E-Business and online commerce, assignment help

User Generated

penaxonvg09366

Business Finance

Description

Case (select the link): Montana Mountain Biking

In a narrative format, discuss the key facts and critical issues presented in the case.

Search for information about Amazon Marketplace and eBay Stores on the Web and in your library that will help you make a recommendation to Betty regarding which alternative would provide the best avenue for her online business expansion. Support your recommendation with relevant facts, including specific costs of operating each type of store and specific benefits that Betty could gain by using one or the other.

Evaluate Betty's business and identify ways in which Betty might be able to utilize the web to reduce costs and become more efficient in her operation.

Outline a strategy that Betty could implement using a social networking site such as Facebook that might direct traffic to her Web site, to her auctions on eBay, and to her pro-ducts for sale on Amazon. com. For each element in the strategy, provide an explanation of how it would help achieve Betty's goals.

Each question needs to be 250 words or more.

APA Format

In text citation

References the article that is provide, reading material, and anything else that you can you use, however please make sure you use what I provide as a reference.

Unformatted Attachment Preview

Unit 4 Case Old Metamora Betty Shriver is the owner of Betty’s Crystal, a small shop that sells collectible glass figurines. Betty’s shop carries many items that she purchased from estate sales and regional auctions, but the shop also sells new crystal figurines from manufacturers such as Baccarat, Lalique, Orrefors, and Swarovski. The shop is located in Metamora, Indiana, which is a popular tourist destination for weekend travelers in the Midwest. The town of Old Metamora is a small historic area in a rural setting that is less than a day’s drive from seven major metropolitan areas: Chicago, Cincinnati, Columbus, Detroit, Indianapolis, Louisville, and St. Louis. The shop is very busy on weekends and during the spring and summer months when tourists flock to Old Metamora. In the early fall, the tourist traffic slows considerably, and in the winter months, the town becomes almost deserted. Two years ago, Betty began to pick up extra business during the off season by auctioning items on eBay. Not only did the auctions help keep inventory moving during the slow months, but Betty found that she was able to carry a wider selection of items in the store. In the past, she would see unusual items at estate sales and auctions that she feared would not sell quickly in the shop. Now Betty knows that any item that does not sell in the shop can be auctioned online quite easily. Another unexpected benefit of participating in online auctions is that Betty developed relationships with regular buyers of crystal figurines and with people who run collectibles stores in other parts of the country. Every auction involves at least two e- mails ( one to confirm the final bid and another to confirm the payment). Many successful bidders also send e- mail messages to Betty when they receive the item with questions about the item, or just to thank Betty for sending the item so quickly. Some of these e- mail exchanges continue with discussions related to crystal figurines and other collectible items. Betty’s online auction experiences prompted her to consider expanding the online portion of her business. She has heard ( from other shop owners) that eBay allows people to create online stores within the eBay site and that Amazon. com offers a similar service that lists seller’s items on Amazon. com’s regular product pages. She is also interested in creating a Web site that contains photos and descriptions of popular crystal figurines with additional information about how they are made. Betty also wants to include a list of figurines that are no longer manufactured ( which makes them more valuable) and a guide to buying collectible crystal figurines that could help her customers and bidders on her auctions make more informed decisions as they add to their collections. She believes that such a site could attract a large number of people interested in crystal figurines. She wants to find ways to direct these site visitors to her auctions and her pro-posed Web store. Betty has hired you as a consultant to build on her ideas and to help her develop an expansion strategy for her online business activities. CHAPTER 6 SOCIAL NETWORKING, MOBILE COMMERCE, A N D O N L I N E AU C T I O N S W I L E A R N I N G O B J E C T IL VES S In this chapter, you will learn: O virtual communities • How social networking emerged from Nblogs are used in online business • How social networking tools such as activities , • About mobile technologies that are now used to do business online • How online auctions and auction-related businesses have become a major new commercial activity introduced as part of electronic commerce J A M INTRODUCTION I In 2003, Mark Zuckerberg and several other E students at Harvard University were working independently on ways to create online information spaces that would network Harvard students with each other. 5 0 uate student body as participants. These5students posted photos and information about themselves 1 and their activities. B Although Zuckerberg ran into some U resistance from the school’s administration and was forced Zuckerberg’s Web site rapidly became successful, attracting more than half of Harvard’s undergrad- to take down his site, he believed the concept had merit. So he continued working on the idea and, after dropping out of school and moving to California, he and two fellow students launched Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. TheFacebook.com, a networking site for college and university students, in 2004. One of PayPal’s founders, Peter Theil, invested $500,000 in the fledgling enterprise and helped the company raise an additional $38 million over the next two years. By 2006, the company had purchased the domain name Facebook.com for $200,000 and had 246 signed major advertising deals, including a three-year agreement with Microsoft. Facebook had gradually expanded the range of users it allowed to set up pages on the site, and by 2006, it was open to everyone. As other Web sites that offered similar functions became less popular, Facebook continued to grow. W I were located outside the United States) and was valued at $50 billion in a round of share offerings L to Goldman Sachs and overseas private S investors. Analysts estimate that the privately held company Orevenue of about $2 billion. In this chapter, you will learn about earns about $500 million per year on N Facebook and other Web sites that earn profits by facilitating visitors’ connections to each other. , In 2011, Facebook reported having more than 750 million regular users (60 percent of whom FROM VIRTUAL COMMUNITIES J TO SOCIAL NETWORKS A In Chapters 3 and 4, you learned how businesses use the Web to create online identities, M and services to those customers. In Chapter 5, you reach customers, and sell products learned how businesses are using I the Web to purchase goods and work with their suppliers more effectively. In all three of these chapters, the focus was on how companies E things that they have been doing for years; primarily are using the Web to improve the buying and selling. In this chapter, you will learn how companies are using the Web to do things that they have never done before. The Web makes it possible for people to form online communities that are not5limited by geography. Individuals and companies with common interests can meet online 0 and discuss issues, share information, generate ideas, and develop valuable relationships. 5 As you learned in earlier chapters, the Internet reduces transaction costs in value chains and offers an efficient means 1 of communication to anyone with an Internet connection. Combining the Internet’s transaction cost-reduction potential with its role as B a facilitator of communication among people has led companies to develop new ways of U as relationship facilitators. making money on the Web by serving This section begins with a brief history of online communities, and then outlines how companies today operate Web sites that promote relationships among site visitors and businesses that advertise or otherwise participate on the sites. Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Virtual Communities A virtual community, also called a Web community or an online community, is a gathering place for people and businesses that does not have a physical existence. Howard Rheingold described the characteristics of these communities in his 1993 book, The Virtual Community, which is widely recognized as the definitive book on the subject. Virtual communities began online even before the Internet was in general use. Bulletin board systems (BBSs) were computers that allowed users to connect through modems (using dialup connections through telephone lines) to read and post messages in a common area, or electronic bulletin board. BBSs often hosted discussions on specific topics or issues related to specific geographic regions. Many BBSs were free, but some charged a monthly membership fee. Other discussion board services followed, provided by commercial enterprises such as Compuserv, Prodigy, and GEnie. These companies generated revenue by charging a monthly fee and selling advertising. Usenet newsgroups were another early form of virtual community. Started at Duke University in 1979, Usenet was a set of interconnected computers devoted to storing information on specific topics. Usenet newsgroups were message posting areas on those computers in which interested persons (primarily from the education and research communities) could discuss those topics. W Today, Web chat rooms and sites devoted to specific topics or the general exchange of I virtual communities. These communities information, photos, or videos can constitute offer people a way to connect with each L other and discuss common issues and interests. The social interaction in these communities can be considerable and many sociologists S believe that the communication and relationship-forming activities that occur online are similar to those that occur in physical communities. The rest of this section describes the O development of these communities into the Web sites that people use today to form and N maintain relationships online. Early Web Communities 247 , One of the first Web communities was the WELL. The WELL, which is an acronym for “whole earth ’lectronic link,” predates theJWeb. It began in 1985 as a series of BBS dialogs among the authors and readers of the Whole A Earth Review. Members of the WELL pay a monthly fee to participate in its forums and conferences. The WELL was home to many of the researchers who created the InternetM and the Web along with a number of noted writers and artists. In 1999, Salon.com bought the WELL and continues to operate it as a I monthly subscription service. As the Web emerged in the mid-1990s,Eits potential for creating new virtual communities was quickly exploited. In 1995, Beverly Hills Internet opened a virtual community site that featured two Webcams aimed down Hollywood streets; the site also had links to 5 entertainment information Web sites. Members were given free space on the site to create their own Web pages. The Webcams never0did attract much traffic, but the offer of free Web space did. As the site grew, it changed its name to GeoCities and earned revenue by selling 5 advertising that appeared on members’ Web pages and pop-up pages that opened whenever 1 grew rapidly and was purchased in 1999 by a visitor accessed a member’s site. GeoCities Yahoo! for $5 billion. Yahoo! operated the site for ten years before closing it in 2009. B Other similar sites became virtual communities. Tripod was founded in 1995 in Massachusetts and offered its participantsUfree Web page space, chat rooms, news and weather updates, and health information pages. Like GeoCities, Tripod sold advertising on its main pages and on participants’ Web pages. Theglobe.com also began in 1995 as a class project at Cornell University. The site included bulletin boards, chat rooms, discussion areas, and personal ads. Theglobe.com sold advertising to support the site’s operation. Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Later additions included news feeds, an online art gallery, and shopping pages. The company fell victim to the Web slowdown of 2000 and closed in 2001 after suffering declines in its advertising revenue. The idea behind these early Web community sites continues to inspire online business endeavors. Virtual communities evolved into the social networking sites that emerged in the second wave of electronic commerce, as you will learn in the next section. Social Networking Emerges 248 Virtual communities provided an important service to the small number of people who regularly used the Internet in its early days. As the Internet and Web grew, many of these communities found that their original purpose as a place for sharing the new experiences of online communication began to fade. In the second wave of electronic commerce, a new phenomenon in online communication began. People who were using the Internet no longer found a single common bond in the very fact that they were using the Internet. Instead, they were finding that a variety of common interests—for example, gardening, specific medical issues, or parenting—created the basis for online interaction. Later Internet communities were formed in which the Internet itself was no longer the focal W point of the community, but was simply a tool that enabled communication among I sites, designed to facilitate interactions among people, community members. These Web are called social networking sites. L A social networking site is a Web site that allows individuals to create and publish a profile, create a list of other users with whom they S control that list, and monitor similar lists made by share a connection (or connections), other users. In this section, youO will learn about the evolution of social networking sites. One of the first sites, Six Degrees, started in 1997. Six Degrees was based on the idea N that no more than six persons separated anyone in the world from any other person. The site was unable to generate sufficient revenue to continue operations and closed in 2000. , More successful social networking sites followed several years later. Friendster was founded by Jonathan Abrams in 2002. Friendster was the first Web site to include most of the features found today in all social J networking sites. After growing rapidly in the United States and in Asia, the company’s membership outstripped its technological ability to A handle their activities. Further, the company’s management team was unable to agree on strategy for dealing with competition M from new U.S. social networking sites such as MySpace, Tribe.net, and Facebook. In Asia, local language social networking sites such as I GREE and mixi in Japan and QQ.com and Renren in China eroded Friendster’s early successes. Orkut (named for theE Google employee who developed the site in 2004) never really caught on in the United States, but became the top social networking site in both Brazil and India. 5 LinkedIn, a site devoted to facilitating business contacts, was founded in 2003 and allows users to create a list of trusted business contacts. Users then invite others to 0 participate in several forms of relationships on the site, each of which is designed to help 5 or develop connections to business opportunities. them either find jobs, find employees, LinkedIn has become the most popular business-focused social networking site in the world. 1 Other social networking sites have met with varying degrees of success. Some sites B specific features; for example, YouTube (now owned have developed a following by offering by Google) popularized the inclusion U of videos in social networking sites, and has become a popular social networking site for younger Web users. Twitter offers users a way to send short messages to other uses who sign up to follow their messages (called tweets). In 2011, Google introduced Google+, a new social networking site to compete with Facebook, which it identified as its primary competition. Figure 6-1 shows the launch year for some of the more successful social networking sites. Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. mixi 1997 Friendster 1998 1999 2000 QQ 2001 2002 2003 Mobage-town Orkut Odnoklassniki Facebook Twitter 2004 Tribe.net Renren MySpace Qzone LinkedIn YouTube 2005 2006 2007 Sina Weibo Google+ WebQQ 2008 2009 2010 2011 Storify VKontakte © Cengage Learning Six Degrees GREE 249 FIGURE 6-1 Social networking Web sites The general idea behind all of these sites is that people are invited to join by existing members who think they would be valuable additions to the community. The site provides a directory that lists members’ locations, interests, and qualities; however, the directory does not disclose the name or contact information of members. A member can offer to communicate with any other member, but the communication does not occur until the intended recipient approves the contact (usually after reviewing the sender’s directory information). In addition to searching the directory of Wthe community, members can make connections with new contacts through friends they have established in the community (perhaps starting I with the person who invited them to join). By gradually building up a set of connections, members can develop contacts within the L community that might prove valuable later. The expansion of social networking sites into all corners of the world continues as we S move into the third wave of electronic commerce. In 2008, Google moved Orkut’s Olocation of its primary audience. In addition to headquarters to Brazil to acknowledge the the Chinese and Japanese sites mentioned N earlier, successful social networking sites in local languages have emerged in Germany (Xing), the Netherlands (Hyves), Russia (VKontakte and Odnoklassniki), and Spain, (Tuenti). Figure 6-2 shows the leading social networking sites in several areas of the world. Facebook Twitter LinkedIn J A M I E Europe Facebook Twitter LinkedIn Russia VKontakte Odnoklassniki Facebook 5 0 5 1 B Brazil Orkut FacebookU Twitter Japan Mixi GREE Mobage-town China Egypt Facebook India Twitter Orkut Facebook Twitter South Africa Facebook Twitter LinkedIn FIGURE 6-2 Qzone/QQ Renren Sina Weibo © Cengage Learning North America Leading social networking sites around the world Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Web Logs (Blogs) 250 As you learned in Chapter 4, Web logs, or blogs, are Web sites that contain commentary on current events or specific issues written by individuals. Many blogs invite visitors to add comments, which the blog owner may or may not edit. The result is a continuing discussion of the topic with the possibility that many interested persons will contribute to that discussion. Because blog sites encourage interaction among people interested in a particular topic, they are a form of a social networking site. Sites such as Twitter are considered to be microblogs because they function as a very informal blog site with entries (messages, or tweets) that are limited to 140 characters in length. Most of the early blogs were focused on technology topics or on topics about which people have strong beliefs (for example, political or religious issues). The 2004 U.S. elections saw the first major use of blogs as a political networking tool. In previous elections, candidates had Web sites and political parties send out e-mail messages to supporters and potential donors, but in the 2004 elections, these activities were coordinated in a new way. Individuals working alone or with established political organizations set up Web sites that provided a place for people interested in a candidate or an issue to communicate with each other. These sites allowed people to discuss issues, plan W strategies, and even arrange in-person meetings called meetups. By the 2008 U.S. elections, all of the major candidates were using blogs, microblogs, and social I networking activities as essential tools for communicating their messages, organizing L volunteers, and raising money. As we enter the third wave of electronic commerce, S used to organize all sorts of charitable fund-raising and social networking tools are being support activities as well. O After seeing the success of blogs, microblogs, and social networks as political networking tools, many retailersN embraced these tools as a way to engage Web site visitors who were not ready to buy from, the site, but who were interested in the products or services offered. Marketing and supply chain managers also saw the benefits of these social networking activities in enhancing their B2B relationships. Many companies include blogs as part of their online offerings. J These blogs discuss uses and technical specification issues regarding the products or services offered for sale. A information from blogs and microblogs in its CNN was a pioneer in including television newscasts. Other broadcasters and newspapers now incorporate blogs and social M networking features in their Web sites. Small-town newspapers often depend on readers to I contribute information about community issues and events. Newspapers of all sizes would rather run a blog with reader contributions tied into microblogs and social networking E sites than pay reporters to write stories about events or issues that would interest only a small segment of their readership. By inviting information and opinion contributions, newspapers are finding they can5reach younger readers who did not grow up reading print newspapers. This trend toward having readers help write online news is called 0 participatory journalism. 5 that is part of an existing activity (such as a political In addition to running a blog campaign, retail business, or newspaper), blogs can become a business in themselves if 1 they can generate financial support through fees or advertising. Jake Dobkins writes about B New York City on the blog site Gothamist . Instead of drawing a salary from a newspaper as a food and entertainment reporter, he blogs about the latest in New York nightlife. U Advertising revenue has been sufficient to support Dobkins and the site’s cofounder, Jen Chung. Now with a staff of bloggers, editors, and ad salespeople, these entrepreneurs are expanding into other cities. Michael Arrington began blogging in 2005 about new online business startups. Again, instead of writing a column for a business magazine, he decided Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. to put his research and reporting talents into his own business, which today is operating as TechCrunch, a successful advertising-supported Web site. Social Networking Web Sites for Shoppers The practice of bringing buyers and sellers together in a social network to facilitate retail sales is called social shopping. One of the first of these was craigslist, an information resource for San Francisco area residents that was created in 1995 by WELL member Craig Newmark. That community has grown to include information for most major cities in the United States and in several other countries. The site is operated by a not-for-profit foundation, and all postings other than help-wanted ads are free. The Etsy Web site provides a marketplace for people who want to sell handmade items. The social network here includes buyers and sellers interested in crafts of all types. In fact, the sense of community is so strong that a separate site, We Love Etsy, exists to provide a place for Etsy buyers and sellers to share information. 