E-commerce. Social Networking Sites - Essay Example

? E-Commerce Social Networking Sites Table of Contents Section Revenue Models, SWOT Analysis and Future Prospects Pg. 2 Section 1: Revenue Models Pg. 2 Section 1.2: SWOT Analysis Pg. 4 Section 1.3: Prospects in the future for Facebook Pg. 5 Section 2: Possible New Uses of an Existing Social Network Pg. 6 Section 2.1: eGovernment Pg. 6 Section 2.2: eEducation Pg. 7 Section 3: : Customer Centric Designs of eCommerce Websites Pg. 8 References Pg. 10 Section 1: Revenue Models, SWOT Analysis and Prospects of Popular Social Networking Sites This section will examine 4 social networking sites (Facebook, MySpace, Twitter and Google+) from an economic perspective. This section will be divided into three sub-sections: 1) The first sub-section will inspect the revenue models employed by each of these sites. 2) The second sub-section will look at the SWOT analysis of two of these sites and attempt to identify the various strengths and weaknesses of these sites. 3) The final sub-section will focus on one of these sites and look at its future prospects. Section 1.1: Revenue Models Facebook With 750 million active users (USA Today 2011), Facebook is undoubtedly the current market leader in the field of social networking sites. Established by former Harvard student Mark Zuckerberg in February 2004 as The Facebook, the site changed its name to Facebook in August 2005 and soon established itself as a major player in a field that was being led by Orkut and MySpace (Mashable, n.d), attracting users with its exclusivity and clean-interface. Facebook’s most important method of earning revenue is through advertising. A major chunk of its revenue is generated by the self-serve advertisement system which allows companies to decide who they want to market to, based on various preferences such as age, gender, marital status and the likes (Guardian 2009). The same report talks about Facebook selling virtual advertising estate on their websites to anyone who can dole out the cash, directing them to pages or profiles as they see fit. Finally, Facebook’s base of 3rd party apps has been the basis for many credit-card based transactions (in games for example) of which Facebook receives a certain percentage. All of these methods have helped Facebook’s revenue rise enough to be able to breakeven with its day to day costs which is a major breakthrough for any social networking site (Guardian 2009). MySpace The leading social networking site before Facebook was established, MySpace had made its name in the field for being a site that was preferred by upcoming musicians for its ability to allow easy sharing of music. It was considered the youth’s most preferred network, since it was the first site that allowed them to ‘relate to brands and bands’ (Web Strategist 2008). However, the site currently owned by Specific Media, failed to innovate and lost a lot of its market share after the advent of Facebook, and has a current active user-base of 110 million users (The Next Web 2010). MySpace’s revenue model also revolves mostly around advertising. The site uses the basic two types of advertisements that are used by a lot of popular websites, namely pay-per-view and pay-per-click. In the former, the marketer pays a certain amount of money to have his Advertisement Banner up on MySpace’s pages while in the latter; he pays a certain amount (usually a few pennies) for every click that his advertisement gets. Although that may not sound like much, but with MySpace’s users still numbering in the million, the numbers certainly add up with the company making more than $550 million in revenue in 2007. However, since MySpace has fallen behind its major competitors, it needs to attract more users and perhaps find a more effective way of earning revenue than just relying on their current method, which seems ‘archaic’ in comparison with Facebook. Twitter Launched in March 2006 by Jack Dorsey, Twitter revolutionized the concept of communicating through social network sites. Instead of relying on photos or music, the heart of Twitter lies in what it calls ‘Tweets’ which are ‘small bursts of information’ (Twitter N.D). This form of micro-blogging was positively approached by internet users, with the site soon gaining 200 million users (BBC 2009). When it comes to revenue generation, Twitter until recently had no revenue model. The site seemed to be more focused on gaining more users before rolling in a revenue generation method that relies on advertisement, 3rd party applications and so on. However, now the site has found two major sources of revenue in the form of advertisement; Twitter sold the rights to display Twitter feeds to search engines like Google, Bing and Yahoo (which allows them to get updated with new information) and allows Twitter to further advertise themselves too. The concept of Promoted Tweets, Trends and Accounts was also launched which works basically on the same principle as Youtube Featured videos do, except with money coming into the equation. Advertisers pay for their product-related Tweets to be placed at the top of search results to any query that pertains to it. The similar concept works with trends and accounts, with marketers paying money to gain ‘premium access’ to Twitter and gaining a wide spread audience (NY Times 2010). The site still hasn’t rolled the big guns when it comes to revenue generation; it seems like they’re waiting for an even increased user base before doing so. Google+ The newest competitor in the social networking market, Google+ is a service that is owned by Google Inc. Launched in June 2011 an ‘invite-only phase’ (something that Facebook initially tested), it is seen as Facebook’s most serious competitor in the current situation (BBC 2010). Currently, not a lot is known about Google’s revenue generation although its mergence with other branches of the mega-huge Google Inc services (Google Mail, Youtube etc) makes it a potential cash cow for Google Inc. It is expected that pay-per-click advertisement will form the major chunk of this venture’s revenue. Another motive from Google+’s non-revenue earning existence might be Google Inc’s desire to challenge Facebook Inc before the latter has a chance to expand into Google’s fields of business and become a real threat to Google. This might be a pre-emptive strike by Google in an effort to maintain its online dominance. Section 1.2: SWOT Analysis (Facebook, MySpace) Facebook Strengths 1) With an active user base of 750 million people (Facebook, n.d), it has established itself as a market leader in its field which serves as an encouragement to various investors to invest in the business and allows it to be the business’s unique selling point too. 2) With a regularly improved layout and new features being offered, it’s doing its best to ensure that it keeps the attention of its users and maintains its high retention rate, reported to be 70% (Nielsen Wire 2009). 3) It’s connectivity across the internet that allows data to be transferred across multiple sites and be displayed on the user’s homepage is a homage to the influence that Facebook holds on the internet. Weaknesses 1) Privacy concerns are one of the biggest concerns to Facebook; it has been hammered with press reports about privacy issues with facebook that can possibly compromise private user information to total strangers if not manually corrected. 2) Facebook Chat is a facet of the site that has never been bug proof. Users have always complained about its unreliability and its proneness to crash and/or freeze. 3) It doesn’t allow users to customize their profiles to the extent that MySpace did with embedded HTML coding etc. Opportunities 1) Facebook’s sheer influence and grasp over the internet-sphere allows it to potentially expand into other ventures such as Google did with Youtube and therefore, be able to rival Google Inc on platforms other than just social networking ones. 2) The reach of Facebook could also be used by government agencies and/or other influences as a medium with which to communicate with the masses e.g. the Vatican its own papal Youtube channel (Fox News 2009). 3) Marketing tools on Facebook such as polls and surveys allow a handier way for businesses to test their products. A lot of new brands have also tried to advertise through Facebook, which could allow it to function on something along the lines of eBay with online trading taking place. Threats 1) The negative image that Facebook has recently acquired that depicts it as a greedy corporation that aims to control every aspect of their user’s life may come back to haunt them if not taken care of immediately. 2) Google+ is their latest competitor, and with a multitude of new services at their disposal, Facebook will suffer from a dearth of innovative services that Google+ might be able to exploit. 3) The global awareness about Privacy Issues might also hamper the success of social networking sites which rely on users posting personal information about themselves online Twitter Strengths 1) Has found a niche place in the market, where it has no serious competitor (in micro-blogging). 2) Very simplistic and easy-to-use where first time users aren’t deterred by complicated posting procedures etc. 3) It functions in real-time which attracts the interest of businesses and search-engines, as well as newspaper agencies. 4) Does not have any advertisement banners cluttering up the main site, which allows it to look ‘classier’ than its competitors. Weaknesses 1) Frequent crashes plague the website which leaves a negative impression the users. 2) There is a huge disparity between Tweeters; 90% of all Tweets come from the top 10% users (BBC News 2009) 3) Suffers from a low retention rate of 40% (NeilsonWire 2009) Opportunities 1) In today’s fast paced world, micro-blogging may take over the conventional form of social networking and Twitter might be the leading social networking site in the world. 2) With its widespread reach, it has the opportunity to become the new marketing platform for the world where advertisers can directly interact with their customers. 3) Twitter can also work in conjunction with mobile manufacturers and service providers to link Twitter to phones in the way that Facebook and Youtube have done, even increasing its influence. Threats 1) Its revenue generation is not as high as one would expect of a site with 200 million users. 2) Micro-blogging may just be a temporary fad, or could be one that is emulated by conventional social networking sites which would take away Twitter’s niche place in the market and it might not be able to withstand competition from the larger businesses. 