Bachelor of Business
Administration Program
©Mathieu CHAUVET – 2014/2015
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SOCIAL NETWORKING,
MOBILE COMMERCE, AND
ONLINE AUCTIONS
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1) From Virtual Communities to Social
Networks
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Online/virtual communities
 Online Web communities are:
 Not limited by geography
 Relating 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
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 People are invited to join by existing members
Creation of main social networking Web sites
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Revenue Models for Social Networking
Sites
 Advertising-supported social networking sites based on:


Audience: sites with higher number of visitors can charge more
Stickiness: important element in site’s attractiveness
Popularity and stickiness of leading Web sites
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 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 Commerce
 Evolutions:
 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
sold
Development 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
announced
 Consideration 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 participate
 Selling advertising, with targeted advertising opportunities
available
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Online Auctions Businesses
 Online auction business: rapidly changing
 Most 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 audience
 Also 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 services
 Entrepreneurs encouraged by eBay and other auction site
growth have developed various kinds of auction-related
services
 Among 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
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 Charge fees, such as percent of item’s cost
 Auction escrow services examples: Escrow.com, eDeposit,
Square Trade
 Sell auction buyer’s insurance and then protect buyers from
non-delivery and quality risks
 Avoid 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 things
 Creating social networks
 Using mobile technologies to make sales and increase
operational efficiency
 Operating auction sites
 Conducting related businesses
 Businesses creating online communities to connect with
customers and suppliers
 Individuals using social networking sites
 Personal 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 objectives
In this part, we will address:
 Laws that govern electronic commerce activities
 Laws that govern the use of intellectual property by online
businesses
 Online crime, terrorism, and warfare
 Ethics issues that arise for companies conducting
electronic commerce
 Conflicts between companies’ desire to collect and use
data about their customers and the privacy rights of those
customers
 Taxes 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 factors
 Web 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 Jurisdiction
 Physical world of traditional commerce
 Territorial borders clearly:


Mark range of culture
Mark reach of applicable laws
 Physical travel across international borders
 People made aware of transition through:


Formal document examination
Language and currency change
Culture helps determine laws and ethical standards
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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
 Physical geographic boundaries lead to legal boundaries
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b) Jurisdiction on the Internet
 Difficult
 No geographic boundaries
 Physical world considerations (power, effects, legitimacy, notice)
do not translate well
 Most 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 laws
 Conflict of laws: When laws address same issues in
different ways
 Online 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 Commerce
 There are three essential contract elements in a contract:
 An offer, an acceptance, a consideration
 Contract formed when one party accepts offer of another
party
 Offer: Commitment with certain terms made to another party
 Acceptance: Expression of willingness to take offer including
all stated terms
 Consideration: Agreed-upon exchange of something valuable
such as money, property, future services, etc…
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Contracting process in an online sale
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 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 regulations
 Limit Web site owner’s liability for what one might do with
site information
 Terms 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
disclaimers on the Web
warranties
and
warranty
 Implied 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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Yahoo! Terms of Service agreement
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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 mind
 Protections afforded by copyrights and patents, trademarks
registration, service marks
 Right 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 issues
 Copyright: Right granted by government to the author
(creator) of literary or artistic work, usually for a specific
time length
 Gives 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 issues
 Patent: Exclusive right granted by government to an
individual who makes, uses, and sells his/her invention
 Invention 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 issues
 Trademark: Distinctive mark, device, etc. that implement
company affixes to goods it produces for identification
purposes
 Service mark: Similar to trademark, identifies services
provided
 Trade 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) Defamation
Most issues regarding Intellectual Property identified on the
Web are related to aspects of defamation:
 Defamatory statement: False and injures reputation of
another person or company
 Product 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 Crime
 Online versions of physical world crimes: Theft, stalking,
pornography distribution, gambling
 New online crime: Commandeering computer to attack
other computers
 Law 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 crime
 Cyberbullying: Using technology to harass, humiliate,
threaten, or embarrass another
 Infiltrating computer systems with intent of stealing data,
creating operational disruptions
 Smaller companies are easier targets but bigger companies
are also suffering these issues
Internet can help law enforcement
 Track perpetrators of crime


Criminals brag on social networking sites
Criminals leave clues in online profiles
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b) Online Warfare and Terrorism
 New age of terrorism and warfare carried out or
coordinated through the Internet
 Web 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 business
 Web 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 Practices
 Ethical lapse rapidly passed among customers, which can
seriously affect company’s reputation
 Important 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 Obligations
 Internet 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 permission
 Opt-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
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 European Union adopted Directive on the Protection of Personal Data
 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 service
 Do not share customer data with others outside your
company without customer’s permission
 Tell customers what data you are collecting and what you
are doing with it
 Give customers the right to have you delete any data
collected about them
 Keep 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 income
 Transaction taxes: levied on products or services company
sells or uses
 Customs duties: levied on imports into the country
 Property taxes: levied on personal property, real estate
 Greatest concern: income and sales taxes
 Example: Google and the willingness on European
governments to tax their revenues
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