Copyright © 2010 Pearson Education, Inc.Copyright © 2007 Pearson Education, Inc. Slide 1-1 ELC 200 Day 22

Agenda Questions? Assignment 8 posted  Due April 20  ELC 200 assignment 8.pdf ELC 200 assignment 8.pdf  Last one Ecommerce Framework papers  Paper and presentation due May 8 AM  initiative framework guidlines(2).pdf initiative framework guidlines(2).pdf Begin discussion on Online Services. Auctions and Portals

Possible Bonus Points Questions Name and origin of   What does his name mean?  What does he look like all  “grown up”? Origin of the word SPAM for  First SPAM  First SPAM Copyright © 2010 Pearson Education, Inc. Slide 1-3

Remaining Class Schedule Today  Social Networks, Auctions and portals April 20  Scholar's Symposium (no class)  Assignment 8 due April 24  Social Networks, Auctions and portals April 27  B2B eCommerce May 1  Supply Chain Management and Collaborative Commerce  Optional Assignment 9 due May 4  Exam 3 May 8 AM  Papers and presentations due Copyright © 2011 Pearson Education, Inc. Slide 8-4

Copyright © 2011 Pearson Education, Inc. Chapter 11: Social Networks, Auctions, and Portals Copyright © 2010 Pearson Education, Inc. Slide 11-5 Chapter 11 Social Networks, Auctions, and Portals Copyright © 2011 Pearson Education, Inc.

Social Networks and Online Communities Internet began as community building technology for scientists, researchers Early communities limited to bulletin boards, newsgroups; e.g. the Well 1985the Well 2002: Mobile Internet devices, blogs, sharing of rich media began new era of social networks Social networks one of most common Internet activities Slide 11-6

Copyright © 2011 Pearson Education, Inc. What Is an Online Social Network? Online area where people who share common ties can interact Participants do not necessarily share goals Portals and social networks:  Moving closer together  Portals adding social network features  Community sites adding portal-like services Searching News E-commerce services Slide 11-7

Copyright © 2011 Pearson Education, Inc. The Growth of Social Networks and Online Communities Top 10 social networks account for over 90% social networking activity Facebook users: Over 54% are 35+ Unique audience size:  Social networks: 175 million  Top 4 search engines: 510 million Annual advertising revenue  Social network sites: $1.6 billion $9.14/user  Top 4 search engines: $14 billion $27.45/user Slide 11-8

Copyright © 2011 Pearson Education, Inc. Top 10 Social Network Sites, 2010 Slide 11-9 SOURCES: Based on data from eMarketer, 2010; Hitwise, 2010Figure 11.1, Page 714

Copyright © 2011 Pearson Education, Inc. Types of Social Networks and Their Business Models Early social network sites relied on subscriptions Today primarily advertising General communities:  Offer opportunities to interact with general audience organized into general topics  Advertising supported by selling ad space on pages and videos Practice networks:  Offer focused discussion groups, help and knowledge related to area of shared practice  May be profit or non-profit; rely on advertising or user donations Slide 11-10

Copyright © 2011 Pearson Education, Inc. Types of Social Networks and Their Business Models (cont’d) Interest-based social networks:  Offer focused discussion groups based on shared interest in some specific subject  Usually advertising supported Affinity communities:  Offer focused discussion and interaction with other people who share same affinity (self or group identification)  Advertising and revenues from sales of products Sponsored communities:  Created by government, non-profit or for-profit organizations for purpose of pursuing organizational goals Slide 11-11

Copyright © 2010 Pearson Education, Inc. Slide 9-12

Copyright © 2011 Pearson Education, Inc. Social Network Features and Technologies Profiles Friends network Network discovery Games, widgets, apps Favorites Storage Instant messaging Message boards Online polling Chat Discussion groups Experts online Membership management tools Slide 11-13

Copyright © 2011 Pearson Education, Inc. Insight on Technology Social Operating Systems: Facebook vs. Google Class Discussion What does Mark Zuckerberg, Facebook’s CEO, mean by “social operating system?” Why have Facebook applications become so popular? Do they have any limitations? How has Google responded? Which core functions can their programs perform? What are the advantages of Google’s software over “closed worlds” like Facebook? Slide 11-14

Copyright © 2011 Pearson Education, Inc. Online Auctions Online auction sites among the most popular consumer-to-consumer sites on the Internet eBay: Market leader Several hundred different auction sites in U.S. alone  Established portals and online retail sites increasingly are adding auctions to their sites Slide 11-15

Copyright © 2011 Pearson Education, Inc. Defining and Measuring the Growth of Auctions and Dynamic Pricing Dynamic pricing  Airline tickets, coupons, college scholarships  Prices based on demand characteristics of customer and supply situation of seller Many types of dynamic pricing  Bundling  Trigger pricing  Utilization pricing  Personalization pricing Slide 11-16

Copyright © 2011 Pearson Education, Inc. Defining and Measuring the Growth of Auctions and Dynamic Pricing (cont’d) Auctions: Type of dynamic pricing  C2C auctions Auction house an intermediary $25 billion gross revenue 2009  B2C auctions Business owns assets; often used for excess goods $19 billion gross revenue 2009  Can be used to allocate, bundle resources  Expected to grow 5% -10% annually through 2013 Slide 11-17