251 Idea-Based Social Networking Social networking sites form communities based on connections among people. Other W Web sites create communities based on the connections between ideas. These more I virtual communities and the people who abstract communities are called idea-based participate in them are said to be engaging in idea-based networking. The del.icio.us site L calls itself a “social bookmarks manager.” Individuals place Web page bookmarks with Sin a community-accessible location on the site. one-word tags that describe the Web page The bookmark–tag combinations are focused O on ideas and the contributions of all community members build a shared base of knowledge about those ideas. Among the most N as design, reference, tools, music, news, how to, active tag names on the site are words such and photography. Another idea-based virtual , community that uses shared tags is 43 Things. Virtual Learning Networks J used is the virtual learning network. One form of social network you might have Many colleges and universities now offer A courses that use distance learning platforms such as Blackboard for student-instructor interaction. These distance learning M chat rooms, and drawing boards that allow platforms include tools such as bulletin boards, students to interact with their instructorsI and each other in ways that are similar to the interactions that might occur in a physical classroom setting. Some open-source software projects are devoted to the development E of virtual learning communities, including Moodle and uPortal (maintained by the not-for-profit open source software development organization, Jasig). Open source software is developed by a community of programmers 5 at no cost. Other programmers then use who make the software available for download the software, work with it, and improve it. 0 Those programmers can submit their improved versions of the software back to the community. Open source software is an early and 5 successful example of a virtual community. You can learn more about open-source software at the Open Source Initiative Web1site. B Revenue Models for Social Networking Sites U selling advertising to generate revenue. By the late 1990s, virtual communities were Search engine sites and Web directories were also selling advertising to generate revenue. Beginning in 1998, a wave of purchases and mergers occurred among these sites. The new sites that emerged still used an advertising-only revenue-generation model and included all the features offered by virtual community sites, search engine sites, Web directories, Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. and other information-providing and entertainment sites. These Web portals, which you first learned about in Chapter 3, are so named because their goal is to be every Web user’s doorway to the Web. Advertising-Supported Social Networking Sites 252 Visitors spend a greater amount of time at portal sites than they do at most other types of Web sites, which is attractive to advertisers. Other types of social networking sites can also draw large numbers of visitors who spend considerable time on the sites. This section describes how these characteristics make social networking sites appealing to advertisers. Smaller social networking sites that have a more specialized appeal can draw enough visitors to generate significant amounts of advertising revenue, especially compared to the costs of running such a site. For example, software developer Eric Nakagawa posted a picture of a grinning fat cat on his Web site in 2007 with the caption “I can has cheezburger?” as a joke. He followed that with several more cat photos and funny captions over the next few weeks and added a blog so that people could post comments about the pictures. Within a few months, the site was getting more than 100,000 visitors a day. Nakagawa found that a site with that kind of traffic could charge between $100 and W $600 per day for a single ad. Today, he spends his time fine-tuning the site to make it more attractive to visitors, who Inow submit their own photos and captions. I Can Has Cheezburger now generates a respectable income. Nakagawa has no illusions about L expanding the site, hiring thousands of people, or selling stock to the public, but he is S earning a comfortable living generated by a highly specialized social networking site. As you learned in Chapter 3, sites that have higher numbers of visitors can charge O more for advertising on the site. You also learned that stickiness (a Web site’s ability to N repeat visitors) is also an important element of a site’s keep visitors on the site and attract attractiveness to advertisers. One , rough measure of stickiness is how long each user spends at the site. Figure 6-3 lists the most popular Web sites in the world based on the number of users who accessed the sites during the month of August 2011. J AMillions of unique visitors M 379 I 316 E Owner Google Microsoft Facebook Yahoo! Wikimedia Foundation eBay InteractiveCorp Amazon.com Apple Computer AOL, Inc. 5 0 5 1 B U Average time per unique visitor per month (H:MM) 3:43 2:20 301 6:21 235 2:30 156 0:13 134 1:16 132 0:11 129 :27 117 1:58 103 3:31 Adapted from reports for August 2011 published by The Nielsen Company at http://www.nielsen.com/us/en/insights/top10s/internet.html FIGURE 6-3 Popularity and stickiness of leading Web sites Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. The leading sites often have more than 200 million unique visitors per month. The figure also shows the average amount of time each visitor spends on the site each month (an estimate of stickiness). The information in both figures is adapted from Nielsen reports and shows sites grouped by owner (for example, the Apple Computer listing includes its iTunes store; the Google listing includes YouTube; the Microsoft listing includes Microsoft software support sites, MSN, and the Bing search engine; and InteractiveCorp includes Ask.com, Citysearch, Match.com, and Newsweek). Web sites that are social networking sites (such as AOL and Facebook) or that include social networking elements (such as eBay, Google, Microsoft, and Yahoo!) regularly appear on these Nielsen lists. Because social networking sites often ask their members to provide demographic information about themselves, the potential for targeted marketing on these types of sites is very high. High visitor counts can yield high advertising rates for these sites. In the boom years of the first wave of electronic commerce, Web sites with high degrees of stickiness (which were usually Web portals) could obtain up-front cash payments from advertisers, which is very unusual for any kind of advertising sale. In recent years, all types of social networking sites have negotiated advertising deals that include a percentage of sales generated from sales leads on their sites. Second-wave advertising fees Wpayments and more on the generation of are based less on up-front site sponsorship revenues from continuing relationships with I people who use the social networking sites. 253 L Networking Sites Mixed-Revenue and Fee-for-Service Social Although most social networking sites useSadvertising to support their operations, some do charge a fee for some services. For example, O the Yahoo! Web portal offers most of its services free (supported by advertising), but it does sell some of its social networking N Yahoo! also sells other features, such as features, such as its All-Star Games package. more space to store messages and attached , files, as part of its premium e-mail service. These fees help support the operation of the social networking elements of the site. Some advertising-supported social networking sites have followed the lead of Yahoo! in a strategy called monetizing eyeballs or J monetizing visitors. Monetizing refers to the conversion of existing regular site visitors seeking free information or services into feeA Sites that monetize visitors by charging them paying subscribers or purchasers of services. always worry about visitor backlash. They Mcan never be sure how many existing visitors will pay for services that have been offered in some form at no cost. I Other social networking sites that use a mixed-revenue model are the financial information sites The Motley Fool and TheStreet.com . These sites offer investment advice, E stock quotes, and financial planning help. Some of the information is provided at no cost, additional information is available to subscribers who pay no fee but who are required to 5 information is available to subscribers who provide personal information, and even more agree to pay a fee. 0 5 Fee-Based Social Networking An early attempt to monetize social networking by charging a fee for a specific service 1 was the Google Answers site. Google Answers gave people a place to ask questions that B were then answered by an expert (called a Google Answers Researcher) for a fee. Google administered a test to determine which members of the community were qualified to U become Google Answers Researchers. Google operated this service from 2002 to 2006 (questions and answers posted during that time period are still available on the Web site). Similar services operated by Yahoo! (Yahoo! Answers) and Amazon (Askville) allow volunteers to answer questions, but provide no opportunity for researchers to earn fees. These services do generate advertising revenue for the sites, however. Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. After Google closed its service, a number of the people who had been Google Researchers joined together and started a similar service on the site Uclue. Researchers earn 75 percent of the total fee paid to Uclue. Advocates of using paid researchers argue that the quality of the answers is higher than on free sites and that the questions tend to be more serious and better formulated. Both approaches are examples of how Web sites can generate revenue by providing a place in which virtual communities can interact. Microlending Sites 254 One of the most interesting uses of social networking on the Web has been the emergence of sites that function as clearinghouses for microlending activity. Microlending is the practice of lending very small amounts of money to people who are starting or operating small businesses, especially in developing countries. Microlending became famous in 2006 when Muhammad Yunus and the Grameen Bank won the Nobel Peace Prize for their work in developing microlending initiatives in Bangladesh. A key element of microlending is working within a social network of borrowers. The borrowers provide support for each other and an element of pressure to ensure the loans are repaid by each member of the group. Kiva and MicroPlace are examples of social networking W sites that bring together many small investors who lend money to groups and individuals all over the world who need loans toI start or continue their small business ventures. Kiva partners with microfinance institutions that are knowledgeable about business conditions in L their parts of the world. These institutions select local individuals they believe are good credit risks and help them post aS loan request on the Kiva site. Lenders can review the loan requests and agree to fund part (or Oall) of the loan amount using the Kiva Web site. The loans, which typically range from a few hundred to a few thousand dollars, are scheduled to be repaid within short time periods N ranging from a few months to a year. Internal Social Networking , A growing number of large organizations have built internal Web sites that provide J among their employees. These sites also include opportunities for online interaction important information for employees. These sites run on the intranets you learned about A in Chapter 2. Organizations have saved significant amounts of money by replacing the Mmemos, newsletters, and other correspondence with a printing and distribution of paper Web site. Internal social networking I pages also provide easy access to employee handbooks, newsletters, and employee benefits information. These organizations are alsoEfinding that an internal social networking Web site can become a good way of fostering working relationships among employees who are dispersed over a wide geographic area. For example, a global company could create a question and 5 maintenance technicians. Such a page would provide answer page for all of its equipment mentoring and informal help functions for all the equipment maintenance technicians in 0 the company. Many companies are adding 5 wireless connectivity to their internal community sites and are using this technology to extend 1 the reach of the site to employees who are traveling, meeting with customers or suppliers, or telecommuting. These extended community sites B are yet another example of a second-wave combination of technology (wireless communications) with a business Ustrategy from the first wave (internal Web portals). The use of mobile technology is becoming an important part of almost every social networking business strategy as people use their mobile phones to do everything from take photos they will post on Facebook to send tweets to their followers on Twitter. In the next section, you will learn about the potential for combining mobile phone technologies with the idea of social networking to create new online business opportunities. Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. MOBILE COMMERCE Virtually all phones sold today include short messaging service (SMS), which allows mobile phone users to send short text messages to each other. For years, mobile phones such as the BlackBerry have had the ability to send and receive e-mail, but until recently, many owners of these phones used them only for phone calls. However, two developments coincided in the United States in 2008 that made these phones more viable as devices for browsing the Web. First, high-speed mobile telephone networks grew dramatically in availability, and second, manufacturers began offering a wide variety of smart phones that include a Web browser (and a screen large enough to make it usable), an operating system, and the ability to run applications on that operating system. In this section, you will learn about the impact of this confluence of technologies on the potential for online business using these devices, called mobile commerce (m-commerce). 