Lecture Notes
Introduction
Many companies are now using technologies such as social media and mobile commerce to interact with customers, potential customers, and other stakeholders in new ways. Participating actively in social media sites such as Facebook and Twitter, along with buying large amounts of advertising on those services, has led to social media success for many companies. Starbucks, however, has incorporated an additional strategy. Starbucks sees social media as an extension of the barista-customer relationships that develop in its stores along with the relationships that arise among its customers as they enjoy Starbucks products and the atmosphere of its stores. In addition to directing communications towards individual customers, the company uses social media to provide a platform for customers to talk with each other about their favorite Starbucks products. Starbucks also integrates mobile technology with the customer experience by accepting payments from mobile devices and by providing a Starbucks mobile device app that lets customers manage their loyalty program benefits.
Whereas most companies embrace the common wisdom that sees social media and mobile technologies as just another advertising channel, Starbucks has taken a different approach: expanding its connection to individual users. Cementing these connections with insights gained by being a social media observer rather than an active participant has helped the company outperform most other consumer brands in the world of online consumer engagement.
Learning Objectives
In this chapter, your students will learn:
• How social networking emerged from virtual communities
• How social networking Web sites earn revenue
• How companies use social networking tools in online business activities
• About mobile technologies that are now used to do business online
• How auctions and auction-related businesses are conducted online
Teaching Tips
From Virtual Communities to Social Networks
1. Remind students that in previous chapters, the focus was on how companies are using the Web to improve the things that they have been doing for years, primarily buying and selling. In this chapter, your students will learn how companies are using the Web to perform tasks that were either very difficult or impossible to do before online connectivity became commonplace.
2. Emphasize that combining the Internet’s transaction cost-reduction potential with its role as a facilitator of communication among people has led companies to develop new ways of making money on the Web by serving as relationship facilitators.
Virtual Communities
1. Discuss the history of virtual communities by introducing the terms virtual community, bulletin board systems (BBSs), and Usenet newsgroups.
2. Note that many sociologists believe the communication and relationship-forming activities that occur online are similar to those that occur in physical communities.
Early Web Communities
1. Note that one of the first Web communities was the WELL. The WELL, which is an acronym for “whole earth ‘lectronic link,” predates the Web.
2. Point out that as the Web emerged in the mid-1990s, its potential for creating new virtual communities was quickly exploited. Briefly review the history of some of these communities.
In 1995, the Beverly Hills Internet site featured two Webcams aimed down Hollywood streets along with links to entertainment Web sites and free space for member-created Web pages.
Beverly Hills grew and changed its name to GeoCities. They earned revenue by selling advertising.
GeoCities grew rapidly and was purchased in 1999 by Yahoo! for $5 billion but Yahoo! failed to engage members and closed GeoCities in 2009.
During the 1995–2001 time period, companies such as Tripod and Theglobe.com operated similar advertising supported virtual communities.
3. Note that these virtual communities evolved into the social networking sites that emerged in the late 1990s as part of the second wave of electronic commerce.
Social Networking Emerges
1. Explain that in the second wave of electronic commerce, a new phenomenon in online communication began. A variety of common interests (e.g., gardening, specific medical issues, parenting) created the basis for online interaction.
2. Introduce the terms social networking, social networking sites and tweets. Refer to Figure 6-1 and discuss some popular social networking sites.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
3. Emphasize that the general idea behind many social networking sites is that people are invited to join by existing members who think they would be valuable additions to the community.
4. Use Figure 6-2 to illustrate how the expansion of social networking sites into all corners of the world continues as we move into the third wave of electronic commerce.
Web Logs (Blogs), Microblogs, and Participatory Journalism
1. Recall that Web logs or blogs are Web sites that contain commentary on current events or specific issues written by individuals.
2. Note that because blog sites encourage interaction among people interested in a particular topic, blog sites are a form of a social networking site.
3. Introduce the terms microblogs and meetups
4. Point out that after seeing the success of blogs and virtual communities as political networking tools, some retailers embraced blogs 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.
5. Introduce the term participatory journalism.
6. Note that blogs can become a business in themselves if they can generate financial support through fees or advertising.
