Chapter 11

1. What do social networks, auctions, and portals have in common?

Social networks, auctions, and portals are all based on feelings of shared interest and self-identification—in short, a sense of community. Social networks and online communities explicitly attract people with shared affinities, such as ethnicity, gender, religion, and political views, or shared interests, such as hobbies, sports, and vacations. The auction site eBay started as a community of people interested in trading unwanted but functional items for which there was no ready commercial market. That community turned out to be huge—much larger than anyone expected. Portals also contain strong elements of community by providing access to community-fostering technologies such as e-mail, chat groups, bulletin boards, and discussion forums.

5. Why are mobile social networks growing so fast?

Mobile social networks are growing so fast due to the rapid adoption and intense use of mobile devices.

10. How does a Name Your Own Price auction, such as Priceline’s, work?

In a Name Your Own Price auction, users specify what they are willing to pay for goods or services, and multiple providers bid for their business. Prices do not descend and are fixed: the initial consumer offer is a commitment to purchase at that price.

15. Name and describe five types of possible abuses and frauds that may occur with auctions.

Some of the possible abuses and frauds include:


Bid rigging: Agreeing offline to limit bids or using shills to submit false bids that drive prices up.

Price matching: Agreeing informally or formally to set floor prices on auction items below which sellers will not sell in open markets.

Shill feedback, defensive: Using secondary IDs or other auction members to inflate seller ratings.

Shill feedback, offensive: Using secondary IDs or other auction members to deflate ratings for another user (feedback bombs).

Feedback extortion: Threatening negative feedback in return for a benefit.

Transaction interference: E-mailing buyers to warn them away from a seller.

Bid manipulation: Using the retraction option to make high bids, discovering the maximum bid of the current high bidder, and then retracting the bid.

Non-payment after winning: Blocking legitimate buyers by bidding high, then not paying.

Shill bidding: Using secondary user IDs or other auction members to artificially raise the price of an item.

Transaction non-performance: Accepting payment and failing to deliver.

Non-selling seller: Refusing payment or failing to deliver after a successful auction.

Bid siphoning: E-mailing another seller’s bidders and offering the same product for less.

20. Why has Yahoo struggled in the last three years?

Yahoo has struggled in the last three years to grow revenues and earnings despite the fact that its unique visitor count has held steady with Google’s. One part of the problem is the falling price of display ads, which are the mainstay of Yahoo’s ad platform. Another key issue is declining user engagement with materials on the site and the amount of time spent on the site. To address these issues, Yahoo has made a number of acquisitions including Aviate, Tumblr, and Flickr, and launched digital magazines like Yahoo Food and Yahoo Tech that curate content from around the Web. The key to display ad revenue is content and engagement: the more you can show users, the longer they stay on your site, the more ad revenue can be generated. So far, Yahoo and the other general portal sites have not been able to compete with social network sites on these dimensions of engagement and time on site.