You Name Here 1. List several products or services subject to network effects. What factors do you believe helped each of these efforts achieve dominance? 2. Which firm do you suspect has stronger end0user network effects: Google’s online search tool or Microsoft’s Windows operating system? Why? 3. Network effects are often associated with technology, but tech isn’t a prerequisite for the existence of network effects. Name a product, service, or phenomenon that is not related to information technology that still dominates due to network effects. 4. Why is staying power particularly important to many technology products and services? 5. What is the difference between same-sided exchange benefits and cross-sided exchange benefits? 6. What is the difference between a one-sided market and a two-sided market? 7. Give examples of one-sided and two-sided markets. 8. Is market entry timing important for network effects markets? Explain and offer an example to back up your point. 9. How might a firm subsidize adoption? Give an example. 10. What makes for a “wise” crowd? When might a crowd not be so wise? Published by Flat World Knowledge, Inc. © 2014 by Flat World Knowledge, Inc. All rights reserved. Your use of this work is subject to the License Agreement available here http://www.flatworldknowledge.com/legal. No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement. Information Systems: A Manager’s Guide to Harnessing Technology V 3.0 By John Gallaugher Chapter 8 Social Media, Peer Production, and Web 2.0 Learning objectives Recognize the unexpected rise and impact of social media and peer production systems, and understand how these services differ from prior generation tools. List the major classifications of social media services. Web 2.0 Peer production: Collaboration between users to create content, products, and services. Leveraged to create open source software that supports Web 2.0. Collaborative consumption: Participants share access to products and services, rather than having ownership. Internet services that foster collaboration and information sharing Web 1.0 and web 2.0WEB 1.0WEB 2.0Domain name speculation Publishing Content management systems Directories (taxonomy) Britannica Online, Encarta Personal websites Ofoto Instant messaging, SMS Monster.com RealNetworks Yellowpages.com Travelocity Vonage Catalogs Expedia, OrbitzSearch engine optimization and fans Participation Wikis Tagging (“folksonomy”) Wikipedia Blogging, Status updates, Link Sharing Instagram, Flickr, Facebook, Twitter Twitter, Facebook, SnapChat, WhatsApp LinkedIn YouTube Yelp TripAdvisor Skype Pinterest Airbnb, Uber, RelayRides Social Media toolsServiceKey UsesBlogsShare ideas, obtain feedback, mobilize a communityWikisCreate a common knowledge baseElectronic social networkDiscover and reinforce affiliations, identify experts, message individuals or.

1. You Name Here
1. List several products or services subject to network effects.
What factors do you believe helped each of these efforts
achieve dominance?
2. Which firm do you suspect has stronger end0user network
effects: Google’s online search tool or Microsoft’s Windows
operating system? Why?
3. Network effects are often associated with technology, but
tech isn’t a prerequisite for the existence of network effects.
Name a product, service, or phenomenon that is not related to
information technology that still dominates due to network
effects.
4. Why is staying power particularly important to many
technology products and services?
5. What is the difference between same-sided exchange benefits
and cross-sided exchange benefits?
6. What is the difference between a one-sided market and a two-
sided market?
7. Give examples of one-sided and two-sided markets.
8. Is market entry timing important for network effects markets?
Explain and offer an example to back up your point.
9. How might a firm subsidize adoption? Give an example.
10. What makes for a “wise” crowd? When might a crowd not
be so wise?

2. Published by Flat World Knowledge, Inc.
© 2014 by Flat World Knowledge, Inc. All rights reserved.
Your use of this work is subject to the License Agreement
available
here http://www.flatworldknowledge.com/legal. No part of this
work may be used, modified, or reproduced in any form or by
any means except as expressly permitted under the License
Agreement.
Information Systems: A Manager’s Guide to Harnessing
Technology V 3.0
By John Gallaugher
Chapter 8
Social Media, Peer Production, and Web 2.0
Learning objectives
Recognize the unexpected rise and impact of social media and
peer production systems, and understand how these services
differ from prior generation tools.
List the major classifications of social media services.
Web 2.0
Peer production: Collaboration between users to create content,
products, and services.

