1. MD253 - E-Commerce Module 5: Virtual Communities Spring 2003

2. Some Types of Communities Chat / Paging / Instant Messaging –free-form, person-to-person –moderated (e.g. Barnes & Noble author chats) Bulletin Boards Interactive Games / Contests –e.g. EverQuest, You Don’t Know Jack, Fantasy Leagues Homesteading –web site hosting services

6. Users = Value? source: InternetWorld, Wired News

7. Why Communities? Higher sales among members –Users for 2/3 of sales from only 1/3 of users Lower churn rates / higher retention –Message posters are twice as loyal Longer & more frequent visits –Message posters visit 9 x as often –More page views per session Lower customer service costs –ex. Cisco Connection Online Source: McKinsey Quarterly

8. Visits, Page Views, & Retention

9. Loyalty Sales

10. Community Participation Focus of online communities –42% professional –35% social –18% hobby Examples: –Cisco Connection Online, QuestLink, State Street FXConnect –L’Eggs ?? source: BusinessWeek / Harris

12. Challenges Some services suffer Congestion Externalities –at some point value can decrease with expansion –ex. Ultima Online, America Online flat-rate fiasco –lessons: scale, focus/concentrate, prune Generating contributions & stickiness –incentives: special recognition, bios, gifts. E-mail reminders Revenue models (ads, subscription, commerce) –ad conflict: participate or click-through –possible solutions include no-click-through ads, forum sponsorships, and ‘bridge sites’ Free Speech –relationship with advertisers & among users