3) The only greatest unique selling point it has is its micro-blogging, and unless it expands into other territories, another business of the same sort might start competing with it. Section 1.3: Prospects in the Future for Facebook This subsection will deal with the short and long term prospects for Facebook. Short Term (up to 3 years) Currently, it appears that Facebook has proved itself to be the crown of the social networking craze and does not appear to be in danger of being dethroned by any competitor in the near future. One way in which they’ve established their current grip on the market is by ensuring they keep themselves up-to-date with the latest internet trends and services, an example of which is their recent joint venture with Skype to provide video-calling to their users in retaliation to Google+ which promised to provide the same service (BBC 2011). The next three years will see Facebook trying to maintain its rate of retention by continuously innovating in response to competition. However, Facebook might suffer serious competition from micro-blogging site Twitter which appears to be less time consuming and the former might see its users switching over to the latter company if it doesn’t try to emulate some features of Twitter and fit it into its own framework of communication. Long Term (more than 3 years) In today’s fast-paced world of technology, it is hard to predict what Facebook will be like in more than three years. Perhaps, the company will no longer resemble the company we are familiar with now. The way Google has managed to increase the number of services it provides is an example of how a company that started off as a simple service (search engine) expanded to offer a countless number of other services such as mailing, video –sharing and picture-sharing. A huge part of Facebook’s future prospects also depend on the business plan that the management of Facebook envisions for the company. If the company is acquired or merged with another large internet-based company like Google or Yahoo, then the future might see an internet-monopoly ruling over us. With an increasing awareness about privacy and security issues, the world just might tire up of facebook in three years too and give up the whole concept of social networking online. Blogs fulfil the purpose of communicating with the world without the need to provide personal information about yourself and the world just might revert itself back to a pre-Facebook era in the future. Section 2: Possible New Uses of an Existing Social Network This section will attempt to look at how Facebook can be used for two forms of eCommerce i.e. eGovernment and eRetail. Section 2.1: eGovernment The concept of eGovernment revolves around a basic concept of using the internet as a medium of communication between a government and its citizens. The advantages of having such a system seem to be numerous and range from having a more transparent government that is more accountable to having a more informed citizenship that is more aware and interested in the political environment around it. Facebook has the potential to be a future platform for eGovernment. Pages, such as those created currently by brands could be created for politicians and political parties who could use them to interact with their followers. They could also disseminate their own ideas amongst the population of the country. The use of surveys and polls could be used to judge the view of the majority before undertaking any major legislative action or anything of the sort. With the proper measures in place, even online voting could take place on facebook (however that sounds far-fetched considering the amount of safety checks that will be needed to put into place). The major problem with having an eGovernment system on Facebook is the loss of privacy that the citizens of the country will inevitably have to deal with. Facebook is not well-known for its privacy settings and increased contact with the government could only expose more information about its users to the government, the idea of which most citizens are not really comfortable with. Secondly, hacker attacks on the website will become more frequent (with the government being the target of many hacker groups who do not agree with the government’s policies) and Facebook has not proved itself very capable when it comes to dealing with security issues. Any cases of attempting to strengthen security through the use of using more information to verify the validity of the accounts could again lead to a reduction in privacy for the users, which could again raise concerns. Finally, the access to internet and Facebook isn’t something that every citizen in any country enjoys; older citizens are the ones that aren’t comfortable with new technology while those who live below the poverty line may have trouble gaining access which will again be a failure of the system since it attempts to connect the government to the people. I believe that Facebook as a tool for eGovernance isn’t an idea that can’t be applied; however, with Facebook’s growing arsenal of problems that stem from privacy and security concerns, it’s improbable that such a system will be implemented in the near future. Section 2.2: eEducation My eEducation (n.d) refers to online education as the ‘process of learning online’. E-Education is quite simply the chance to have virtual classrooms and a learning experience from home or from work. The advantages to having such a system are numerous; it allows people who are incapable of being physically present at school due to physical disabilities or simply other requirements can join a ‘virtual school’ and learn from wherever they choose fit, being able to acquire a degree. Even reputed universities in the US offer this method of learning such Arizona State