Virtual Communities Panu Moilanen pjmoilan cc jyu fi University

Virtual Communities Panu Moilanen pjmoilan@cc. jyu. fi University of Jyväskylä August 13 th, 2001

Acknowledgements n This presentation is partly based on the presentation given by Timo Saarinen and Virpi Tuunainen on February 9 th, 2000 at Helsinki School of Business and Economics)

Outline n n n Business models generally Some business models Virtual Communities

Business Model n n n An architecture for product, service and information flows, including a description of the various business actors and their roles Description of the potential benefits for the various business actors Description of the sources of revenue

Marketing model n n n Business model Marketing strategy of the business actor under consideration NB! A business model (in use) without a marketing model is futile.

Some business models n n n There are several models of doing business on the Internet Technological development can (should? ) be guided by the definition of (new) business models. Many of the conceivable models have not yet been experimented with commercially

E-Shops n n n Marketing of a company or a shop in an electronic environment (e. g. Web) Main emphasis on promotion Often possibility to order and pay goods Often combined with traditional marketing Seller revenues: reduced costs, higher volume, advertising

E-Malls n n n Collection of E-Shops enhanced by a common umbrella Might be enriched by a common (and guaranteed) payment method; cf. Scandinavian SOLO-payment Revenues: membership fees, advertising, transaction fees

E-Auctions n n Offer an electronic implementation of bidding mechanisms Variety of presentations methods used Often integration with contracting, payments and delivery Revenues – Auction provider: Selling the technology platform, transaction fees and advertising – Suppliers: Reduced surplus stock, better utilisation of production capacity, lower sales overheads – Buyers: Reduced overhead cost of purchasing, reduced cost of items purchased n E-Bay

Other models… n n n E-Procurement Collaboration platforms Third party marketplaces Value-chain integrators Value-chain service providers Information brokerage, trust and other services

Current trend: 1 -2 -1 n Paradigm shift of marketing from production orientation to one-2 -one-marketing – Relationship with the customer is seen as a process – Like in human relations, you get to know your partner over time - enchantment isn’t enough for marriage – Loyalty is built, appreciated and rewarded – Business is actually about giving promises and redeeming them – Key acronym (at least at the moment): CRM n Main goal: LOYALTY. Question: Can seller alone create loyalty?

Loyalty n n Loyalty between seller and customer can and should be created However, it might be worth considering to create a system, where loyalty is created also among customer – Cf. pubs with their regular guests – What might a suitable example on the Net?

Virtualisation of communities & society n Before – – n Geographic vicinity Personal communication Real-life identity Common interest Now – – Technological vicinity Communication over networks Real-life identity vs. virtual identity Common interest

Virtual Community n Community = a group of social connections within a given context or environment – Ideological component: common nature, goals and identity – Non-geographical environment => virtual community n “Virtual community is a group of individuals gathered around a specific theme. No geographic or other real-world dependency is to be detected between the members of the community, but the community exists in a virtual space, e. g. in a computer network. ”

Virtual Community n n n Is a forum for members Integrates supply and demand Offers services for interaction and exchange between members Has rules accepted by the community (i. e. members) Has its own history, adoption of which is an essential part of the socialisation to the community

History n n n As a term used for the first time in the beginning of 1980 s. First form of (primitive) manifestation Usenet in the beginning of 1970 s. In the beginning of 1980 s real-time communication From the beginning of 1990 s shift to WWW Virtual Community as a commercial possibility - Hagel & Armstrong: NET GAIN (1997)

Some types of VCs n Relationship communities – Based on communication between people. Discussion, electronic identity, hierarchy, history. n Fantasy – MUDs (Multi-User Dungeons). Imagination identities n Transaction – Need/interest to acquire a specific product or products n Interest – E. g. common hobby

Defining Characteristics I n Distinctive focus – Community is always formed around a common area of interest, which connects members – Community can have a structure of a pyramid or a tree => several areas of interests within a a same environment – Cf. cities in the real world: High Society areas, Villages, Flower Towns…

Defining Characteristics II n Integration of content and communication – Content (e. g. product offering) is integrated with the discussion about it. – Aspect of trust – Aspect of customer feedback – Aspect of incentive to do something better

Defining Characteristics III n Emphasis on member-generated content – Member-generated content is an essential factor of attraction, cf. news groups – Snowball –effect – Very significant aspect of creating loyalty, possibility to create identities and hierarchies, cf. sources of power. – The maintainer of community offers possibilities, but is not an active actor <= neutrality – Social innovations

Defining Characteristics IV n Choice of competing vendor offers – Better possibilities to compare products – Competition as well on price as on quality – Increases trust in community – Cf. shopping centres (“Itäkeskus-effect” ) – Fair play is an essential presupposition – B-to-C, C-to-C and B-to-B

Defining Characteristics V n Commercially motivated community organisers (intermediaries) – Majority of existing virtual communities are non-commercial – Commercial orientation => more resources – Continuous development => wide selection of services and working infrastructure => high interest from users => more actors => more resources => (…)

Peculiarities of virtual communication n Identity – Basis of interaction – In the real world, identity is formed as a sum of opinions, attitudes and external characteristics (looks, clothes, tone). – In virtual reality, you can practically create the identity of your choice – The lack of signals has both pros and cons – cf. caution and role-play

Peculiarities of virtual communication n Social order and control – Weaker than in the real world – The need exists; normally community recognises the need – cf. rules of the IRC-groups. – Mass tends to overcome troublemakers. Problem: consensus about the acceptable behaviour – Normally a hierarchy is formed – cf. opped, voiced and normal users in the IRC-groups.