Copyright © 2010 Pearson Education, Inc. Slide 9-18

Copyright © 2011 Pearson Education, Inc. Benefits of Auctions Liquidity Price discovery Price transparency Market efficiency Lower transaction costs Consumer aggregation Network effects Market maker benefits  No inventory or fulfillment activities Slide 11-19

Copyright © 2011 Pearson Education, Inc. Risks and Costs of Auctions for Consumers and Businesses Delayed consumption costs Monitoring costs  Possible solutions include: Fixed pricing Watch lists Proxy bidding Equipment costs Trust risks  Possible solution—rating systems Fulfillment costs Slide 11-20

Copyright © 2011 Pearson Education, Inc. Internet Auction Basics Different from traditional auctions  Last much longer (usually a week)  Variable number of bidders who come and go from auction arena Market power and bias in dynamically priced markets  Neutral: Number of buyers and sellers is few or equal  Seller bias: Few sellers and many buyers  Buyer bias: Many sellers and few buyers Slide 11-21

Copyright © 2011 Pearson Education, Inc. Bias in Dynamically Priced Markets Slide Figure 11.4, Page 727

Copyright © 2011 Pearson Education, Inc. Internet Auction Basics (cont’d) Price Allocation Rules  Uniform pricing rule: Multiple winners who all pay the same price  Discriminatory pricing rule: Winners pay different amount depending on what they bid Public vs. private information  Prices bid may be kept secret Bid rigging  Open markets Price matching Slide 11-23

Copyright © 2011 Pearson Education, Inc. Types of Auctions English auctions:  Single item up for sale to single seller  Highest bidder wins Traditional Dutch auction:  Uses a clock that displays starting price  Clock ticks down price until buyer stops it Dutch Internet auction:  Public ascending price, multiple units  Final price is lowest successful bid, which sets price for all higher bidders Slide 11-24

Copyright © 2011 Pearson Education, Inc. Types of Auctions (cont’d) Name Your Own Price Auctions  Users specify what they are willing to pay for goods or services and multiple providers bid for their business  Prices do not descend and are fixed Group buying auctions (demand aggregators)  Group buying of products at dynamically adjusted discount prices based on high volume purchases  Two principles Sellers more likely to offer discounts to buyers purchasing in volume Buyers increase their purchases as prices fall Slide 11-25

Copyright © 2011 Pearson Education, Inc. Types of Auctions (cont’d) Professional service auctions  Example: Elance.com Auction aggregators (mega auctions)  Use Web crawlers to search thousands of Web auction sites and accumulate information on products, bids, auction duration, etc.  Unlicensed aggregators opposed by eBay Slide 11-26

Copyright © 2010 Pearson Education, Inc. Slide 9-27

Copyright © 2011 Pearson Education, Inc. Table 11.7, p 733 Slide 11-28

Copyright © 2011 Pearson Education, Inc. Seller and Consumer Behavior at Auctions Seller profit: Arrival rate, auction length, and number of units at auction Auction prices not necessarily the lowest Unintended results of participating in auctions:  Winner’s regret  Seller’s lament  Loser’s lament Consumer trust an important motivating factor in auctions Slide 11-29

Copyright © 2011 Pearson Education, Inc. Auction Profits Slide SOURCE: Vakrat and Seidmann, 1998.Figure 11.5, Page 744

Copyright © 2011 Pearson Education, Inc. Insight on Society Swoopo: Online Auction or Game of Chance? Class Discussion What are the similarities of Swoopo to auctions? To gambling? Are there any ethical considerations posed by Swoopo’s business model? Is Swoopo essentially a deceptive experience? Why or why not? What other sites or online experiences contain deceptive elements? Slide 11-31

Copyright © 2011 Pearson Education, Inc. When Auction Markets Fail: Fraud and Abuse in Auctions Markets fail to produce socially desirable outcomes in four situations:  Information asymmetry, monopoly power, public goods, and externalities. Auction markets prone to fraud  Most common: Failure to deliver, failure to pay In 2010, 10% Internet fraud complaints concern online auctions Slide 11-32

Copyright © 2011 Pearson Education, Inc. E-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’) Compete on reach and unique visitors Enterprise portals  Help employees find important organizational content Slide 11-33

Copyright © 2011 Pearson Education, Inc. Top 5 Portal/Search Engines in U.S. Slide SOURCE: Based on data from comScore, 2010Figure 11.5, Page 746

Copyright © 2011 Pearson Education, Inc. Types of Portals General purpose portals:  Attempt to attract very large general audience  Retain audience by providing in-depth vertical content channels  e.g. Yahoo, MSN Vertical market portals:  Attempt to attract highly focused, loyal audiences with specific interest in: Community (affinity group); e.g. iVillage.com Focused content; e.g. ESPN.com Slide 11-35

Copyright © 2011 Pearson Education, Inc. Two General Types of Portals: General Purpose and Vertical Market Portals Figure 11.6, Page 747 Slide 11-36

Copyright © 2011 Pearson Education, Inc. Portal Business Models ISP services (AOL)  Provide Web access, for monthly fee General advertising revenue Tenancy deals  Fixed charge for number of impressions, exclusive partnerships, “sole providers” Commissions on sales Subscription fees  Charging for premium content Applications and games Slide 11-37

Copyright © 2011 Pearson Education, Inc. Revenue per Customer and Market Focus Figure 11.7, Page 749 Slide 11-38

Copyright © 2011 Pearson Education, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2011 Pearson Education, Inc. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall