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

MD253 - E-Commerce

Module 5: Virtual Communities

Spring 2003

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

Users = Value?

source: InternetWorld, Wired News

Date Service Purchaser # of Users Deal $ $/UserJun-00 eGroups Yahoo 17 million $428 million 25$ Jun-00 AnyDay.com Palm 3 million $80 million 27$ Nov-99 Gamesville Lycos 2.2 million $207 million 94$ Jan-99 GeoCities Yahoo 3.5 million $3.56 billion 1,017$ Aug-98 WhoWhere Lycos 10.6 million $133 million 13$ Aug-98 PlanetAll Amazon 1.5 million $87.9 million 59$ Jun-98 Mirabilis/ICQ AOL 11 million $287 million 26$ Apr-98 WebChat InfoSeek 2.7 million $6.7 million 2$ Feb-98 Tripod Lycos 1 million $58 million 58$ Jan-98 HotMail Microsoft 9 million $400 million 44$ Oct-97 Four11 /

RocketmailYahoo 1 million $92 million $ 92

Sep-97 CompuServe AOL 2.6 million $425 million 163$

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

Visits, Page Views, & Retention

Loyalty

Sales

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

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