Location-Aware Mobile Social Networks
1. Discuss the impact a traveling Internet connection has on social media and introduce the term location-aware services.
Teaching
Tip
Invite students to share their own experiences using social networking sites.
Business Uses of Social Networking
1. Point out that business use of social media is still evolving and there are many opinions on what companies should and should not try to do with social networking tools. Mention Starbucks, Brooks Running and Campbell’s Soup as examples.
2. Use Figure 6-3 to illustrate social media strategies for business.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Social Shopping Sites
1. Discuss the concept of social networking Web sites for shoppers. Introduce the term social shopping. Mention Craigslist, ETSY, Wanelo, Polyvore and Poshmark as examples.
Idea-Based Social Networking
1. Introduce the terms idea-based social media and idea-based social networking Mention Delicious as an example.
Virtual Learning Networks
1. Introduce the term virtual learning network. Mention Blackboard as an example. Introduce the term massive open online courses (MOOCs). Discuss the pros and cons of sites such as Coursera and Udacity.
Open-Source Software
1. Note that some open-source software projects such as Moodle and uPortal are developed to the development of virtual learning communities.
2. Introduce the term open-source software Point out that open-source software is an early and successful example of a virtual community that we would now call a social network.
Revenue Models for Social Networking Sites
1. Discuss the wave of purchases and mergers that occurred among virtual communities, search engine sites, and Web directories beginning in 1998.
2. Refer to Figure 6-4 to illustrate the most popular Web sites in the world based on the number of users who accessed the sites during the month of August 2015.
Advertising-Supported Social Networking Sites
1. Discuss why social networking sites appeal to advertisers.
2. Use Figure 6-5 to illustrate recent and projected worldwide social network spending on advertising.
Mixed-Revenue and Fee-For-Service Social
Networking Sites
1. Discuss the concept of mixed-revenue and fee-for-service social networking sites. Point out that most social networking sites use advertising to support their operations, but some charge a fee for some services. Use Yahoo! as an example.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
2. Introduce the term monetizing.
3. Note that financial information sites such as The Motley Fool and TheStreet.com also use mixed-revenue models.
Fee-Based Social Networking
1. Discuss the concept of fee-based social networking and Google’s attempt to monetize social networking by charging a fee for a specific service with GoogleAnswers
Microlending Sites
1. Introduce the term microlending.
2. Note that a key element of microlending is working within a social network of borrowers.
3. Explain how Kiva and MicroPlace work. Refer to the Michigan Economic Development Corporation (MEDC), local community groups in the state, and Huntington Bank as an example of a microlending program designed to help new businesses start and existing home-based businesses expand.
Teaching Tip To learn more about how microlending works, see: http://money.howstuffworks.com/microlending.htm
Crowdfunding Sites
1. Introduce the terms crowdfunding and reward-based crowdfunding
2. Point out that crowdfunding reduces the investors’ individual risk but still can provide substantial total equity funding for new ventures. Use Kickstarter and IndieGoGo as examples.
Teaching Tip
Review the top 10 crowdfunding sites at: http://crowdfunding.com/
Internal Social Networking
1. Discuss the concept of internal social networking. Point out that organizations can save significant amounts of money by replacing the printing and distribution of paper memos, newsletters, and other correspondence with a Web site.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Teaching Tip
Note that an intranet is another name for an internal virtual community. Encourage students to read the following article: http://www.buzzle.com/articles/intranet-vs-internet.html
Quick Quiz 1
1. A(n) ____ is a gathering place for people and businesses that does not have a physical existence.
Answer: virtual community, Web community, online community
2. The practice of bringing buyers and sellers together in a social network to facilitate retail sales is called ____.
Answer: social shopping
3. The trend toward having readers help write their own news is called ____.
Answer: participatory journalism
4. The term ____ refers to the conversion of existing regular site visitors seeking free information or services into fee-paying subscribers or purchasers of services.
Answer: monetizing
Mobile Commerce
1. Introduce the terms short messaging service (SMS) and texting.
2. Emphasize the two developments that made mobile phones truly viable Web browsing devices: high-speed mobile telephone network availability and smartphones that included a Web browser and a large screen.
