Bachelor of Business Administration Program ©Mathieu CHAUVET – 2014/2015 1.

Bachelor of Business Administration Program

©Mathieu CHAUVET – 2014/2015 1

SOCIAL NETWORKING, MOBILE COMMERCE, AND

ONLINE AUCTIONS

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1) From Virtual Communities to Social Networks

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Online/virtual communitiesOnline Web communities are:

Not limited by geographyRelating individuals and companies with common interests

Meet online and discuss issues, share information, generate ideas, and develop valuable relationships

Organizations make money by serving as relationship facilitators

As such, virtual communities are gathering place for people and businesses, but have no physical existence

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Recent forms of virtual communities 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

Emergence of blogs: Form of social networking site that encourages interaction among people and visitors to add comments

Development of social networking sites 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

People are invited to join by existing members

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Creation of main social networking Web sites

Revenue Models for Social Networking SitesAdvertising-supported social networking sites based on:

Audience: sites with higher number of visitors can charge more Stickiness: important element in site’s attractiveness

7Popularity and stickiness of leading Web sites

Social networking sites characteristics: Members provide demographic information Potential for targeted marketing: very high High visitor counts that can yield high advertising rates

Second-wave advertising fees based: Less on up-front site sponsorship payments More on revenue generation from continuing relationships with people who use

the social networking sites

Most social networking sites use advertising… …But some charge some fee for specific services!Monetizing: Converting site visitors into fee-paying subscribers or

purchasers of services

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2) Mobile Commerce

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Mobile CommerceEvolutions:

High-speed mobile telephone networks grew dramatically Wireless Application Protocol (WAP) that allows Web pages formatted

in HTML to be displayed on small devices Manufacturers offered range of smart phones with Web browser,

operating system, applications (Apple iPhone, Palm Pre, several BlackBerry models)

Emergence of M-Commerce in Japan and Southeast Asia Much larger online business activity, had high-capacity networks early on Development of Mobile wallets: Mobile phones functioning as credit

cards

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Mobile commerce browser display options:Operating systems:

Apple, BlackBerry use their own proprietary operating systems Others use a standard operating system provided by a third party

(Android, Windows Mobile, Symbian)

Common operating systems emergence occurred due to a change in the way software applications developed and soldDevelopment of Itunes store (Apple), Google store, etc…

Independent developers create apps and sell them

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3) Online auctions

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Auction: seller offering item for sale

Most auctions follow principles of English auctions (or ascending-price auction)

Bidders publicly announce successively higher bids: Item is sold to highest bidder (at bidder’s price)

Open auction (open-outcry auction) since bids publicly announcedConsideration of a Minimum bid: Beginning price, if not met: item

removed (not sold)Possibilities of Reserve price (reserve)

Seller’s minimum acceptable price Not announced If not exceeded: item withdrawn (not sold)

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Business opportunity perfect for the Web!!Online auctions capitalize on Internet’s strength

Bring together geographically dispersed people sharing narrow interests

Auction site revenue sources:Charging both buyers and sellers to participateSelling advertising, with targeted advertising opportunities

available

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Online Auctions BusinessesOnline auction business: rapidly changingMost significant auction Web site categories is illustrated by

general consumer auctions

Best example: eBay Registration required, seller fees, rating system Seller’s risk: stolen credit cards, buyer fails to conclude transaction Buyer’s risk: no item delivery; misrepresented item Adopted auction format: English auction

Seller may set reserve price Bidders listed: bids not disclosed (until auction end) Continually updated high bid amount displayed

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eBay’s success Due to unspecified audienceAlso spends $1 billion each year to market and promote

Web site

Major determinants of Web auction site success is to attract enough buyers and sellers

Most competitors from eBay just closed because they failed to do so…

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Other types of auction Web site categories can also be illustrated by group shopping sites Seller posts item with tentative price Individual buyers enter bids

Agreement to buy a specific amount of units (no price provided) Site negotiates with seller for lower price

Posted price decreases as number of bids increases Result: buyers force seller to reduce price, similarly to consumer

reverse auction

Disadvantages Well-suited companies find no real permanent advantages, fear sites

cannibalize product sales, reluctant to offend current distributors

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Aunctions-related servicesEntrepreneurs encouraged by eBay and other auction site growth

have developed various kinds of auction-related servicesAmong them, the most significant correspond to escrow

services

Auction escrow services Buyers’ common concern: seller reliability Independent party holds payment until buyer receives item and is

satisfied with his item as expected May take delivery of item from seller and perform buyer

inspection Charge fees, such as percent of item’s cost

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Auction escrow services examples: Escrow.com, eDeposit, Square TradeSell auction buyer’s insurance and then protect buyers from

non-delivery and quality risksAvoid escrow fraud by determining if licensed, bonded

