ul><li>1999: purchased by Yahoo! ($5 billion) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  60. 60. Early Web Communities (cont’d.) <ul><li>1995: Tripod virtual community </li></ul><ul><ul><li>Offered free Web page space, chat rooms, news, weather updates, health information pages </li></ul></ul><ul><ul><li>Revenue: sold advertising </li></ul></ul><ul><ul><li>1998 : purchased by Lycos ($58 million) </li></ul></ul><ul><li>1995: Theglobe.com Cornell University class project </li></ul><ul><ul><li>Included bulletin boards, chat rooms, discussion areas, personal ads </li></ul></ul><ul><ul><ul><li>Added more features </li></ul></ul></ul><ul><ul><li>Revenue: sold advertising </li></ul></ul><ul><ul><li>2001: closed </li></ul></ul>Electronic Commerce, Eighth Edition
  61. 61. Web Community Consolidation <ul><li>Consumer virtual community success as money-making proposition </li></ul><ul><ul><li>Must offer something of sufficient value </li></ul></ul><ul><ul><ul><li>Justifies membership charge </li></ul></ul></ul><ul><li>Example: WELL community members </li></ul><ul><ul><li>Obtain access to interesting members </li></ul></ul><ul><li>Most virtual communities unable to support themselves </li></ul><ul><ul><li>Closed </li></ul></ul><ul><ul><li>Sold to sites with other revenue-generating activities </li></ul></ul>Electronic Commerce, Eighth Edition
  62. 62. The Second Wave of Electronic Commerce: Social Networking <ul><li>As the Internet and Web grew: </li></ul><ul><ul><li>Experiences of online communication faded </li></ul></ul><ul><ul><li>New phenomenon in online communication began </li></ul></ul><ul><ul><ul><li>Internet no longer focus of community (became a tool) </li></ul></ul></ul><ul><ul><ul><li>Enabled communication among community members </li></ul></ul></ul><ul><li>Social networking sites </li></ul><ul><ul><li>New Web site category designed to facilitate interactions among people </li></ul></ul>Electronic Commerce, Eighth Edition
  63. 63. The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Friendster: Jonathan Abrams (2002) </li></ul><ul><li>Facebook, LinkedIn, Tribe.net </li></ul><ul><ul><li>Tools to make new local friends, establish acquaintances, obtain advice </li></ul></ul><ul><li>YouTube: popularized video inclusion </li></ul><ul><li>MySpace: popular with younger Web users </li></ul><ul><li>Basic idea </li></ul><ul><ul><li>People invited to join by existing members </li></ul></ul><ul><ul><li>Site provides directory </li></ul></ul><ul><ul><ul><li>Member offers to communicate with any other member </li></ul></ul></ul><ul><ul><ul><li>Intended recipient must approve contact </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  64. 64. The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Web logs (Blogs) </li></ul><ul><ul><li>Web sites containing individual commentary on current events or specific issues </li></ul></ul><ul><ul><li>Form of social networking site </li></ul></ul><ul><ul><ul><li>Encourage interaction among people </li></ul></ul></ul><ul><ul><ul><li>Visitors add comments </li></ul></ul></ul><ul><li>Early blogs focused on technology topics </li></ul><ul><li>2004: blogs used as political networking tool </li></ul><ul><li>2008: all major candidates using blogs </li></ul><ul><ul><li>Communicating messages, organizing volunteers, raising money </li></ul></ul>Electronic Commerce, Eighth Edition
  65. 65. The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Retailers embracing blogs </li></ul><ul><ul><li>Bluefly.com: online discount apparel retailer </li></ul></ul><ul><ul><ul><li>Flypaper blog (2005) </li></ul></ul></ul><ul><ul><li>Ice.com: online jeweler </li></ul></ul><ul><ul><ul><li>Operates several blogs </li></ul></ul></ul><ul><li>Business use </li></ul><ul><ul><li>CNN, newspapers </li></ul></ul><ul><ul><ul><li>Inviting information and opinion contributions </li></ul></ul></ul><ul><ul><ul><li>Target 18- to 35-year-old generation </li></ul></ul></ul><ul><li>Blogs can become businesses in themselves </li></ul><ul><ul><li>Must generate financial support (fees, advertising) </li></ul></ul>Electronic Commerce, Eighth Edition