3. Introduce the term mobile commerce (m-commerce).
Mobile Phones
1. Explain why Internet-capable phones first caught on in Japan and parts of Southeast Asia.
2. Note that in the United States, smartphones and the high-capacity networks that make them functional began appearing in 2008.
Tablet Devices
1. Introduce the terms tablet devices and phablets
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
2. Use Figure 6-6 to illustrate the growth in worldwide sales of tablet devices.
3. Note that Apple’s iPad tablet devices run the company’s proprietary iOS operating system. Most other manufacturers’ tablet devices run the Android operating system.
4. Use Figure 6-7 to illustrate several examples of smartphones, tablet devices, and phablets used today.
5. Introduce the term Wireless Application Protocol (WAP).
Mobile Device Operating Systems
1. Note that Apple and BlackBerry use their own proprietary operating systems.
2. Introduce the most common third-party operating systems today are Android and Windows Phone Mention that Android, the fastest growing and most widely used was developed by Google and is open source. Windows Phone is a proprietary operating system sold by Microsoft.
3. Use Figure 6-8 to illustrate the change in U.S. market shares for leading smartphone operating systems during recent years.
4. Introduce the terms jailbreaking and rooting
Teaching Tip
Mobile Apps
Learn more about Android at: http://developer.android.com/guide/basics/what-is-android.html
1. Explain why most mobile phones use a common operating system
2. Introduce the term apps Note that companies would license apps from software developers and then charge subscribers a monthly usage fee for each app.
3. Point out that Apple turned this revenue strategy on its head when AT&T agreed to be Apple’s sole carrier for the iPhone and agreed to allow Apple to sell apps for the phone directly.
4. Discuss the role of the Apple App Store and the Google Play store in distributing mobile apps. Note that a number of apps do nothing more than provide a quick gateway to a company’s Web site.
5. Explain how some mobile app sellers include an advertising element in their revenue models.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
6. Discuss how the use of mobile devices for banking and financial services is growing. Explain how a growing number of hospitals and clinics are providing apps that give doctors access to detailed information needed for treating patients.
7. Note that a growing number of hospitals and clinics are providing apps that give doctors access to detailed information needed for treating patients.
8. Discuss how mobile devices utilize global positioning satellite (GPS) service capabilities.
Teaching Tip
Read more about the “The VERY BEST iPhone Apps For 2016” at: http://www.knowyourmobile.com/apple/apple-iphone-apps/20020/best-iphoneapps-2015-ios-9-wwdc-2015
Mobile Payment Apps
1. Introduce the term mobile wallets
2. Briefly discuss the development of retail store technologies in the U.S. that allow the use of smart phones as payment devices.
Teaching Tip
Learn more about mobile wallet technology at: https://www.chasepaymentech.com/mobile_wallet_technology.html
Online Auctions
1. Explain that one of the Internet’s strengths is that it can bring together people who share narrow interests but are geographically dispersed. Online auctions can capitalize on that ability by either catering to a narrow interest or providing a general auction site that has sections devoted to specific interests.
2. Explain how online auctions create a natural social network.
Auction Basics
1. Discuss the history of auctions dating back to 500 BC.
2. Introduce the terms bids, bidders, private valuations, auctioneer, and shill bidders.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
English Auctions
1. Introduce the terms English auction, ascending-price auction, open auction (or openoutcry auction), minimum bid, and reserve price (or reserve)
2. Introduce the term Yankee auctions. Note that 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.
3. Review the drawbacks for both sellers and bidders in an English auction. Introduce the term winner’s curse.
Dutch Auctions
1. Note that the Dutch auction (also called descending-price auctions) is a form of open auction in which bidding starts at a high price and drops until a bidder accepts the price.
2. Point out that a Dutch auction is often better 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.
3. Note that Dutch auctions are particularly good for moving large numbers of commodity items quickly.
Teaching Tip
To learn more about Dutch auctions, see: http://collectibles.about.com/library/articles/blebaydutch.htm.
