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10 Social Networks and Communities


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10 Social Networks and Communities

  1. 1. 1e-commerceKenneth C. LaudonCarol Guercio Traverbusiness. technology. society.eighth editionCopyright © 2012 Pearson EducationChapter 10Social Networks, and Communities
  2. 2. 2Copyright © 2012 Pearson Education Slide 10-4Social Network Fever Spreads to the ProfessionsClass Discussion How has the growth of social networking enabled thecreation of more specific niche sites? What are some examples of social network sites with afinancial or business focus? Describe some common features and activities on thesesocial networking sites. What feature of social networks best explains theirpopularity? SocialPicks for stock investors, for health care professionals, LawLink forlawyers, Sermo for physicians, for wireless industry executives, AdGabber foradvertising professionals, LinkedFA for financial advisors Encourage members to intensely discuss realities of their professions and practices,sharing successes and failures, and developing network for career advancement Ability to reveal group attitudes and opinions, values, and practicesClass DiscussionCopyright © 2012 Pearson Education Slide 10-5
  3. 3. 3Copyright © 2012 Pearson Education Slide 10-6Learning Objectives Explain the difference between a traditional socialnetwork and an online social network Understand how a social network differs from a portal Describe the different types of social networks and onlinecommunities and their business models Describe the major types of auctions, their benefits, andcosts, and how they operate Understand when to use auctions in a business Recognize the potential for auction abuse and fraud Describe the major types of Internet portals Understand the business models of portalsCopyright © 2012 Pearson Education Slide 10-7Social Networks and Online Communities Internet began as community buildingtechnology for scientists, researchers to sharedata, knowledge, and opinions in a real-timeonline environment Early communities limited to bulletin boards,newsgroups; e.g., the Well (first onlinecommunity formed in 1985 in San Francisco by asmall group of people) Today: Mobile devices; sharing of photos, video;blogs have created new era of social networks Social networks now one of most commonInternet activities
  4. 4. 4Copyright © 2012 Pearson Education Slide 10-8What Is an Online Social Network? Online area where people who share common ties can interact Social networks involve:1. A group of people2. Shared social interaction3. Common ties among members4. People who share an area for some period of time Participants do not necessarily share goals, purposes, orintentions Portals and social networks: Moving closer together Portalsadding social network features, e.g., chat groups, bulletinboards,free Website design and hosting Community sites, e.g.,iVillage (site devotedto women’s issues), adding portal-likeservices Searching News E-commerceservicesCopyright © 2012 Pearson Education Slide 10-9The Growth of Social Networks andOnline Communities Top 10 social networks account for over 90% social networkingactivity (see next Fig.) Facebook users: Over 50% are 35+ Unique audience size: Top four U.S. social networks(FB, LinkedIn,Twitter, MySpace): 264million/month Top four portal/searchengines (Google, Yahoo,MSN, AOL): 650 million/month Annual advertising revenue U.S. social network sites: $3.08 billion Top four portal/searchengines (Google, Yahoo,Microsoft, AOL): $19 billion Social networking sites fastest growing form of Internet usage,but still not as powerful as search engines/portals in terms ofunique visitors, overall reach, and ad dollars generated
  5. 5. 5Copyright © 2012 Pearson Education Slide 10-10Top 10 Social Network Sites, 2011Figure 10.1, Page 678 SOURCES: Based on data from eMarketer, 2010; Hitwise, 2010.Copyright © 2012 Pearson Education Slide 10-11Turning Social Networks into Businesses Early networking sites relied on subscriptions Today primarily advertising (see next Fig.) Profound impact of social networks onbusinesses Marketing and branding tool Facebook pages, “fans” Twitter feeds Listening tool Monitoringonline reputation Extension of CRMS
  6. 6. 6Copyright © 2012 Pearson Education Slide 10-12Copyright © 2012 Pearson Education Slide 10-13Types of Social Networksand Their Business Models General communities: Offer opportunities to interact with general audienceorganized into general topics, e.g., MySpace, Facebook Advertising supported by selling ad space on pages andvideos Practice networks: Offer focused discussion groups, help, and knowledgerelated to area of shared practice, e.g., andLinkedIn (business) May be profit or nonprofit; rely on advertising or userdonations