(licensing agency)Avoid offshore escrow companies entirely

Other types of buyer protections Check seller’s rating Use Web site listings of unreliable sellers

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Summary

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Companies using the Web for entirely new thingsCreating social networksUsing mobile technologies to make sales and increase operational

efficiencyOperating auction sitesConducting related businesses

Businesses creating online communities to connect with customers and suppliers

Individuals using social networking sitesPersonal and business-related interactions

Mobile commerce opportunities emerging

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THE ENVIRONMENT OF ELECTRONIC COMMERCE:

LEGAL, ETHICAL, AND TAX ISSUES

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Learning objectivesIn this part, we will address:Laws that govern electronic commerce activitiesLaws that govern the use of intellectual property by online

businessesOnline crime, terrorism, and warfareEthics issues that arise for companies conducting electronic

commerceConflicts between companies’ desire to collect and use data

about their customers and the privacy rights of those customersTaxes that are levied on electronic commerce activities

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1) The Legal Environment of Electronic Commerce

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Web businesses face additional complicating factorsWeb extends reach beyond traditional boundaries

Subject to more laws more quickly Web businesses are international businesses

More interactive and complex customer relationships due to increased communications speed and efficiency

Web creates network of customers with significant levels of interaction

Implications of violating law or breaching ethical standards? Web businesses face rapid, intense reactions from customers and stakeholders

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a) Borders and JurisdictionPhysical world of traditional commerce

Territorial borders clearly: Mark range of culture Mark reach of applicable laws

Physical travel across international bordersPeople made aware of transition through:

Formal document examination Language and currency change

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Jurisdiction: Government ability to exert control over a person or corporation

Physical world laws do not apply to people: People are always located in or owning assets in geographic area that created laws

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Physical geographic boundaries lead to legal boundaries

b) Jurisdiction on the InternetDifficult

No geographic boundariesPhysical world considerations (power, effects, legitimacy, notice) do not

translate wellMost procedural laws had been written before electronic commerce

existed

Governments trying to enforce Internet business conduct laws and to establish jurisdiction over conduct

E-commerce transactions might then be mostly regulated jurisdiction in international commerce, governed by treaties between countries

However these collaboration can sometimes be problematic…

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c) Conflict of lawsConflict of laws: When laws address same issues in

different waysOnline businesses span many localities, regions, states

US for instance look to federal laws for guidance, but this may lead to problems with state and local laws

Example: direct wine sales industry, unpasteurized cheese between Europe and USA

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d) Contracting and Contract Enforcement in Electronic CommerceThere are three essential contract elements in a contract:

An offer, an acceptance, a consideration

Contract formed when one party accepts offer of another partyOffer: Commitment with certain terms made to another partyAcceptance: Expression of willingness to take offer including

all stated termsConsideration: Agreed-upon exchange of something valuable

such as money, property, future services, etc…

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Contracting process in an online sale

Click-wrap and Web-wrap contract acceptances End-user license agreements (EULAs)

Contract user must accept before installing software Click-wrap acceptance

Agree to site’s EULA or its terms and conditions by clicking a button on the Web site

Web-wrap acceptance or browser-wrap acceptance Accept by simply using the Web site

On the Web, the consideration of a contract requires neither writing nor a signature to create a legally binding acceptance (Article 11 of the United Nations Convention on Contracts for the International Sale of Goods (CISG))

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E-commerce website also provide specific Terms of service (ToS) agreements, which:Consist in detailed rules and regulationsLimit Web site owner’s liability for what one might do with

site informationTerms of service agreements

Site visitors must follow stated rules, although most of the time, visitors are not really aware of rules

However, site visitor held to terms of service by simply using site

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Terms of Services or End-user license agreements often mention about implied warranties and warranty disclaimers on the WebImplied warranty: Promise to which the seller can be held

even though the seller did not make an explicit statement of that promise

Law establishes these basic elements of a transaction in any contract to sell goods or services

But…Warranty disclaimer: Statement declaring that the seller

will not honor some or all implied warranties

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35Yahoo! Terms of Service agreement

2) Use and Protection of Intellectual Property in Online Business

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E-commerce websites can be the object of both: Intellectual property (general term) includes all products

(tangible or not tangible) of the human mindProtections afforded by copyrights and patents, trademarks

registration, service marksRight of publicity

Limited right to control others’ commercial use of an individual’s name, image, likeness, identifying aspect of identity