  66. 66. The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Social networking Web sites for shoppers </li></ul><ul><ul><li>Sense of community to generate revenue </li></ul></ul><ul><ul><li>Social shopping </li></ul></ul><ul><ul><ul><li>Practice of bringing buyers and sellers together in a social network to facilitate retail sales </li></ul></ul></ul><ul><ul><li>Example: Craigslist </li></ul></ul><ul><ul><ul><li>Operated by not-for-profit foundation </li></ul></ul></ul><ul><ul><ul><li>All postings free (except help wanted ads) </li></ul></ul></ul><ul><ul><li>Example: Etsy Web site </li></ul></ul><ul><ul><ul><li>Marketplace for selling handmade items </li></ul></ul></ul><ul><ul><ul><li>We Love Etsy: Etsy buyers, sellers share information </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  67. 67. The Second Wave of Electronic Commerce: Social Networking (cont’d.) <ul><li>Idea-based social networking </li></ul><ul><ul><li>Idea-based virtual communities </li></ul></ul><ul><ul><ul><li>Create communities based on connections between ideas </li></ul></ul></ul><ul><ul><ul><li>More abstract, participants more engaging </li></ul></ul></ul><ul><ul><li>Example: del.icio.us site </li></ul></ul><ul><ul><ul><li>One-word bookmarks tags describe Web pages </li></ul></ul></ul><ul><ul><ul><li>Focus: ideas, contributions of all community members </li></ul></ul></ul><ul><ul><li>Example: 43 Things </li></ul></ul><ul><ul><li>Show promise for re-creating essence of original Internet communities </li></ul></ul>Electronic Commerce, Eighth Edition
  68. 68. Revenue Models for Social Networking Sites <ul><li>1990 </li></ul><ul><ul><li>Virtual communities, search engine sites, Web directories selling advertising </li></ul></ul><ul><ul><ul><li>Generate revenue </li></ul></ul></ul><ul><li>1998 </li></ul><ul><ul><li>Purchases and mergers occurred </li></ul></ul><ul><ul><li>New sites still used advertising-only revenue-generation model </li></ul></ul><ul><ul><ul><li>Included features offered by virtual community sites, search engine sites, Web directories, other information-providing and entertainment sites </li></ul></ul></ul><ul><ul><li>Goal: be every Web surfer’s doorway to the Web </li></ul></ul>Electronic Commerce, Eighth Edition
  69. 69. Revenue Models for Social Networking Sites (cont’d.) <ul><li>Advertising-supported social networking sites </li></ul><ul><ul><li>Smaller with specialized appeal </li></ul></ul><ul><ul><ul><li>Draw enough visitors to generate significant advertising revenue </li></ul></ul></ul><ul><ul><li>Example: I Can Has Cheezburger site </li></ul></ul><ul><ul><li>Rough measure of stickiness </li></ul></ul><ul><ul><ul><li>Time each user spends at site (popularity) </li></ul></ul></ul><ul><ul><ul><li>Figure 6-10 and Figure 6-11 </li></ul></ul></ul><ul><li>Social networking sites </li></ul><ul><ul><li>Members provide demographic information </li></ul></ul><ul><ul><ul><li>Potential for targeted marketing: very high </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  70. 70. Electronic Commerce, Eighth Edition
  71. 71. Electronic Commerce, Eighth Edition