  7. 7. 7Copyright © 2012 Pearson Education Slide 10-14Types of Social Networksand Their Business Models (cont.) Interest-based social networks: Offer focused discussiongroups based on shared interest in somespecific subject, e.g., and SocialPicks (stock marketsite) Usuallyadvertising supported Affinity communities: Offer focused discussionand interaction with other people who sharesame affinity (self or group identification), e.g., iVillage and Oxygen(focusing on women), BlackPlanet (African American community) Advertising and revenues from sales of products Sponsored communities: Created by government, nonprofit, or for-profit organizations forpurposeof various purposes,e.g., increasing information available tocitizens (, online auction site (eBay), product site(, sharing knowledge within corporate (IBM, Cisco, HP)Copyright © 2012 Pearson Education Slide 10-15
  8. 8. 8Copyright © 2012 Pearson Education Slide 10-18Online Auctions Online auction sites are among the mostpopular consumer-to-consumer sites on theInternet eBay: Market leader with 97 million active usersin the US, 200 million items listed each day, $4.8billion net revenues from its Marketplacessegment in 2010 Several hundred different auction sites inUnited States alone Established portals and online retail sites (fromYahoo, MSN to JCPenny and Sam’s Club)increasingly are adding auctions to their sitesCopyright © 2012 Pearson Education Slide 10-19Defining and Measuring the Growth ofAuctions and Dynamic Pricing Dynamic pricing Airline tickets, coupons, college scholarships Prices based on demand characteristics of customer andsupply situation of seller Many types of dynamic pricing Bundling of digital goods – including low-demand productsin a bundle “for free” to increase total revenues Trigger pricing – adjust prices based on location ofconsumer; used in m-commerce applications Utilization pricing– adjust prices based on utilization ofproduct, e.g., auto and health insurances Personalization pricing – adjust prices based on merchant’sestimate of how much customer values the product, e.g.,higher prices paid for hard-covered books by fans of writers
  9. 9. 9Copyright © 2012 Pearson Education Slide 10-20Defining and Measuring the Growth ofAuctions and Dynamic Pricing (cont.) Auctions: One form of dynamic pricingC2C auctions (most widely known) Auction house an intermediary market maker,providing forum where consumers – buyers andsellers – can discover prices and tradeB2C auctions Business owns assets; often used for excess goodsAuctions can be used to Sell goods and services Allocate resources among independent agents(bidders), e.g., workers bidding for task assignmentsCopyright © 2012 Pearson Education Slide 10-21
  10. 10. 10Copyright © 2012 Pearson Education Slide 10-23Benefits of Auctions Liquidity– sellers can find willing buyers, and buyers can findsellers Price discovery – buyers and sellers can quickly and efficientlydevelop prices for items difficult to assess, where product is rare Price transparency – public Internet auctions allow everyone tosee asking and bidding prices for items Market efficiency – auctions can lead to reduced prices reduced profits for merchants  increasing consumer welfare(one measure of market efficiency) Lower transaction costs – lower cost of selling and buyingproducts Consumer aggregation – sellers benefit from large auction sites’ability to aggregate large number of consumers Network effects – large auction sites with large number of visitorsand products make it likely to find what you want at a good price,and highly probable to find a buyer for just about anythingCopyright © 2012 Pearson Education Slide 10-24Risks and Costs of Auctions forConsumers and Businesses Delayed consumption costs – buyers must wait untilauctions are over, and shipping takes time Monitoring costs – requires time to monitor bidding Possible solutions include: Fixed pricing – clicking on the “Buy It Now” buttonand paying premiumprice comparedto regular auctionprice Watchlists – permit consumer to monitorcertain auctions of interest Proxy bidding– allows consumerto enter maximumprice, and auctionsoftwareautomaticallybids for goods up to that price in small increments Equipment costs – costs of computer system, Internetaccess, and learning complex operating system cost Trust risks Possible solution—rating systems Fulfillment costs – buyers pay costs of packing,shipping, and insurance
  11. 11. 11Copyright © 2012 Pearson Education Slide 10-25Market-Maker Benefits No inventory No fulfillment activities No warehouses, shipping, or logistical facilities eBay makes money from every stage inauction cycle Transaction fees based on amount of sale Listing fees for display of goods Financial services fees from payment system, e.g.,PayPal Advertising or placement fees where sellers pay extrafor particular display or listing servicesCopyright © 2012 Pearson Education Slide 10-26Internet Auction Basics Different from traditional auctions Last much longer (usually a week) Variable number of bidders who come and go fromauction arena Market power and bias in dynamically pricedmarkets Neutral: Number of buyers and sellers is few or equal Seller bias: Few sellers and many buyers Buyer bias: Many sellers and few buyers