3. Leveraged to create open source software that supports Web
2.0.
Collaborative consumption: Participants share access to
products and services, rather than having ownership.
Internet services that foster collaboration and information
sharing
Web 1.0 and web 2.0WEB 1.0WEB 2.0Domain name
speculation
Publishing
Content management systems
Directories (taxonomy)
Britannica Online, Encarta
Personal websites
Ofoto
Instant messaging, SMS
Monster.com
RealNetworks
Yellowpages.com
Travelocity
Vonage
Catalogs
Expedia, OrbitzSearch engine optimization and fans
Participation
Wikis
Tagging (“folksonomy”)
Wikipedia
Blogging, Status updates, Link Sharing
Instagram, Flickr, Facebook, Twitter
Twitter, Facebook, SnapChat, WhatsApp
LinkedIn
YouTube
Yelp

4. TripAdvisor
Skype
Pinterest
Airbnb, Uber, RelayRides
Social Media toolsServiceKey UsesBlogsShare ideas, obtain
feedback, mobilize a communityWikisCreate a common
knowledge baseElectronic social networkDiscover and reinforce
affiliations, identify experts, message individuals or groups,
visually share mediaMicrobloggingDistribute time-sensitive
information, share opinions, virally spread ideas, run contests
and promotions, solicit feedback, provide customer support,
track commentary on firms/products/issues, organize protests
Learning objectives
Know what blogs are and how corporations, executives,
individuals, and the media use them.
Understand the benefits and risks of blogging.
Appreciate the growth in the number of blogs, their influence,
and their capacity to generate revenue.
blogs
Long tail: Phenomenon whereby firms can make money by
offering a near-limitless selection of contents and products.
Trackbacks: Links in a blog post that refer readers back to cited
sources.
Blog rolls: List of a blogger’s favorite blogs.
Corporations use blogs to distribute ideas and gather feedback
from the public.
Online journal entries usually presented
in a reverse chronological order

5. Learning Objectives
Know what wikis are and how they are used by corporations and
the public at large.
Understand the technical and social features that drive effective
and useful wikis.
Suggest opportunities where wikis would be useful and consider
under what circumstances their use may present risks.
Recognize how social media such as wikis and blogs can
influence a firm’s customers and brand.
Wikis
Acts as a collective corporate memory that is vital for sharing
skills, learning, and preserving expertise.
Users can make changes to existing content and easily create
new content.
Roll back: Ability to revert a wiki page to a prior version.
Useful for restoring earlier work in the event of a posting error,
inaccuracy, or vandalism.
Website, that can be modified by anyone directly within a web
browser, that serves as a shared knowledge repository
Wikis
All changes are attributed.
A complete revision history is maintained.
Automatic notification and monitoring of updates.
All pages in a wiki are searchable.
Specific wiki pages can be classified under an organized
tagging scheme.
Website, that can be modified by anyone directly within a web
browser, that serves as a shared knowledge repository

6. Wikimasters
Useful for jump-starting a wiki.
Griefer: Internet vandal and mischief-maker
Employed to delete excessive posts, move commentary to the
best location, and edit as necessary.
Individuals employed by organizations to review community
content
Uses of wikis
Collect and leverage knowledge that would otherwise be
scattered throughout an organization.
Remove boundaries between functional areas.
Flatten preexisting hierarchies.
Allow organizations to leverage input from their customers and
partners.
Neutral point of view (NPOV): Editorial style that is free of
bias and opinion.
Learning Objectives
Know what social networks are, be able to list key features, and
understand how they are used by individuals, groups, and
corporations.
Understand the difference between major social networks such
as Facebook, Google+, and LinkedIn.
Recognize the benefits and risks of using social networks.
Be aware of trends that may influence the evolution of social
networks.

7. Social network
Feed - Powerful feature of social networks:
Provides a timely list of the activities of and public messages
from people, groups, and organizations that an individual has an
association with.
Viral: Information or applications that spread rapidly between
users.
Online community that allows users to establish a personal
profile and communicate with others
Social network
Rapidly mobilizes populations.
Prompts activism.
Offers low-cost promotion and awareness of a firm’s efforts.
Poorly managed social network presence can:
Create accusations of spamming.
Create public relations snafus.
Lead to a reduction in the likelihood that a firm’s message will
appear in a given fan’s feed.
Lead to user discontent and can potentially open up a site to
legal action.
Corporate use of social networks
Organizational productivity tools.
Displaced the traditional employee directory.
Important since a large percentage of employees regularly work
from home or client locations.
Firms are setting up social networks for customer engagement
and mining these sites for customer ideas, innovation, and

