1. MIS 205: E-Business Lecture 6: Virtual Communities (Book chapter 7)
Md Mahbubul Alam, PhD
Professor

2. Intended Learning Outcomes
Social networking and online business activities
Using mobile devices to do business online
Online auctions and auction-related businesses
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Md. Mahbubul Alam, PhD 2

3. From Virtual Communities to Social Networks
Online Web communities
Not limited by geography
Individuals and companies with common interests
Meet online and discuss issues, share information, generate ideas, and develop valuable relationships
Companies make money by serving as relationship facilitators
Combine Internet’s transaction cost-reduction potential with a communication facilitator role
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Md. Mahbubul Alam, PhD 3 3

4. Virtual Communities
Virtual community (Web community, online community)
Gathering place for people and businesses
No physical existence
Early virtual communities
Bulletin board systems (BBSs)
Revenue source: monthly fees and selling advertising
Usenet newsgroups
Message posting areas on usenets
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Md. Mahbubul Alam, PhD

5. Virtual Communities (cont’d.)
Current forms
Web chat rooms
Sites devoted to specific topics or general exchange of information, photos, videos
People connect and discuss common issues, interests
Considerable social interaction
Relationship-forming activities
Similar to physical communities
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Md. Mahbubul Alam, PhD

6. Early Web Communities 1985: WELL (“whole earth ‘electronic link”)
Monthly fee to participate in forums and conferences
1999 bought by Salon.com
1995: Beverly Hills Internet virtual community site
Offered webcams, free Web site space
Grew into GeoCities
Revenue source: advertising, pop-up pages
1999: purchased by Yahoo! ($5 billion)
Closed in 2009
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Md. Mahbubul Alam, PhD

7. Early Web Communities (cont’d.)
1995: Tripod virtual community
Offered free Web page space, chat rooms, news, weather updates, health information pages
Revenue source: sold advertising
1995: Theglobe.com Cornell University class project
Included bulletin boards, chat rooms, discussion areas, personal ads
Added more features
Most early Web community businesses closed
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Md. Mahbubul Alam, PhD

8. Social Networking
Allow individuals to create and publish a profile, create a list of other users with whom they share a connection (or connections), control that list, and monitor similar lists made by other users.
Example:
Six Degrees (1997), Friendster (2002), LinkedIn, Tribe.net, YouTube, MySpace, Twitter, Facebook
Blog: Web sites containing individual commentary on current events or specific issues, e.g., Bluefly.com, Ice.com
Basic idea behind social networking
People invited to join by existing members
Site provides directory
New members work through friends established in the community
1. Friendster (2002). Had features found in today’s social networking sites
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Md. Mahbubul Alam, PhD

9. Social networking Web sites
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Md. Mahbubul Alam, PhD

10. Social Networking (cont’d.)
Social networking Web sites for shoppers
Social shopping
Practice of bringing buyers and sellers together in a social network to facilitate retail sales
Example: craigslist
Operated by not-for-profit foundation
All postings free (except help wanted ads)
Example: Etsy Web site
Marketplace for selling handmade items
We Love Etsy: Etsy buyers, sellers share information
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Md. Mahbubul Alam, PhD

11. Social Networking (cont’d.)
Social networking sites form communities based on connections among people
Idea-based virtual communities, Communities based on connections between ideas
Idea-based networking, Participating in idea-based virtual communities, e.g., del.icio.us site, 43 Things site
Virtual learning networks
Distance learning platforms for student-instructor interaction (Blackboard)
Tools include:
Bulletin boards, chat rooms, drawing boards
Moodle and uPortal, Open-source software projects devoted to virtual learning community development
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Md. Mahbubul Alam, PhD

12. Revenue Models for Social Networking Sites
Advertising-supported social networking sites
Social networking sites
Members provide demographic information
Potential for targeted marketing: very high
High visitor counts
Can yield high advertising rates
Second-wave advertising fees
Based less on up-front site sponsorship payments
Based more on revenue generation from continuing relationships with people who use the social networking sites
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Md. Mahbubul Alam, PhD