255 Mobile Operating Systems In Japan and parts of Southeast Asia, mobile commerce has been a much larger part of online business activity than it has elsewhere in the world (including in the United Wintroduced high-capacity mobile phone States). One reason is that these countries networks long before U.S. network providers I did. NTT DoCoMo, which is the largest phone company in Japan, pioneered mobile commerce in 2000 with its i-mode service. Starting L that run on the phones, NTT DoCoMo has been with the sale of games and other programs a leader in expanding mobile commerce,S including online shopping and payments. In the United States, the introduction of smart phones and the high-capacity networks O that make them able to support mobile commerce did not begin until 2008. These smart phones, such as the Apple iPhone, the Palm NPre, several BlackBerry models, and phones that use the Android operating system, opened the door for serious U.S. mobile commerce for , the first time. Figure 6-4 shows several examples of designs used in smart phones today. 5 Oleksiy Mark/Shutterstock.com 0 5 1 B U mkabakov/Shutterstock.com PixAchi/Shutterstock.com J A M I E Christian Delbert/Shutterstock.com FIGURE 6-4 Smart phones come in a range of different styles Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 256 Some smart phones and wireless PDAs display Web pages using the Wireless Application Protocol (WAP). WAP allows Web pages formatted in HTML to be displayed on devices with small screens, such as mobile phones. Another approach, made possible by increased screen resolution, is to display a normal Web page on the device. The Apple iPhone was one of the first devices to include touch screen controls that make viewing and navigating a normal Web page easy to do on a small handheld device. A third approach is to design Web sites to match specific smart phones. This is much more difficult to accomplish because there can be many different phones that use the same operating system, and each phone has a different interface (the buttons, touches, or gestures that perform specific functions often vary). Apple, BlackBerry, and Palm each use their own proprietary operating systems. Some phone makers (including HTC, Motorola, and Nokia) that created their own operating systems and software applications for common functions such as calendar, contacts, and e-mail now use a standard operating system provided by a third party. The most common third-party operating systems are Android, Windows Phone, and Symbian. Windows Phone (formerly Windows Mobile) is a proprietary operating system sold by Microsoft. Symbian started as a proprietary system but became open source in 2008. Nokia, the main user of Symbian,W donated the software to the Symbian Foundation, which manages continued open source Idevelopment of the operating system. However, in 2011, Nokia began building smart phones that use the Windows Phone operating system. Many L industry analysts believe that Symbian, which had been a leader in early Internet-capable phones, is no longer competitiveS as an operating system for full-featured smart phones. The most popular and fastest growing third-party operating system is Android, which was developed by Google.OAndroid is open source, which allows smart phone manufacturers to use it at no cost. N Most smart phone manufacturers that use Android add some customized features to the software’s interface. Figure 6-5 shows the change in U.S. , market shares for leading smart phone operating systems during recent years. 100% 90% 80% 70% 60% J A M I E 50% Windows (Mobile and Phone 7) Symbian Palm webOS BlackBerry (RIM) Apple iOS Android 40% 5 0 20% 5 10% 1 0% B 2006 2007 2008 2009 2010 2011 Source: The NPG Group, Consumer Tracking U Service, Mobile Phone Track at http://www.bgr.com/2011/12/13/appleand-google-dominate-smartphone-space-while-other-vendors-scramble/ 30% FIGURE 6-5 Smart phone operating systems: U.S. market shares Once a manufacturer chooses an operating system for its phones, the user cannot delete it and switch to a different operating system. Unlike computers, the operating Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. system is integrated into the software the carrier uses to make the phone operate on its network. Most carriers will void the warranty on a phone if the user has modified the operating system in any way, although some users with technical skills do so. Modifying an Apple iPhone’s operating system is called jailbreaking the phone. Modifying an Android operating system is called rooting the phone. Mobile Apps The emergence of common operating systems (instead of each phone manufacturer using its own operating system) occurred because the way software applications are developed and sold has changed. In the past, U.S. mobile phone companies generated revenue by controlling the application software (usually called apps) that could run on their phones. Companies would license the apps from software developers and then charge subscribers a monthly usage fee for each app. Apple turned this revenue strategy on its head when AT&T agreed to be Apple’s sole carrier for the iPhone (that is, iPhones would only operate on the AT&T network) and agreed to allow Apple to sell apps for the phone directly. The Apple Apps for iPhone online store was launched at the same time as the iPhone itself and became an instant success, making a wide variety of software available for the W developers to create apps and sell them (on a phone. Because Apple allowed independent revenue-sharing basis) through their Apps for iPhone store, a number of software I developers made hundreds of thousands of dollars for their creations. Zynga, a company L that develops games for mobile phones, generates more than $1 billion in revenues each year selling its game apps for phones. Other firms, such as Mutual Mobile, provide software S design and development services for companies that want apps to use in their own O organizations. BlackBerry and Palm have followed Apple’s lead and now have apps stores of their N own (BlackBerry App World and Palm Pre Applications), and the open source Android and , Symbian phones also have software developers creating apps for them (see Android Market and SymbianGear). Many companies now develop apps for multiple platforms. A number of apps do nothing more than provide a quick gateway to a company’s Web J free apps that are optimized to provide users site. Many online shopping destinations offer the best possible shopping experience onA the small screen of a smart phone. Other apps are sold for a fee. Games, puzzles, productivity tools (such as contact managers, M calendars, and task organizers), and reference works generally fall into this category. Most apps sell for $1 to $5, although prices can I vary widely. Some newspaper and media sites offer free access to their online content through apps; others, such as The New York E Times, offer subscriptions that can be accessed through their apps. Some mobile app sellers include an advertising element in their revenue models. These apps include mobile ads that display 5 messages from advertisers (other than the seller of the app). One common way to include ads is to display them in a small bar at the 0 advertising that appears on a part of bottom of the app screen. Some apps include the screen or as a separate screen that must 5 be clicked through to get to the app. The advertising space on mobile apps is sold in the same way that banner advertising on Web sites is sold (which you learned about in 1 Chapter 4). Companies that want to participate in Bmobile commerce should first review their Web sites to determine how well the site works when viewed on a mobile device. Many U with mobile users are creating separate Web companies that are serious about connecting sites for mobile users. For example, the Scottrade Mobile Web site is optimized for display on the small screens used in smart phones. The site gives Scottrade customers quick access to financial markets information and to their trading accounts. Yahoo! Mobile provides a version of its Web portal that is similarly optimized for the small screen and limited controls of most smart phones. 257 Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 258 Although the use of mobile phones for online banking is still in its early stages in the United States, forward-looking financial institutions such as Wescorp are working on ways to draw in younger customers by offering complete banking services through a Web site that is optimized for specific smart phones. The Veterans Affairs Medical Center in Washington, D.C., has issued smart phones to its physicians. They use the phones to send and receive messages, but in addition, they can use the phones to read detailed information needed for treating patients. For example, cardiologists can read electrocardiograms (EKGs) on their smart phones, saving time and often a trip to the hospital. Other hospitals are using smart phones in equally creative ways. For example, diabetic patients can track what they eat, insulin injections, blood sugar readings, and their level of physical activities on their phones. Doctors treating these patients can access the data using their own smart phones and can better help patients manage their diabetes. The University of Louisville Medical School provides a suite of smart phone apps to their students, including Epocrates (a drug information database), and apps that let them look up information about diseases and access reference works. Most smart phones have global positioning satellite (GPS) service capabilities, which means that apps that combine the phone user’s location with the availability of retail W into creative mobile business opportunities. For stores and services can be interwoven example, some apps can direct the I user to specific business locations (such as restaurants, movie theaters, or auto repair facilities) based on the user’s current location. L by trained programmers; however, there are tools such Most app development is done as Swebapps and App Inventor that S provide a point-and-click interface for building simple apps. And sites such as TaskCity can connect a person or company that needs an app created with a programmer whoO can do the job. Tablet Devices N , In 2010, Apple introduced the iPad, a tablet device that is smaller than a laptop computer, yet larger than a smart phone. Tablet devices can be connected to the Internet through a wireless phone carrier’s service J or through a local wireless network. Most tablet devices can use both access modes and can switch between them. Within a year, many other A manufacturers had introduced tablet devices to compete with the iPad. Apple’s iPad tablet devices run M the company’s proprietary iOS operating system. Most other manufacturers’ tablet devices run the Android operating system. Some of I Amazon.com’s electronic book products, such as the Kindle Fire, have the ability to be E used as online tablet devices. Because tablet devices’ screens are larger, they are more likely to be used than smart phones to buy consumer products (most purchases completed on smart phones are for digital products such as music, videos, or apps). 5 Mobile Payment Apps 0 Since 2004, NTT DoCoMo has been selling mobile phones, called mobile wallets (osaifu5 ketai, in Japanese), that function as credit cards. Although the individual applications on 1 DoCoMo phones are not overwhelming (for example, one application lets you use a mobile phone to pay for a vending machine purchase in Japan), their combined capabilities B generate a significant amount of business. Other countries that have a tradition of using cash for retail transactions have seen U significant adoptions of mobile phone apps that allow them to be used to make payments. Very few people have credit cards in these countries and the convenience of using a mobile phone for payments has been very attractive. In the United States, where the use of credit cards is widespread, the use of a mobile phone for payments has not been as compelling. However, in 2011, a number of companies began to offer retail store technologies that allow the use of smart phones Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. as payment devices. American Express, Visa, and MasterCard have all made phone readers available to retailers. Google introduced its Google Wallet for Android phones. You will learn more about payment systems in Chapter 11. In the next section, you will learn how online business pioneers adapted auctions, a very old business practice, to a new online business opportunity. ONLINE AUCTIONS In many ways, online auctions provide a business opportunity that is perfect for the Web. An auction site can charge both buyers and sellers to participate, and it can sell advertising on its pages. People interested in trading specific items can form a market segment that advertisers will pay extra to reach. Thus, the same kind of targeted advertising opportunities that search engine sites generate with their results pages are available to advertisers on auction sites. This combination of revenue-generating characteristics makes it relatively easy to develop online auctions that yield profits early in the life of the project. One of the Internet’s strengths is that it can bring together people who share narrow WOnline auctions can capitalize on that ability interests but are geographically dispersed. by either catering to a narrow interest orIproviding a general auction site that has sections devoted to specific interests. Before you learn more about online auctions, the next L section introduces some basic auction terminology and principles. 