8. feedback.
Learning objectives
Appreciate the rapid rise of Twitter—its scale, scope, and broad
appeal.
Understand how Twitter is being used by individuals,
organizations, and political movements.
Contrast Twitter and microblogging with Facebook,
conventional blogs, and other social media efforts.
Understand how organizations use Twitter for organic as well as
paid promotion.
Consider the commercial viability of the effort, its competitive
environment, and concerns regarding growth.
Twitter and the Rise of Microblogging
Microblogging: Short-message blogging, made through a mobile
device.
Twitter is a microblogging service that allows users to post via
the Web, SMSA text messaging, or a variety of third-party
desktop and smartphone applications.
Tweet: Twitter post, limited to 140 characters.
Hash tags: Method for organizing tweets where keywords are
preceded by the # character.
Firms leverage Twitter for:
Real-time promotion
Customer response, engagement, and support
Gathering feedback and up-to-date information
Time-sensitive communication

9. Uses of twitter:
Application programming interfaces (APIs): Programming
hooks, or guidelines published by firms that tell other programs
how to get a service to perform a task such as send or receive
data.
Free rider problem: When others take advantage of a user or
service without providing any sort of reciprocal benefit.
Learning Objectives
Understand the concept of the wisdom of crowds as it applies to
social networking.
List the criteria necessary for a crowd to be smart.
Understand the value of crowdsourcing.
Identify firms that have used crowdsourcing successfully.
Prediction Markets and the Wisdom of Crowds
Wisdom of crowds; Idea that a group of individuals will
collectively have more insight than a single or small group of
trained professionals.
Consists of untrained amateurs.
Prediction market: Polling a diverse crowd and aggregating
opinions in order to form a forecast of an eventual outcome.
The “Smart” Crowd
Diverse

10. Decentralized
Offer a collective verdict
Independent
Crowdsourcing
Leveraged by several public markets:
For innovation
As an alternative to standard means of production
Taking a job traditionally performed by a designated agent and
outsourcing it to an undefined, generally large, group of people
in the form of an open call
Learning objectives
Illustrate several examples of effective and poor social media
use.
Recognize the skills and issues involved in creating and staffing
an effective social media awareness and response team
(SMART).
List and describe key components that should be included in any
firm’s social media policy.

11. Understand the implications of ethical issues in social media
such as “sock puppetry” and “astroturfing” and provide
examples and outcomes of firms and managers who used social
media as a vehicle for dishonesty.
List and describe tools for monitoring social media activity
relating to a firm, its brands, and staff.
Understand issues involved in establishing a social media
presence, including the embassy approach, openness, and
staffing.
Discuss how firms can engage and respond through social
media, and how companies should plan for potential issues and
crises.
Social Media Awareness and Response Team
Key issues behind SMART capabilities:
Creating the social media team
Establishing firm wide policies
Monitoring activity inside and outside the firm
Establishing the social media presence
Managing social media engagement and response
Creating the team
Social media is an interdisciplinary practice, and the team
should include professionals experienced in:
Technology
Marketing
Public relations
Customer service
Law
Human resources

12. Responsibilities and Policy Setting
Social media policies revolve around three Rs: Representation,
Responsibility, Respect.
Security training is a vital component of establishing social
media policy.
Creating sock puppets to astroturf violates FTC rules and can
result in prosecution.
Sock puppet: Fake online persona created to promote a
particular point of view, product, or individual.
Astroturfing: Engineering the posting of positive comments and
reviews of a firm’s product and services.
Ratings sites will penalize firms that offer incentives for
positive feedback posts.
Online reputation management
Many tools exist for monitoring social media mentions of an
organization, brands, competitors, and executives.
Social media are easy to adopt and potentially easy to abuse.
Tracking and responding to online mentions of a product,
organization, or individual
Establishing a Presence
Embassy approach to social media has firms establish their
online presence at various services with a consistent name.
Embassy: Established online presence where customers can
reach and interact with the firm.
Firm’s social media embassies can be highlighted in physical
space such as:
In print
On bags and packaging

13. On store signage
Engage and Respond
Social media provides four Ms of engagement:
Megaphone to send out messages from the firm
Magnet to attract inbound communication
Monitoring and Mediation - Paying attention to what is
happening online and selectively engage conversations when
appropriate
Engagement can be public or private.
Published by Flat World Knowledge, Inc.
© 2014 by Flat World Knowledge, Inc. All rights reserved.
Your use of this work is subject to the License Agreement
available
here http://www.flatworldknowledge.com/legal. No part of this
work may be used, modified, or reproduced in any form or by
any means except as expressly permitted under the License
Agreement.
Information Systems: A Manager’s Guide to Harnessing
Technology V 3.0
By John Gallaugher
Chapter 7
Understanding Network Effects: Strategies for Competing in a