First-Price Sealed-Bid Auctions
1. Explain that in sealed-bid auctions, bidders submit their bids independently and are usually prohibited from sharing information with each other.
2. Note that in a first-price sealed-bid auction, the highest bidder wins. If multiple items are auctioned, successive lower (next highest) bidders are awarded the remaining items at the prices they bid.
Second-Price Sealed-Bid Auctions
1. Explain that a second-price sealed-bid auction is the same as the first-price sealed-bid auction except that the highest bidder is awarded the item at the price bid by the secondhighest bidder.
2. Discuss why a seller would even consider such an auction.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
3. Mention that second-price sealed-bid auctions are commonly called Vickrey auctions, named for William Vickrey, who won the Nobel Prize in Economics for his research on this auction type.
Teaching Tip
To learn more about Vickrey auctions, see: http://www.maxi-pedia.com/vickrey+auction
Open-Outcry Double Auctions
1. Note that the Chicago Board Options Exchange conducts open-outcry double auctions of commodity futures and stock options. The buy and sell offers are shouted by traders standing in a small area on the exchange floor called a trading pit.
2. Point out that double auctions, either sealed bid or open outcry, work well only for items of known quality, such as securities or graded agricultural products, which are regularly traded in large quantities because such items can be auctioned without bidders inspecting the items before placing their bids.
Double Auctions
1. Describe double auctions, in which buyers and sellers each submit combined pricequantity bids to an auctioneer who matches sellers’ offers (starting with the lowest price and going up) to buyers’ offers (starting with the highest price and then going down) until all the goods offered for sale are sold.
2. Explain that 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.
3. Mention that in 2007, the New York Stock Exchange added an electronic trading system that automatically matches buyer and seller offers and bypasses specialists. This system now handles most of the trading volume on the exchange
Reverse (Seller-Bid) Auctions
1. Explain that in a reverse auction (also called a seller-bid auction), multiple sellers submit price bids to an auctioneer who represents a single buyer.
2. Most reverse auctions involve businesses as buyers and sellers.
3. Refer to Figure 6-9 to summarize key characteristics of each of the seven major auction types.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Quick Quiz 2
1. (True or False) Shill bidders can artificially inflate the price of an item and may be prohibited from bidding by the rules of a particular auction.
Answer: True
2. A(n) ____ is the price at which an auction begins.
Answer: minimum bid
3. In ____ auctions, bidders submit their bids independently and are usually prohibited from sharing information with each other.
Answer: sealed-bid
4. Second-price sealed-bid auctions are commonly called ____. Answer: Vickrey auctions
Online Auctions and Related Businesses
1. Note that 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.
2. Introduce the term consumer-to-business.
General Consumer Auctions
1. Use this section to discuss the most successful consumer auction Web site today: eBay.
2. Note that the most common format used on eBay is a computerized version of the English auction.
3. Introduce the terms minimum bid increment and proxy bids
General Consumer Auctions: The Lock-in Effect
1. Point out that by being the first major consumer auction site and by investing in substantial general media advertising, eBay was able to establish itself early.
2. Discuss the unsuccessful attempts of Yahoo! and Amazon.com in sustaining their Web auction sites in the U.S. and Yahoo! and eBay in the Japanese online auction market.
3. Introduce the term lock-in effect.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Specialty Consumer Auctions
1. Students should be aware that 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 Web auction sites that meet the needs of those market segments.’
2. Use JustBeads.com, Cigarbid.com and Winebid as examples.
Consumer Reverse Auctions
1. Introduce the term reverse bid.
2. Point out that many people think of Priceline.com as a seller-bid auction site.
Group Shopping and Coupon Sites
1. Introduce the terms group purchasing site and group shopping site.
2. Describe the types of products that work well for group shopping sites.
3. Note that Mercata and LetsBuyIt.com closed their doors after failing to find consistent sources of products that sold well on their sites.
4. Use Groupon as an example of a successful group shopping business site.
Business-to-Business Auctions
1. Introduce the term liquidation brokers.
2. Point out that two of the three emerging business-to-business Web auction models are direct descendants of the two traditional methods for handling excess inventory.