259 S O The earliest written records of auctions are from Babylon and date from 500 BC. In those auctions, men bid against each other for N the women they wished to marry. Roman soldiers used auctions to liquidate the property they took from their vanquished foes. , Auction Basics In AD 193, the Praetorian Guard auctioned off the entire Roman Empire after killing the Emperor Pertinax. In later years, Buddhist temples held auctions to sell off the possessions of deceased monks. AuctionsJbecame common activities in 17th-century England, where taverns held regular auctions of art and furniture. The 18th century saw the birth of two British auction houses—A Sotheby’s in 1744 and Christie’s in 1766—that continue to be major auction firms today. MThe British settlers of the colonies that would become the United States brought auctions with them. Colonial auctions were used to sell I farm equipment, animals, tobacco, and, sad to say, human beings. In an auction, a seller offers an itemE or items for sale, but does not establish a price. This is called “putting an item up for bid” or “putting an item on the (auction) block.” Potential buyers are given information about the item or some opportunity to examine 5 they are willing to pay for the item. The it; they then offer bids, which are the prices potential buyers, or bidders, each have developed private valuations, or amounts they 0 are willing to pay for the item. The whole auction process is managed by an auctioneer. 5 seller or the auctioneer can make bids on In some auctions, people employed by the behalf of the seller. These people are called 1 shill bidders. Shill bidders can artificially inflate the price of an item and may be prohibited from bidding by the rules of a B particular auction. English Auctions U Many different kinds of auctions exist. Most people who have attended or seen an auction on television have experienced only one type of auction, the English auction, in which bidders publicly announce their successive higher bids until no higher bid is forthcoming. At that point, the auctioneer pronounces the item sold to the highest bidder at that Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 260 bidder’s price. This type of auction is also called an ascending-price auction. An English auction is sometimes called an open auction (or open-outcry auction) because the bids are publicly announced; however, there are other types of auctions that use publicly announced bids that are also called open auctions. In some cases, an English auction has a minimum bid, or reserve price. A minimum bid is the price at which an auction begins. If no bidders are willing to pay that price, the item is removed from the auction and not sold. In some auctions, a minimum bid is not announced, but sellers can establish a minimum acceptable price, called a reserve price, or simply reserve. If the reserve price is not exceeded, the item is withdrawn from the auction and not sold. English auctions that offer multiple units of an item for sale and allow bidders to specify the quantity they want to buy are called Yankee auctions. When the bidding concludes in a Yankee auction, the highest bidder is allotted the quantity he or she bid. If items remain after satisfying the highest bidder, those remaining items are allocated to successive lower (next highest) bidders until all items are distributed. Although all successful bidders (except possibly the lowest successful bidder) receive the quantity of items on which they bid, they only pay the price bid by the lowest successful bidder. To understand Yankee auctions better, consider this example. A seller places nine W stop increasing their bids, the successful bidders items up for bid. When the bidders include the following: the highest I bidder, who bid $85, quantity five; the second-highest bidder, who bid $83, quantity three; and the third-highest bidder, who bid $81, quantity four. All three of the successful L bidders pay $81 per item, but the highest bidder receives five items, the second-highest bidder S receives three items, and the third-highest bidder receives the one remaining item, despite having bid for a quantity of four, because only O bids of the higher bidders. one is left after satisfying the quantity English auctions have drawbacks N for both sellers and bidders. Because the winning bidder is only required to bid a small amount more than the next-highest bidder, , winning bidders tend not to bid their full private valuations, which prevents sellers from obtaining the maximum possible price. Bidders risk becoming caught up in the excitement of competitive bidding and then bidding more than their private valuations. J This psychological phenomenon, called the winner’s curse, has been extensively documented by William Thaler A (see the Thaler reference in the “For Further Study and Research” section at the end of M this chapter) and other behavioral economists. I The Dutch auction is a form of E open auction in which bidding starts at a high price and Dutch Auctions drops until a bidder accepts the price. Because the price drops until a bidder claims the item, Dutch auctions are also called descending-price auctions. Farmers’ cooperatives in the Netherlands use this type of5auction to sell perishable goods such as produce and flowers, which is how it came to be known as a “Dutch” auction. In most Dutch auctions, 0 the seller offers a number of similar items for sale. One common implementation of a Dutch auction uses a clock that5drops the price with each tick. The first bidder to call out “stop,” which stops the clock, becomes the winning bidder. The winning bidder can take 1 all or any part of the auctioned items at that price. If any items remain, the clock is B all the items are taken by successive lower bidders. restarted and continues to run until A Dutch auction is often better U for the seller because the bidder with the highest private valuation will not let the bid drop much below that valuation for fear of losing the item to another bidder. Dutch auctions are particularly good for moving large numbers of commodity items quickly. A few online stores have offered Dutch auctions from time to time. For several years, women’s clothing retailer Coldwater Creek used Dutch auctions to sell closeout items on its site. Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. In 2004, Google used a Dutch auction to sell its stock to investors in its initial public offering. The financial community considered this use of a Dutch auction to be highly innovative and very successful. Google used the Dutch auction to obtain the highest price possible for its shares. In a similar financial transaction, online advertising and technology company LookSmart used a Dutch auction to buy back some of its stock. Usually, when a company announces a share buyback, the price of the stock moves upward and the company must pay an increasing price as it buys the shares on the open market. LookSmart announced a price range and let shareholders place bids that specified the number of shares and the price within that range at which they would be willing to sell. When the auction was over, LookSmart had repurchased exactly the number of shares it had wanted to buy at the lowest price it had specified, which meant that the Dutch auction worked very well for it. 261 First-Price Sealed-Bid Auctions In sealed-bid auctions, bidders submit their bids independently and are usually prohibited from sharing information with each other. In a first-price sealed-bid auction, the highest bidder wins. If multiple items are auctioned, successive lower (next highest) bidders are W awarded the remaining items at the prices they bid. I L The second-price sealed-bid auction is the same as the first-price sealed-bid auction except that the highest bidder is awardedSthe item at the price bid by the second-highest bidder. At first glance, one might wonderO why a seller would even consider such an auction because it gives the item to the winning bidder at a lower price. William Vickrey Nhis studies of the properties of this auction won the 1996 Nobel Prize in Economics for type. He concluded that it yields higher returns for the seller, encourages all bidders to , Second-Price Sealed-Bid Auctions bid the amounts of their private valuations, and reduces the tendency for bidders to collude. Because the winning bidder is protected from an erroneously high bid, all bidders J tend to bid higher than they would in a first-price sealed-bid auction. Second-price sealedbid auctions are commonly called Vickrey auctions. A M Open-Outcry Double Auctions The Chicago Board Options Exchange conducts open-outcry double auctions of I commodity futures and stock options. The buy and sell offers are shouted by traders standing in a small area on the exchangeEfloor called a trading pit. Each commodity or stock option is traded in its own pit. The action in a trading pit can become quite frenzied as 20 or 30 traders shout offers aloud. Double auctions, either sealed bid or open outcry, 5 work well only for items of known quality, such as securities or graded agricultural products, which are regularly traded in large 0 quantities. Such items can be auctioned without bidders inspecting the items before placing their bids. 5 Double Auctions 1 In a double auction, buyers and sellers each B submit combined price–quantity bids to an auctioneer. The auctioneer matches the sellers’ offers (starting with the lowest price and U with the highest price and then going down) then going up) to the buyers’ offers (starting until all the quantities offered for sale are sold to buyers. Double auctions can be operated in either sealed-bid or open-outcry formats. The New York Stock Exchange conducts sealedbid double auctions of stocks and bonds in which the auctioneer, called a specialist, manages the market for a particular stock or bond issue. The specialist company must use its own funds, when necessary, to maintain a stable market in the specific security it Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. manages. Although the specialist system has been in use for more than a century, critics have charged that specialists can and do use their knowledge to enrich themselves at the expense of investors. In 2007, the New York Stock Exchange added an electronic trading system that automatically matches buyer and seller offers. Today the automated system, which bypasses specialists, handles most of the trading volume on the exchange. Reverse (Seller-Bid) Auctions 262 In a reverse auction (also called a seller-bid auction), multiple sellers submit price bids to an auctioneer who represents a single buyer. The bids are for a given amount of a specific item that the buyer wants to purchase. The prices go down as the bidding continues until no seller is willing to bid lower. Reverse auctions have been operated for consumers from time to time, but most reverse auctions involve businesses as buyers and sellers. In many business reverse auctions, the buyer acts as auctioneer and screens sellers before they can participate. You will learn more about specific implementations of reverse auctions later in this chapter. The seven auction types described in this section are the most commonly used in business today. Figure 6-6 summarizes the key characteristics of each of these seven W major auction types. Auction type English auction Dutch auction I L S O N , First-price sealed-bid auction J Second-price sealed-bid auction A (Vickrey auction) M Double auction (open-outcry) I E Double auction (sealed-bid) Reverse auction (seller-bid) FIGURE 6-6 5 0 5 1 B U Key characteristics Starting from a low price, bidding increases until no bidder is willing to bid higher. Starting from a high price, bidding automatically decreases until the bidder accepts the price. Secret bidding process; the highest bidder pays the amount of the highest bid. Secret bidding process; the highest bidder pays the amount of the second-highest bid. Buyers and sellers declare combined price– quantity bids. The auctioneer matches seller offers (lowest to highest) with buyer offers (highest to lowest). Buyers and sellers can modify bids based on knowledge gained from other bids. Buyers and sellers declare combined price– quantity bids. The auctioneer (specialist) matches seller offers (lowest to highest) with buyer