14. Platform-Centric, Winner-Take-All World
Learning Objectives
Define network effects.
Recognize products and services that are subject to network
effects.
Understand the factors that add value to products and services
subject to network effects.
Identify the three primary sources of value for network effects.
Recognize factors that contribute to the staying power and
complementary benefits of a product or service subject to
network effects.
Understand how firms like Microsoft and Apple each benefit
from strong network effects.
Network effects
Also referred to as network externalities or Metcalfe’s Law.
Most products are not subject to network effects.
Presence of network effects influences the choice of one
product or service over another.
the value of a product or service increases as its number of
users expands
The origins of value
Products and services subject to network effects foster
exchange, which creates value.
Staying power: Long-term viability of a product or service.
Bolstered by networks with greater numbers of users.
Switching costs: incurred when moving from one product to
another.

15. Directly related to staying power.
Strengthen the value of network effects as a strategic asset.
Increases with the higher friction available to prevent users
from migrating to a rival.
Total cost of ownership (TCO): Economic measure of the full
cost of owning a product.
The origins of value
Complementary benefits: Products or services that add
additional value to the primary product or service that makes up
a network.
Platforms: Allow for the development and integration of
software products and other complementary goods.
Value-adding sources work together to reinforce one another to
make the network effect even stronger.
Each add-on of an iOS product enhances the value of choosing
it over a rival.
Learning objectives
Recognize and distinguish between one-sided and two-sided
markets.
Understand same-side and cross-side exchange benefits.
One-sided market, two-sided marketONE-SIDED
MARKETTWO-SIDED MARKETMarket that derives most of its
value from a single class of users.
Same-side exchange benefits: Benefits derived by interaction
among members of a single class of participant.Network
markets comprised of two distinct categories of participant.
Both need to deliver value for the network to function.

16. Cross-side exchange benefit: An increase in the number of users
on one side of the market, creating a rise in the other side.
Learning Objectives
Understand how competition in markets where network effects
are present differ from competition in traditional markets.
Understand the reasons why it is so difficult for late-moving,
incompatible rivals to compete in markets where a dominant,
proprietary standard is present.
How Are These Markets Different?
Network markets experience early, fierce competition.
Caused by positive-feedback loop inherent in network effects.
Firms are aggressive in the early stages because once a leader
becomes clear, new adopters begin to favor the leading product
over rivals.
Tips the market in favor of one dominant firm or standard.
Markets exhibit monopolistic tendencies.
One firm dominates all rivals.
Monopoly: Market where there are many buyers but only one
dominant seller.
Oligopoly: Market dominated by a small number of powerful
sellers.
Learning objectives
Plot strategies for competing in markets where network effects
are present, both from the perspective of the incumbent firm and
the new market entrant.
Give examples of how firms have leveraged these strategies to
compete effectively.

17. Competing in Markets with Network Effects
Move early (Yahoo! Auctions in Japan).
Subsidize product adoption (PayPal).
Leverage viral promotion (Skype, Facebook feeds, Uber).
Expand by redefining the market to bring in new categories of
users or through convergence (iPhone).
Convergence: When two or more markets, once considered
distinctly separate, begin to offer similar features and
capabilities.
Envelopment: When one market attempts to conquer a new
market by making it a subset, component, or feature of its
primary offering.
Form alliances and partnerships (NYCE vs. Citibank)
Competing in Markets with Network Effects
Establish distribution channels (Java with Netscape, Microsoft
bundling Media Player with Windows)
Seed the market with complements (Blu-ray, Nintendo)
Encourage the development of complementary goods (Facebook
fbFund)
Maintain backward compatibility (Apple’s Mac OS X Rosetta
translation software for PowerPC to Intel)
Backward compatibility: Ability to use complementary products
developed for a prior generation of technology.
Adaptor: Product that allows a firm to use the complementary
products, data, or user base of another product or service.
Competing in Markets with Network Effects
Rivals: maintain compatibility with larger networks (Apple’s
move to Intel)
Incumbents: close off rival access and constantly innovate

18. (Apple’s efforts to block access to its own systems)
Large, established firms : make preannouncements (Microsoft)
The Osborne Effect: Firm experiencing a sharp and detrimental
drop in the sales of current offerings due to its
preannouncement of forthcoming products
Congestion effects: Increasing numbers of users to lower the
value of a product or service