University (ASU Online, n.d) and others. Using Facebook as a tool for eEducation however, is an interesting concept and one that is worth looking into. Facebook already seems to have worked its way into the everyday school-life with students chatting about school work amongst other things. A lot of professors/students also create groups on Facebook which allows their students/colleagues, which are united through either a subject or an educational degree, to share and discuss academic information in a private forum (akin to that of a real classroom). Even India appreciates the importance of an eEducation system on Facebook with a report in the Economic Times that the government will aim to come up with a Facebook-like education website to encourage school-going children to partake in academic activities (Economic Times 2011). A more complete eEducation system on Facebook could include multiple-video calling ‘classrooms’, a real time feed (something like Twitter) in which a teacher could communicate with his or her students along with a system that allows for online tests to be taken. The latter will require a system of stringent security checks to make sure that the students do not cheat; they could perhaps consent to being monitored with their web-camera or something along those lines. Facebook as an eEducation system seems more probable in the near future than eGovernance. Of course, like everything, certain issues need to be sorted out before Facebook can undertake an ambitious venture (perhaps in conjunction with an education board or a university) like this for students who aren’t able to take part in regular schools and universities. Certain elements of eEducation have already embedded themselves with the youth of today and it does not seem implausible that there could be an extension of this embedment in the future. Section 3: Customer Centric Designs of eCommerce Websites This section will look at 3 eCommerce websites and analyze how well they meet the guidelines for a customer-centric website. Mozilla Marketplace (store.mozilla.org) The Mozilla Marketplace is a good example of an eCommerce website according to the guidelines published in the book; they meet quite a lot of these guidelines. 1) The homepage is uncluttered; it gives a simple description of the ‘store’ and directs you to other pages of the site, whichever you’ll find necessary. 2) The site employs a simplistic colour scheme that allows for some extremely comfortable viewing; discerning text from the background is not difficult. 3) The pages are not burdened with a lot of content (such as Java Apps or pictures) which makes them easier to load and more compatible with most of the browsers. 4) Navigation is again very hassle-free. A simple mouse click is all that’s needed to go to the area of the store that you wish to. 5) The entire site follows the same visual theme; again, that makes navigation easier since most pages have the same format. 6) The site is also not infested by Ad Banners and/or Pop-Up Ads which could ruin the whole experience of surfing online. Macy’s (www.macys.com) Macy’s is a huge retail store based in the US and their site tries to showcase their products in a virtual environment; however, a well-designed site that still suffers from a few flaws. Pros 1) The home page is loaded with useful information for any prospective customer; the latest deals are advertised here. 2) The site has a white background with black text; this makes for some easy reading. 3) A bar of links visible on each page that allow you to go from page-to-page with ease. 4) A search bar on the home page also allows customers to just cut through all of the data and find whatever they need. Cons 1) Too cluttered; the homepage suffers from an overload of information with too many links and a huge unsightly picture right in the centre. 2) The website generally suffers from an information overload as well; the size of the store and their large range of products make this almost inevitable, however one wonders whether they couldn’t have tried to minimize this information in some manner. 3) Macy’s also suffers from bland visuals; a monotony of sorts plagues this website interspersed only with unsightly pictures among information about products. MSY Technology Pty Ltd. (msy.com.au) One of the worst eCommerce sites that this scribe has ever managed to come across, MSY serves as a shining example for businesses on how NOT-TO design their website. It’s hard to find a single redeeming feature of this site’s design and it suffers from a variety of faults. 1) The home page is one of the most unappealing in terms of its visual appearances; a colour scheme of white, blue and red with lots of banners and links clogged together makes making sense of this site no mean feat. 2) The main page is also useless in the sense that it gives no clue about the type of site MSY is, only mentioned it as ‘The Name You Can Trust...’. 3) This site suffers from information overload too, with a lot of information being crammed onto one page almost as an afterthought with no underlying pattern to help the user. 4) Despite its lack of heavy content (in terms of pictures and videos), the loading time of the site was significantly higher than the previous two websites mentioned. 5) Different pages follow different designs which again can confuse any first-time user. 6) Some tabs open in a new window, while some open entirely as a .PDF file. 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