offers (highest to lowest). Buyers and sellers cannot modify their bids. Multiple sellers submit price bids to an auctioneer that represents a single buyer. The bids are for a given amount of a specific item that the buyer wants to purchase. Prices go down as the bidding continues until no seller is willing to bid lower. Key characteristics of seven major auction types Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Online Auctions and Related Businesses Millions of people buy and sell all types of goods on consumer auction sites each year. Although the online auction business is changing rapidly as it grows, three broad categories of auction Web sites have emerged: general consumer auctions, specialty consumer auctions, and business-to-business auctions. Some industry analysts consider the two types of consumer auctions to be business-to-consumer electronic commerce. Other analysts believe that a more appropriate term for the electronic commerce that occurs in general consumer auctions is consumer-to-consumer or even consumerto-business (because the bidders at a general consumer auction might be businesses). Their argument is that many sellers who participate in general consumer auctions are not really businesses; they are ordinary people who use these auctions to sell personal items instead of holding a garage sale, for example. Whether you prefer to think of online auctions as business-to-consumer, consumer-to-consumer, or consumerto-business, the largest number of auction transactions occurs on general consumer auction sites. General Consumer Auctions 263 W The most successful consumer auction Web site today is eBay. Sellers and buyers must register with eBay and agree to the site’sIbasic terms of doing business. Sellers pay eBay a listing fee and a sliding percentage of the L final selling price. Buyers pay nothing to eBay. In addition to paying the basic fees, sellers can choose from a variety of enhanced and extra-cost services, including having S their auctions listed in boldface type and featured in lists of preferred auctions. O In an attempt to address buyer concerns about seller reliability, eBay instituted a N rating system. Buyers can submit ratings of sellers after doing business with them. These ratings are converted into graphics, that appear with the seller’s nickname in each auction in which the seller participates. Although this system is not perfect, many eBay bidders feel that it affords them some protection from unscrupulous sellers. eBay also uses J on sellers (such as withholding funds for three buyer ratings of sellers to place restrictions weeks) or, if the ratings are low enough, A prohibit them from selling on eBay at all. The converse is true also; sellers rate buyers, which provides sellers some protection from M unscrupulous buyers. Although eBay does not release anyIstatistics about buyer and seller frauds, most industry observers agree that sellers face larger potential losses than buyers. Sellers’ E credit card numbers or who place the greatest risks are from buyers who use stolen winning bid but never contact the seller to conclude the transaction. Buyers’ risks include sellers who never deliver or who misrepresent their merchandise. You will learn about ways that sellers and buyers5can protect themselves later in this chapter. The most common format used on eBay 0 is a computerized version of the English auction. The eBay English auction allows the seller to set a reserve price. In eBay 5 English auctions, the bidders are listed, but the bid amounts are not disclosed until after the auction is over. This is a slight variation 1 on the in-person English auction, but because eBay always shows a continually updated high bid amount, a bidder who B monitors the auction can see the bidding pattern as it occurs. The main difference between eBay and a live English auctionUis that bidders do not see the details of the bidding history (which bidders placed which bids when) until the auction is over. The eBay English auction also allows sellers to specify that an auction be made private. In an eBay private auction, the site never discloses bidders’ identities and the prices they bid. At the conclusion of the auction, eBay notifies only the seller and the highest bidder. Another auction type offered by eBay is an increasing-price format for multiple-item Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 264 auctions that eBay calls a Dutch auction. However, these auctions are actually the Yankee auction variant of an English auction. In either type of eBay auction, bidders must constantly monitor the bidding activity if they intend to win the auction. All eBay auctions have a minimum bid increment, the amount by which one bid must exceed the previous bid, which is about 3 percent of the bid amount. To make bidding easier, eBay allows bidders to make a proxy bid. In a proxy bid, the bidder specifies a maximum bid. If that maximum bid exceeds the current bid, the eBay site automatically enters a bid that is one minimum bid increment higher than the current bid. As new bidders enter the auction, the eBay site software continually enters higher bids for all bidders who placed proxy bids. Although this feature is designed to make bidding require less bidder attention, if a number of bidders enter proxy bids on one item, the bidding rises rapidly to the highest proxy bid offered. This rapid rise in the current bid often occurs in the closing hours of an eBay auction, usually as the result of bidders raising their proxy bid levels. To attract sellers who frequently offer items or who continually offer large numbers of items, eBay offers a platform called eBay stores within its auction site. At a very low cost, sellers can establish eBay stores that show items for sale as well as items being auctioned. W profits from sales of items related to those offered in This can help sellers generate additional their auctions. These eBay storesI are integrated into the auction site; that is, when a bidder searches for an item, the results page includes auctions and listings from sellers’ eBay stores. L Competition in General Consumer S Auctions eBay has been so successful because O it was the first major Web auction site for consumers that did not cater to a specific audience and because it advertises widely. eBay spends N and promote its Web site. A significant portion of about $1 billion each year to market this promotional budget is devoted , to traditional mass media outlets, such as television advertising. For eBay, such advertising has proven to be the best way to reach its main market: people who have a hobby or a very specific interest in items that are not locally available. Whether those items are J jewelry, antique furniture, coins, first-edition books, or stuffed animals, eBay has created a place where people can become collectors, dispose of their collections, or trade out ofA their collections. Because one of the major determinants of Web auction site success is attracting M enough buyers and sellers to create markets in many different items, some Web sites I that already have a large number of visitors entered the general consumer auction business. Yahoo! created an auction E site patterned after eBay. Yahoo! believed that it could leverage its brand name and capitalize on its large number of site visitors to compete with eBay. 5 in attracting large numbers of auction participants, Yahoo! had some early success in part because it offered its auction service to sellers at no charge. Yahoo! was less 0 successful in attracting buyers, resulting in less bidding action in each auction than 5 generally occurs on eBay. In January 2001, Yahoo! began charging sellers in the face of dropping ad revenues in its other Web operations. Within one month, Yahoo! lost 1 about 80 percent of its auction listings; however, the percentage of listed items that B and the dollar amount of completed auctions ended in a sale increased six-fold, remained constant. Because Yahoo! U draws a large number of visitors every month, the company hoped that it would be able to further increase participation in its auctions and attract some of the sellers who left in reaction to the fees. However, in 2005, Yahoo! reverted to its original policy of not charging fees to sellers. Despite its efforts, Yahoo! was unable to draw enough buyers or sellers to its U.S. auction site and closed the operation in 2007. Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Amazon.com also added a general consumer auction to its list of products and services. Unlike eBay, which was profitable from the start, Amazon took seven years to earn its first small profits from all of its businesses. One way that Amazon attempted to compete with eBay was through its “Auctions Guarantee.” This guarantee directly addressed concerns raised in the media by eBay customers about being cheated by sellers. When Amazon opened its Auctions site, it agreed to reimburse any buyer for merchandise purchased in an auction that was not delivered or that was “materially different” from the seller’s representations up to $250. In response to Amazon’s guarantee, eBay immediately offered its customers a similar guarantee, but not before Amazon gained free publicity from the media coverage of its guarantee. In 2003, eBay increased its guarantee to $500 in the hopes that it would induce new customers to buy at eBay auctions. The experiment worked well; in fact, eBay increased its guarantee again in 2004 to $1000. In 2005, eBay reduced its guarantee to $200 with a $25 deductible, but continued to offer a $1000 guarantee through its payment processing subsidiary PayPal. This change encourages bidders to use PayPal, yet still provides some protection for bidders who do not. Some eBay users have complained that the company does not act quickly on claims under the guarantee and does its best to W remains a powerful marketing tool. Buyers of avoid paying claims; however, the guarantee more expensive items can protect themselves I by using a third-party escrow service, which holds the buyer’s payment until he or she receives and is satisfied with the purchased L most auction sites. You will learn more about item. Escrow services are available through escrow services later in this chapter. S Amazon also used other strategies to compete with eBay. For example, Amazon O established an online joint venture with Sotheby’s, the famous British auction house, to hold online auctions of fine art, antiques,Njewelry, and other high-value collectibles. Despite its years of effort, Amazon was unable to draw sellers and buyers in sufficient , numbers and closed its general consumer auction site in 2006. The success of eBay has inspired competition from a number of powerful and well-financed companies. Most of these competitors have met the same fate as Yahoo! J and Amazon, failing after spending large amounts of money in their efforts. Future A challengers to eBay will find that the economic structure of markets is biased against new entrants. Because markets become M more efficient (yielding fairer prices to both buyers and sellers) as the number of buyers and sellers increases, new auction I participants are inclined to patronize established marketplaces. Thus, existing auction sites, such as eBay, are inherently moreE valuable to customers than new auction sites. This basic economic fact, which economists call a lock-in effect, will make the task of creating other successful general consumer Web auction sites even more difficult in the future. 5 A somewhat ironic example of the lock-in effect exists in the Japanese general consumer auction market. In this market,0unlike in the United States, Yahoo! was the first major company to offer online auctions. 5 At the time (early 1999), Yahoo! did not charge fees to sellers. When eBay entered the Japanese market five months later, it charged fees 1 and found few people interested in its services. Even when Yahoo! began charging fees in 2001 for its auctions, the lock-in effect preserved its strong lead in Japan. Today, Yahoo! B Auctions holds more than 90 percent of the Japanese online auction market, while eBay’s U market share is less than 3 percent. 