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a) Copyright issuesCopyright: Right granted by government to the author (creator)

of literary or artistic work, usually for a specific time lengthGives author (creator) sole and exclusive right to the work (print,

publish, sell)Includes virtually all forms of artistic or intellectual expression

Most Web pages are protected by automatic copyright provision

The copy can however be accepted under fair use…Includes copying it for use in criticism, comment, news reporting,

teaching, scholarship, or research…Which sometimes lead copyright law difficult to apply

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b) Patent issuesPatent: Exclusive right granted by government to an

individual who makes, uses, and sells his/her inventionInvention must be:

Genuine, novel, useful Not obvious given current technology state

Business process patent: Protects specific set of procedures for conducting a particular business activity

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c) Trademark issuesTrademark: Distinctive mark, device, etc. that implement

company affixes to goods it produces for identification purposesService mark: Similar to trademark, identifies services providedTrade name: Name business uses to identify itself, ensures a

protection under common law

Web site designers must not use any trademarked name, logo, or other identifying mark without express trademark owner permission

Trademarked object manipulation constitutes infringement of trademark holder’s rights

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d) DefamationMost issues regarding Intellectual Property identified on the Web are related to aspects of defamation:Defamatory statement: False and injures reputation of another person or companyProduct disparagement: When statement injures product or service reputation

Web sites must consider specific laws before making negative, evaluative statements.

Web actors must avoid potential defamation liability:The US allow considerable leeway for satirical statements and

valid expressions of personal opinion…But other countries do not offer same protections…

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3) Online Crime, Terrorism, and Warfare

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a) Online CrimeOnline versions of physical world crimes: Theft, stalking,

pornography distribution, gamblingNew online crime: Commandeering computer to attack

other computersLaw enforcement obstacles: Jurisdiction issues prosecuting

across international boundaries

Jurisdiction not clear: Example: Online gambling

State laws specifically outlaw Internet gambling… …but Sites located outside United States

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Other types of cyber crimeCyberbullying: Using technology to harass, humiliate,

threaten, or embarrass another

Infiltrating computer systems with intent of stealing data, creating operational disruptionsSmaller companies are easier targets but bigger companies are

also suffering these issues

Internet can help law enforcementTrack perpetrators of crime

Criminals brag on social networking sites Criminals leave clues in online profiles

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b) Online Warfare and TerrorismNew age of terrorism and warfare carried out or coordinated

through the InternetWeb sites (considerable number) supervised by national

agencies Operated by hate groups and terrorist organizations Contain detailed instructions for creating biological weapons,

other poisons, or training for terrorism Contain discussion boards that help terrorist groups recruit new

members online

Deep and dark webs: Searching on the Internet today can be compared to dragging a net across the surface of the ocean

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4) Ethical Issues

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Web electronic commerce sites adhere to same ethical standards of other businesses

As such: All companies suffer damaged reputation, long-term loss of

trust, loss of businessWeb advertising or promotion needs to:

Include true statements, omit misleading information Ensure products supported by verifiable information

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a) Ethics and Online Business PracticesEthical lapse rapidly passed among customers, which can

seriously affect company’s reputationImportant ethical issues organizations face:

Limiting use of collected e-mail addresses, related information

Lack of government regulation protecting site visitor

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b) Privacy Rights and ObligationsInternet has changed traditional assumptions about privacy:

Companies may lose control of data collected or release confidential information about individuals without the individual’s permission

Two possibilities regarding use of information:Opt-out approach: Assumes customer does not object to company’s use of

information, unless customer specifically denies permissionOpt-in approach: Company collecting information does not use it for any

other purpose, unless customer specifically chooses to allow use

Worldwide cultural differences provide different electronic commerce privacy expectations

European Union adopted Directive on the Protection of Personal Data

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In order to foster their own image, electronic commerce Web sites try to be conservative in customer data collection and use

Principles for handling customer data:Use data collected for improved customer serviceDo not share customer data with others outside your company

without customer’s permissionTell customers what data you are collecting and what you are

doing with itGive customers the right to have you delete any data collected

about themKeep data secure

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5) Taxation and Electronic Commerce

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Web businesses must comply with multiple tax laws Several types of taxes

Income taxes: levied on net incomeTransaction taxes: levied on products or services company

sells or usesCustoms duties: levied on imports into the countryProperty taxes: levied on personal property, real estate

Greatest concern: income and sales taxesExample: Google and the willingness on European

governments to tax their revenues

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