3. Note also that a growing number of hospitals and other organizations are using online auctions to fill temporary employment openings.
Business-to-Business
Reverse Auctions
1. Explain that not all companies are enthusiastic about reverse auctions. 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.
2. Note that others argue that reverse auctions can be useful for nonstrategic commodity items with established quality standards.
3. Discuss how using reverse auctions replaces trusting relationships with a bidding activity that pits suppliers against each other and is seen by many purchasing managers as a step backward.
4. Use Figure 6-10 to review the supply chain characteristics that support or discourage reverse auctions.
Teaching Tip
Learn more about reverse auctions at: http://purchasingauctions.com/what-is-a-reverse-auction/
Auction-Related Services
1. Mention that the growth of eBay and other auction sites has encouraged entrepreneurs to create businesses that provide auction-related services of various kinds.
Auction Escrow Services
1. Note that a common concern among people bidding in online auctions is the reliability of the sellers.
2. Introduce the term escrow service.
3. Review additional ways wary bidders in low-price auctions can protect themselves.
Auction Directory and Information Services
1. Describe how eCommerceBytes is an auction information site that publishes articles about developments in the online auction industry.
2. Use Price Watch as an example of a site that lists current selling prices for computer hardware, software, and consumer electronics items.
Auction Software
1. Point out that both auction buyers and sellers can purchase software to help them manage their online auctions.
2. Mention that AuctionHawk and Vendio sell auction management software and services for both buyers and sellers.
3. Introduce the terms sniping software and snipe.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
Quick Quiz 3
1. Bidders can enter a(n) ____, which automatically increases to the next highest increment needed to exceed any bid, up to a bidder-specified maximum bid. Answer: proxy bid
2. Smaller businesses often sell their unusable and excess inventory to ____, which are firms that find buyers for these items. Answer: liquidation brokers
3. A(n) ____ is an independent party that holds a buyer’s payment until the buyer receives the purchased item and is satisfied that the item is what the seller represented it to be. Answer: escrow service
4. The act of placing a winning bid at the last second is called a(n) ____. Answer: snipe
Class Discussion Topics
1. To what do you attribute eBay’s popularity?
2. With respect to online auctions, what are some of the risks faced by sellers?
3. Discuss some of the marketing tactics used by Web sites to promote their auctions.
Additional Projects
1. Would you consider Twitter to be a sticky Web site? In about 140 words, give reasons for your answer.
2. The online auction company eBay is discussed at length in the chapter. Using the Internet, research eBay’s competitors. Select one such competitor and write one or two paragraphs on how this company distinguishes itself from eBay.
Additional Resources
1. 15 Social Media Statistics That Every Business Needs to Know: https://www.aabacosmallbusiness.com/advisor/15-social-media-statistics-everybusiness-needs-know-001509118.html
2. Marketing: 10 Ten Social Media Trends to Watch in 2016: http://www.business2community.com/social-media/marketing-top-10-social-mediatrends-watch-2016-01421356#0xbmyrs8b9G4dHdZ.97
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Some day we are going back. Celia, E. M., and I have planned it. We must have plenty of time, and take our whole families with us, so that she will not have to hurry home to a husband, and I will not have to rush on without pause, in order to get home to a younger son. When we go again, we are going in two cars—one to help the other in case of need, and, if possible, a third car to carry a camping outfit and camp! Celia and I both hate camping, so this proves the change that can come over you as you go out into the West. I say “out into,” because I don’t in the least mean being tunneled through on a limited train! The steel-walled Pullman carefully preserves for you the attitude you started with. Plunging into an uninhabited land is not unlike plunging into the surf. A first shock! To which you quickly become accustomed, and find invigoratingly delicious. Why difficulties seem to disappear; and why that magic land leaves you afterwards with a persistent longing to go back, I can’t explain; I only know that it is true.
The taste we had of the desert has something so appealing in the reminiscence of its harsh immensity by day, its velvet mystery at night—if only we might have gone further into it! We couldn’t then and now it is lost to us, three thousand miles away!