265 Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. LEARNING FROM FAILURES Auction Universe 266 One of the most promising new entrants into the general consumer auction business was Auction Universe. Times Mirror, the parent company of the Los Angeles Times newspaper, started Auction Universe in 1997 and then sold it in 1998 to a partnership of eight major newspaper companies (including Times Mirror itself) called Classified Ventures. These companies were concerned that classified advertising on the Web posed a threat to their newspapers’ classified advertising, which is one of the most profitable elements in the newspaper business. Through their Classified Ventures partnership, these newspaper companies started their own Web sites for classified ads such as Apartments.com, Cars.com, and NewHomeNetwork.com. These sites earn revenue by charging for running ads, selling advertising on their pages, or both. Classified Ventures believed that the Auction Universe site could become an important and profitable part of its Web presence. Auction Universe closed in August 2000, but Classified Ventures’ classified ad sites continue to operate. The Auction Universe site was modeled on eBay and offered similar types of auctions and services W for buyers and sellers. Some critics believed that the Auction Universe interface was more intuitive than eBay’s and included a better search engine; however, the site failedI to mount a sustained challenge to eBay’s dominance. Even with major corporate sponsorship and a $10 million advertising campaign behind L it, Auction Universe was unable to displace the advantage eBay obtained from the lock-in effect it has created for a largeSnumber of auction bidders and sellers. O N Specialty Consumer Auctions , Rather than struggle to compete with a well-established rival such as eBay in the general consumer auction market, a number of firms have decided to identify special-interest market targets and create specialized J Web auction sites that meet the needs of those market segments. A JustBeads.com is one example of an auction site that caters to buyers and sellers who are geographically dispersed butM share highly focused interests. Other specialty consumer auction sites include Cigarbid.com and Winebid. These sites gain an advantage by I identifying a strong market segment with readily identifiable products that are desired by Eof disposable income. Cigars and wine meet those people with relatively high levels requirements. These specialized consumer auctions occupy profitable niches, which allows them to coexist successfully with large general consumer sites, such as eBay. 5 Consumer Reverse Auctions 0 In the past, a number of companies have created sites that allow site visitors to describe 5 items or services they wish to buy. The site then routes the visitor’s request to a group of participating merchants who reply 1 to the visitor by e-mail with offers to supply the item at a particular price. This type of offer is often called a reverse bid. The buyer can then B accept the lowest offer or the offer that best matches the buyer’s criteria. None of these U a large enough following to interest merchants, so they sites were successful in developing have all closed. Many people think of Priceline.com as a seller-bid auction site. Priceline.com allows site visitors to state a price they are willing to pay for airline tickets, car rentals, hotel rooms, and a few other services. If the price is sufficiently high, the transaction is Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. completed. However, Priceline.com completes many of its transactions from an inventory that it has purchased from airlines, car rental agencies, and hotels. Group Shopping Sites Another type of business that the Internet made possible is the group purchasing site, or group shopping site. On these sites, the seller posts an item with a tentative price. As individual buyers enter bids on the item (these bids are agreements to buy one unit of that item, but no price is specified), the site operators negotiate with the seller to obtain a lower price. The posted price will decrease as the number of bids increases, but only if the number of bids increases. Thus, a group shopping site builds up the number of buyers sufficiently to encourage the seller to offer a quantity discount. The effect is similar to the outcome achieved by a reverse auction. The types of products that work well for group shopping sites are branded products with well-established reputations. This allows buyers to feel confident that they are getting a good bargain and are not just getting a lower price for a low-quality product. Ideal products also have a high value-to-size ratio and are not perishable. Two companies, Mercata and LetsBuyIt.com, operated major group shopping sites for W several years; however, both closed their doors after failing to find consistent sources of products that sold well on their sites. They I found that few sellers of products that are well suited to group shopping efforts—such as computers, consumer electronics, and small L appliances—were willing to work with them. These sellers did not see any compelling S merchandise to Web sites that were advantage in offering reduced prices on their probably cannibalizing sales in their existing O marketing channels. They also worried about offending the regular distributors of their products by selling through group shopping sites. N In 2008, Andrew Mason and Eric Lefkofsky decided to give the group shopping business another try. Starting in Chicago,, they launched a site called Groupon (a shortening of “group coupon”). The site offered one coupon offer (called a “groupon”) per day in the city. A groupon requires a certain number of people to sign up for it or it does not become available to anyone. For example, J a $50 dinner coupon redeemable at a specific restaurant might be sold for $30. The consumer gets a $50 dinner for $30. Groupon would keep approximately half A the money paid by the consumer for the groupon ($15) and the remainder would go to theM restaurant. Thus, the restaurant gets $15 for its $50 dinner, but it has a chance to impress a new customer and gain that customer’s I return business. Further, the restaurant makes no upfront cash outlay, as it would if it were purchasing advertising. E Groupon promotes its business using social networking sites such as Facebook and Twitter to make contacts with consumers and to spread the word about the groupon deal for the day. Groupon’s current customer 5 base is primarily female, so the bulk of its business is in the health, beauty, and fitness markets. Similar services are offered by 0 LivingSocial and Gilt. Industry analysts expect that the continued success of these group buying sites will bring competition from 5 larger companies such as eBay and Google. 267 1 B Unlike consumer online auctions, business-to-business online auctions evolved to meet a specific existing need. Many manufacturing U companies periodically need to dispose of Business-to-Business Auctions unusable or excess inventory. Despite the best efforts of procurement and production management, businesses occasionally buy more raw materials than they need. Many times, unforeseen changes in customer demand for a product can saddle manufacturers with excess finished goods or spare parts. Social Networking, Mobile Commerce, and Online Auctions Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 268 Depending on its size, a firm typically uses one of two methods to distribute excess inventory. Large companies sometimes have liquidation specialists who find buyers for these unusable inventory items. Smaller businesses often sell their unusable and excess inventory to liquidation brokers, which are firms that find buyers for these items. Online auctions are the logical extension of these inventory liquidation activities to a new and more efficient channel, the Internet. Two of the three emerging business-to-business Web auction models are direct descendants of these two traditional methods for handling excess inventory. In the largecompany model, the business creates its own auction site that sells excess inventory. In the small-company model, a third-party Web auction site takes the place of the liquidation broker and auctions excess inventory listed on the site by a number of smaller sellers. The third business-to-business Web auction model resembles consumer online auctions. In this model, a new business entity enters a market that lacked efficiency and creates a site at which buyers and sellers who have not historically done business with each other can participate in auctions. An alternative implementation of this model occurs when a Web auction replaces an existing sales channel. In the second business-to-business auction model, smaller firms sell their obsolete W third-party auction site. In some cases, these online inventory through an independent auctions are conducted by the same I liquidation brokers that have always handled the disposition of obsolete inventory. These brokers adapted to the changed environment and L to stay in business. One example is the GoIndustry implemented electronic commerce Dove Bid site, established by theSRoss-Dove Company, a traditional liquidation broker for many years. Gordon Brothers Group, another liquidation broker, has been selling the O1903. The company has used its expertise to launch or inventory of failed retailers since help others launch Web sites that N liquidate retailer inventories. A number of hospitals and other organizations are using online auctions to fill , temporary employment openings. Health care workers, such as nurses, perform similar duties in specific health care settings in most hospitals. For example, the duties performed by an intensive care unit nurse are almost identical across hospitals. State regulations on J nurse licensing require that nurses have similar levels of knowledge, skills, and abilities. Having similar job functions in A workplaces and having similarly qualified persons working in those jobs allows both nursesM and employers to treat the nursing function as a commodity. Therefore, nurses can easily work for a variety of employers and do not require long periods of training Ior learning procedures specific to a particular hospital. In the past, nurse agencies would coordinate placement, matching nurses who wanted to E work particular days or shifts with hospitals and other health care organizations who had shifts to fill. The agency would earn a commission on each placement. Today, employers operate their own shift auctions.5Nurses bid on the shifts they would prefer to work and the software manages the auctions. In an efficient matching of supply and demand, 0 efficiently, nurses get to work when they want, and employers meet their staffing needs the agency fee is avoided. 5 1 In Chapter 5, you learned how B businesses are creating various types of electronic marketplaces to conduct business-to-business (B2B) transactions. Many of these U Business-to-Business Reverse Auctions marketplaces include auctions and reverse auctions. Glass and building materials producer Owens Corning uses reverse auctions for items ranging from chemicals (direct materials) to conveyors (fixed assets) to pipe fittings (MRO). Owens Corning even held a reverse auction to buy bottled water. Asking its suppliers to bid has reduced the cost of those items by an average of 10 percent. Because Owens Corning buys billions of dollars Chapter 6 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. worth of materials, fixed assets, and MRO items each year, the potential for cost savings is significant. Both the U.S. Navy and the federal government’s General Services Administration use reverse auctions to acquire some of the billions of dollars worth of materials and supplies they purchase each year. Other companies that use reverse auctions include Agilent, Bechtel, Boeing, Raytheon, and Sony. Not all companies are enthusiastic about reverse auctions, however. Some purchasing executives argue that reverse auctions cause suppliers to compete on price alone, which can lead suppliers to cut corners on quality or miss scheduled delivery dates. Others argue that reverse auctions can be useful for nonstrategic commodity items with established quality standards. Companies that have considered reverse auctions and decided not to use them include Cisco, Cubic, IBM, and Solar Turbines. With compelling arguments on both sides, the advisability of using reverse auctions can depend on specific conditions that exist in a given company. A company can also determine whether to use reverse auctions based on guidelines that have emerged. For example, in some industry supply chains, the need for trust and long-term strategic relationships with suppliers makes reverse auctions less attractive. In fact, the trend in purchasing management over the last 30 years has been to build trust-based relationships W auctions replaces trusting relationships that can endure for many years. Using reverse with a bidding activity that pits suppliersI against each other and is seen by many purchasing managers as a step backward. L and more powerful than the buyers. In those In some industries, suppliers are larger industries, suppliers simply will not agreeSto participate in reverse auctions. If enough important suppliers refuse to participate, it is impossible to conduct reverse auctions. In O exists among s...
Purchase answer to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