  12. 12. 12Copyright © 2012 Pearson Education Slide 10-27Bias in Dynamically Priced MarketsFigure 10.3, Page 694Copyright © 2012 Pearson Education Slide 10-28Internet Auction Basics (cont.) Price Allocation Rules – Rules for establishingwinning bids and prices in auctions where thereare multiple units for sale Uniform pricing rule: Multiple winners who all pay the sameprice Discriminatory pricing rule: Winners pay different amountdepending on what they bid, as in From buyer’s point of view, uniform pricing is better, butfrom seller’s point of view, discriminatory pricing is better Public vs. private information Prices bid may be kept secret Bid rigging – bidders communicate prior to submitting their bids,and rig their bids to ensure lowest price is higher than it mightotherwise be Open markets Price matching – sellers agree to set floor prices on auctionitems belowwhich they will not sell
  13. 13. 13Copyright © 2012 Pearson Education Slide 10-29Types of Auctions English auctions (eBay): Single item up for sale to single seller Highest bidder wins Seller bias: single seller and multiple buyers competing against oneanother Traditional Dutch auction (Dutch flower market): Public descending price auction Uses a clock that displays starting price Clock ticks down price until buyer stops it Sellerbias Dutch Internet auction (eBay Dutch auction): Public ascending price, multiple units Final price is lowest successful bid, which sets price for all higherbidders (uniform price rule)Copyright © 2012 Pearson Education Slide 10-30winners3
  14. 14. 14Copyright © 2012 Pearson Education Slide 10-31Types of Auctions (cont.) Name Your Own Price AuctionsPioneered by PricelineUsers specify what they are willing to pay forgoods or services and multiple providers bid fortheir businessPrices do not descend and are fixed Consumer offer is commitment to buy at that pricee.g., PricelineEnables sellers to unload unsold excess capacity Buyer bias: Multiple sellers compete against oneanotherCopyright © 2012 Pearson Education Slide 10-32
  15. 15. 15Copyright © 2012 Pearson Education Slide 10-33Types of Auctions (cont.) Group buying auctions (demand aggregators) Group buying of products at dynamically adjusted discount pricesbased on high volume purchases Based on two principles Sellersmore likelyto offer discounts to buyers purchasing in volume Buyers increase their purchases as prices fall Buyer bias Professional service auctions Sealed-bid, dynamic-priced market for freelance professionalservices from legal and marketing services to graphics design andprogramming Sealed bids are submitted and the winner is the low-cost providerof services Buyer bias Example:, SoloGigCopyright © 2012 Pearson Education Slide 10-34
  16. 16. 16Copyright © 2012 Pearson Education Slide 10-35Copyright © 2012 Pearson Education Slide 10-36Table 10.7, p 701
  17. 17. 17Copyright © 2012 Pearson Education Slide 10-37Seller and Consumer Behaviorat Auctions Seller profit: A function of arrival rate, auction length,and number of units at auction (see next Fig.) Auction prices not necessarily the lowest Reasons include herd behavior (tendency to gravitate toward, and bidfor, auction listing with one or more existing bids) Herd behavior results in consumers paying higher prices than necessary Unintended results of participating in auctions: Winner’s regret – winner’s feeling after auction that he/she paid toomuch for an item Seller’s lament – concern that one will never know how much ultimatewinner might have paid, or true value to final winner Loser’s lament – feeling of having been too cheap in bidding and failingto win Consumer trust an important motivating factor inauctionsCopyright © 2012 Pearson Education Slide 10-38Auction ProfitsFigure 10.4, Page 703 SOURCE: Based on data from Vakrat and Seidmann, 1998.N = arrival rate at the auction
  18. 18. 18Copyright © 2012 Pearson Education Slide 10-39When Auction Markets Fail:Fraud and Abuse in Auctions Markets fail to produce sociallydesirable outcomes in four situations:Information asymmetry, monopoly power,public goods, externalities Auction markets prone to fraudMost common: Failure to deliver, failure to pay In 2010, 6% Internet fraud complaintsconcern online auctionsCopyright © 2012 Pearson Education Slide 10-40
  19. 19. 19Copyright © 2012 Pearson Education Slide 10-41Copyright © 2012 Pearson Education Slide 10-42E-commerce Portals Most frequently visited sites on Web Original portals were search enginesAs search sites, attracted huge audiences Today provide: Navigation of the Web Commerce Content (owned and others’), e.g., news, entertainment,maps, images, social networks, in-depth info Compete on reach and unique visitors Enterprise portals Help employees find important organizational content
  20. 20. 20Copyright © 2012 Pearson Education Slide 10-43Top Five Portal/Search Engines in United StatesSOURCE: Based on data from comScore, 2011.Figure 10.5, Page 708Copyright © 2012 Pearson Education Slide 10-45Types of Portals General purpose portals:Attempt to attract very large general audienceRetain audience by providing in-depth verticalcontent channelse.g., Yahoo, MSN Vertical market portals:Attempt to attract highly-focused, loyalaudiences with specific interest in: Community (affinity group); e.g., iVillage Focused content; e.g.,
  21. 21. 21Copyright © 2012 Pearson Education Slide 10-46Two General Types of Portals:General Purpose and Vertical Market PortalsFigure 10.6, Page 712Copyright © 2012 Pearson Education Slide 10-48
  22. 22. 22Copyright © 2012 Pearson Education Slide 10-49Revenue per Customer and Market FocusFigure 10.7, Page 714Copyright © 2012 Pearson Education Slide 10-50