13. Revenue Models for Social Networking Sites (cont’d.)
Mixed-revenue and fee-for-service social networking sites
Most social networking sites use advertising
Some charge a fee for some services
Examples: Yahoo! All-Star Games package, Yahoo! premium service
Monetizing
Converting site visitors into fee-paying subscribers or purchasers of services
Concern: visitor backlash
More examples: The Motley Fool and TheStreet.com
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Md. Mahbubul Alam, PhD

14. Revenue Models for Social Networking Sites (cont’d.)
Fee-based social networking
Google Answers site
Early attempt to monetize social networking
Questions answered for a fee
Google operated service from 2002 to 2006
Similar free services
Yahoo! Answers, Amazon (Askville)
Uclue (paid researchers earn 75 percent of total fee)
Advocates claim better quality
Fee-based Web sites can generate revenue by providing virtual community interaction
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Md. Mahbubul Alam, PhD

15. Revenue Models for Social Networking Sites (cont’d.)
Microlending sites
Function as clearinghouses for microlending activity
Microlending
Practice of lending very small amounts of money
Lend to people starting or operating small businesses (especially in developing countries)
Microlending key element
Working within social network of borrowers
Provide support, element of pressure to repay
Examples: Kiva and MicroPlace
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Md. Mahbubul Alam, PhD

16. Revenue Models for Social Networking Sites (cont’d.)
Internal virtual communities
Provide social interaction among organization’s employees
Run on organization’s intranet
Save money (less paper)
Provide easy access to employee information
Good for geographically dispersed employees
Adding wireless connectivity
Combine second-wave technology with first-wave business strategy
Wireless communications with internal Web portals
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Md. Mahbubul Alam, PhD

17. Mobile Commerce Short messaging service (SMS)
Allows mobile phone users to send short text messages to each other
Wireless Application Protocol (WAP)
Allows Web pages formatted in HTML to be displayed on devices with small screens
Mobile wallets
Mobile phones functioning as credit cards
Japan’s NTT DoCoMo phones combined capabilities
Generate significant business
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Md. Mahbubul Alam, PhD

18. The Future of Mobile Commerce
Mobile phones for online banking
In early stages in the United States
Physicians using smart phones
Phones’ global positioning satellite (GPS) service capabilities
Allow mobile business opportunities
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Md. Mahbubul Alam, PhD

19. Auction
Auction:
A process of determining the basis of product or service exchange between a buyer and seller according to particular trading rules that help select the best match between the buyer and seller from a number of participants.
Offer:
a commitment for a trader to sell under certain conditions such as a minimum price.
Bid:
a commitment made by a trader to buy under certain conditions such as a commitment to purchase at a particular price.
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Md. Mahbubul Alam, PhD

20. Auction: Roles Price discovery:
auction helps to establish a realistic price for a product, e.g., antiques
Efficient Allocation mechanism:
sale of products which is difficult to distribute through traditional channels. ‘Damage inventory’, aircraft flight, e.g.,
Distribution mechanism:
attracting particular audiences.
Coordination mechanism:
coordinate the sale of a product to a number of interested parties, e.g., broadband spectrum licenses for 3G telecoms.
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Md. Mahbubul Alam, PhD

21. Types of Auction Auction Type Key Characteristics English auction
Single item up for sale to single buyer, highest bidder wins, sellers-initiated, seller sets the rules and timing, increasing bids are placed within a certain time limit, conventional auctions we commonly seen in physical world and on virtual market.
Dutch auction
Starting from a high price, bidding automatically decreases until the bidder accepts the price.
First-price sealed-bid auction
Secret bidding process, the highest bidder pays the amount of the highest bid.
Second-price sealed-bid auction (Vickrey auction)
Secret bidding process, the highest bidder pays the amount of the second-highest bid.
Double auction (open-outcry)
Buyers and seller 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, e.g. Chicago Board Open Auction.
Double auction (sealed-bid)
Buyers and seller 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, e.g. New York Stock Exchange.
Reverse auction (seller-bid)
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.
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Md. Mahbubul Alam, PhD

22. Question Please ? Acknowledgement:
“E-Business” by Gary Schneider, International Edition