Running head: E-BUSINESS AND ONLINE COMMERCE

E-Business and Online Commerce
Student’s Name
Institutional Affiliation
Date

1

E-BUSINESS AND ONLINE COMMERCE

2

E-Business and Online Commerce
Montana Mountain Biking
Jerry Singleton is the founder of Montana Mountain Biking which was started 18 years
ago. It offers supervised expeditions in four different locations in Montana. Most of its
customers learn of the company’s existence from older Amazon. Many of these customers
repeat the experience on a yearly basis. The founder has been trying to explore different options
to increase the number of customers. In his view, the company hasn’t amassed as many clients
as he would have preferred.
In his efforts to publicize MMB, Jerry spent & 80,000 on advertising through a print
advertising campaign that had advertisements in various magazines. The adverts didn’t
generate the projected outcome since the number of new customers didn’t cover the cost of
advertising. He once approached a marketing consultant to discuss on buying an address list to
promote his company through mailing. The numbers didn’t impress him enough, out of the
60000 addresses, he would acquire only 1800 new customers.
Jerry wanted to reach the true bike enthusiasts and to achieve this he had to reach a
wider scope of potential clients. Nine years ago, MMB made a significant step by launching its
first website. The website comprised of the company’s information and its exploits. The
website has proved monumental in popularizing the...


Anonymous
Super useful! Studypool never disappoints.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Content

Related Tags