  72. 72. Revenue Models for Social Networking Sites (cont’d.) <ul><li>Mixed-revenue and fee-for-service social networking sites </li></ul><ul><ul><li>Most successful Web portals: Time Warner’s AOL </li></ul></ul><ul><ul><ul><li>Charged fee and ran advertising </li></ul></ul></ul><ul><ul><li>Yahoo!: now charges for Internet phone service, “premium” e-mail service </li></ul></ul><ul><ul><ul><li>Increased its revenues from non-advertising sources </li></ul></ul></ul><ul><ul><li>New strategy: monetizing </li></ul></ul><ul><ul><ul><li>Converting existing regular site visitors seeking free information or services into fee-paying subscribers </li></ul></ul></ul><ul><ul><ul><li>Backlash concerns </li></ul></ul></ul><ul><ul><li>Examples: The Motley Fool and TheStreet.com </li></ul></ul>Electronic Commerce, Eighth Edition
  73. 73. Revenue Models for Social Networking Sites (cont’d.) <ul><li>Fee-based social networking </li></ul><ul><ul><li>2002 to 2006: Google Answers site (fee based) </li></ul></ul><ul><ul><ul><li>Attempt to monetize social networking </li></ul></ul></ul><ul><ul><li>Similar sites: Yahoo! Answers, Amazon (Askville) </li></ul></ul><ul><ul><ul><li>Volunteers answer questions (no fees) </li></ul></ul></ul><ul><ul><ul><li>Services generate advertising revenue </li></ul></ul></ul><ul><ul><li>Uclue (researchers earn 75 percent of total fee) </li></ul></ul><ul><ul><ul><li>Advantages: higher-quality answers, questions more serious, better formulated </li></ul></ul></ul><ul><ul><li>Web sites generate revenue by providing virtual community interaction </li></ul></ul>Electronic Commerce, Eighth Edition
  74. 74. Revenue Models for Social Networking Sites (cont’d.) <ul><li>Microlending Sites </li></ul><ul><ul><li>Function as clearinghouses for microlending activity </li></ul></ul><ul><ul><li>Microlending (became famous in 2006) </li></ul></ul><ul><ul><ul><li>Practice of lending very small amounts of money </li></ul></ul></ul><ul><ul><ul><li>People starting or operating small businesses (especially in developing countries) </li></ul></ul></ul><ul><ul><li>Microlending key element </li></ul></ul><ul><ul><ul><li>Working within social network of borrowers </li></ul></ul></ul><ul><ul><ul><li>Provide support, element of pressure to repay </li></ul></ul></ul><ul><ul><li>Example: Kiva </li></ul></ul>Electronic Commerce, Eighth Edition
  75. 75. Electronic Commerce, Eighth Edition
  76. 76. Revenue Models for Social Networking Sites (cont’d.) <ul><li>Internal virtual communities </li></ul><ul><ul><li>Company-based; for employees </li></ul></ul><ul><ul><ul><li>Communities and opportunities for social interaction </li></ul></ul></ul><ul><ul><li>Run on intranets </li></ul></ul><ul><ul><li>Save money with Web site (reduce paper) </li></ul></ul><ul><ul><li>Provide easy access to employee information </li></ul></ul><ul><ul><li>Good for geographically dispersed employees </li></ul></ul><ul><ul><li>Adding wireless connectivity for traveling employees </li></ul></ul><ul><ul><li>Combines second-wave technology with first-wave business strategy </li></ul></ul><ul><ul><ul><li>Wireless communications with internal Web portals </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  77. 77. Summary <ul><li>Look at how companies using the Web to do entirely new things </li></ul><ul><ul><li>Running auctions, creating virtual communities, operating Web portals </li></ul></ul><ul><li>Key characteristics of seven major auction types </li></ul><ul><li>Consumer online auction business dominated by eBay (United States) </li></ul><ul><li>New industries to meet needs of auction participants </li></ul>Electronic Commerce, Eighth Edition
  78. 78. Summary (cont’d.) <ul><li>Ways sellers and buyers can protect themselves </li></ul><ul><li>New approaches to making money on the Internet and the Web </li></ul><ul><ul><li>Virtual communities and Web portals </li></ul></ul><ul><li>Social networking sites </li></ul><ul><ul><li>Emerging as important parts of electronic commerce </li></ul></ul>Electronic Commerce, Eighth Edition
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