Lecture 5

Lecture 5 Online Markets - Slides

• Online marketplaces
  • Priceline.com, hotels.com, Orbitz.com etc.
• Auctions
  • How they work; why the internet makes them easier
    • Counterparty risk - importance of customer feedback; fraud
  • The importance of price
  • IMPORTANT - The network effect
  • eBay, Amazon. other online retail auctions
    • Heavy community involvement
    • Business model
  • eBay and other stores
• Payment systems - PayPal
  • Why did we need PayPal?
  • The network effect again
• Effect of the internet on competition and pricing
  • Is the internet good for business?
  • Should businesses change the way they set prices because of the internet?
• Search
  • Why search costs are a big deal
  • How we used to search
  • Economics of search
    • Customer feedback
  • Price comparison sites
  • Network search
    • Characteristics of networks - small world effect
  • to come
• Search engines and portals
  • Portals
    • Yahoo!, AOL etc.
    • Still attract many viewers
    • Specialized portals such as WebMD
  • Business models
• Lock-in and switching costs
  • Why so many things are free on the internet - Hotmail, gmail, Wikidot etc?
• Online marketplaces
  • eBay, Amazon shops, Yahoo! Shops and competitors
  • Priceline, hotels.com etc.
  • Job markets
  • Dating markets
    • What does eHarmony tell us?
  • B2B markets
  • Social networking sites
    • Social: MySpace, Facebook
    • Facebook has been valued at $15 billion
    • Professional: LinkedIn
  • Economics of online marketplaces
    • The importance of the network effect
    • Economies of scale
    • Amazon's web services
• Other Web 2.0 businesses
  • What is Web 2.0?
    • Wikipedia has an overview of web 2.0
    • Description from one of the originators of the term
  • User Generated Content
    • Blogs
    • YouTube
  • Business models
• Review of Assignment 4
  • Importance of network effects to profitability
    • The network effect creates monopolies
    • Monopolies are more profitable than competitive firms
    • Not every product exhibits network effects