Actors in the VC n Service providers – Provide services for the community n Integrator – Maintains the technological infrastructure – Acts as a bridge between processes of customer and service provider, i. e. demand supply n Customer – Consumer or institution, wants to acquire something from the community n n (Infomediary ( integrator? )) Roles are an important part of community

Benefits for the service provider n n n Lower barriers to start electronic commerce Lower cost of contacting customers Higher probability of purchase because of security offered by the community to the customer Better possibilities to target marketing Better possibilities to adapt offering Visibility

Benefits for the customer n Possibilities not only for shopping but also for communication, relationships with other people and fantasising. – To go shopping is actually a form of social interaction and play – not a rational activity. Hedonistic goals are more important than one wants to admit. – Communication between members diminishes uncertainty and cognitive dissonance – Transactions are technically easier – Familiar and safe – cf. groceries

Why infomediaries? n n n Marketing efforts Consumers’ right to privacy Infomediary is a trusted third party, kind of a personal agent – Aggregate consumers’ information with that of others – Use the combined market power to negotiate with vendors on their behalf – Protects customers’ privacy

Agent for the rest of us? n Infomediaries do not sell or own the customer profiles they manage – They act as custodians or agents – They represent the interest of the clients – They help to optimise the value they receive from vendors – as many as possible n Lower transaction costs and increased privacy

3 Roles of infomediaries n Privacy – Prevent vendors from capturing data n Profiling – Assembling an informational portrait, complete and integrated view n Value maximisation – Filtering, agents, target marketing, purchaser identification, data management and analysis

Sources of revenue n From consumer to integrator – Membership fees – Fees according to the use of certain services n From service providers to integrator – – Transaction fees (commissions) Service fees Income from advertising and media Membership fees

End of Part I n Questions? Comments?

Privacy – a basic human right Panu Moilanen pjmoilan@cc. jyu. fi University of Jyväskylä August 13 th, 2001

About this presentation n n This presentation is based mainly on Finnish legislation However, the legislation concerning privacy is governed by the directives of the European Union – Same principles are to be found in the legislation of all member states of the EU. – Directives always set minimum standards. In some countries the regulations can be even stricter. – Trend is towards more regulated environment.

Why? n Universal Declaration of Human Rights (1948) – ”No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks. ” n Finnish Constitution (1919/1999) – “Everyone's private life, honour and the sanctity of the home are guaranteed. More detailed provisions on the protection of personal data are laid down by an Act. ”

Legislation n In Finland, the foundation of protection of privacy is laid down by – Personal Data File Act (+ statute), 1999 – Act on the Protection of Privacy and Data Security in Telecommunications (+ statute), 1999 n Orders are given also in numerous other acts (e. g. Consumer Protection Act).

Goals n n n To secure people’s privacy To give people possibilities to control their privacy To give people possibilities to restrict the processing of their personal data

Basic Principles (PDFA 5 -7§) n To be entitled to process (= store and use) personal data, one has – to have an acceptable connection with the person, whose data is processed. – to have an acceptable need to process the data on persons. – to be extremely careful => the information collected has to be accurate and valid – to plan processing of personal data in advance.

The most important rights n Right of prohibition – Everyone has the right to prohibit processing of unnecessary information concerning himself or information for marketing purposes n Right of inspection – Everyone has the right to inspect all the information concerning himself. Corrections! n Right to be informed – Everyone has the right to be informed about the principles, methods and goals of the processing of the information concerning himself.

Sensitive information n It’s prohibited to process information on someone’s – – Race or ethnic origin Political or religious conviction Membership in a trades union Criminal activities, punishment or other consequence of a crime – Health, sickness, disabilities or treatments – Sexual orientation or behaviour – Need or use of services of the social security. n Exceptions to above mentioned prohibitions do exist

Other aspects n PDFA regulates also – Transfer of personal data – Making of automated decisions based on personal data – Data security of the systems containing personal data – Obligations of processing entities towards authorities – Authorities having the administrative power on processing of personal data

Telecommunications n n n Separate protection by the “Act on the Protection of Privacy and Data Security in Telecommunications” Main goal is to restrict the use of control information, which is formed in the process of offering services to customers. Marketing using telecommunications is restricted as well.

Basic contents n n Telecommunications is always confidential Customer may use any method of coding his/her telecommunication Operator is responsible for the data security of the telecommunications operated by it. Processing of identification information is strongly restricted

Marketing using telecommunications n In case the connection is formed automatically and customer is a person – OPT-IN - ”I want to receive marketing. ” – ” Telecommunications may not be used for direct marketing without the prior consent of the subscriber if the calls to the called subscriber are made by means of automated calling systems or facsimile machines unless otherwise decided by the ministry under paragraph 4” n In all other cases – OPT-OUT - ”I don’t want to receive marketing” – ”Telecommunications used for the purposes of direct marketing to a natural person by other means than those referred to in paragraph 1 shall be allowed unless expressly forbidden by him. The subscriber must have a way of forbidding the direct marketing referred to in this subparagraph free of charge. ”

Interested in? n The University of Lapland has an ”Institute for Legal Informatics” – The university of Lapland offers a course ”Foundations of Legal Informatics”, lecturer professor Ahti Saarenpää – The course will most likely be available in JKL in the spring 2002 – Topics covered: privacy, data protection, legislation concerning immaterial rights, regulation in the European Union, legal informatics and electronic commerce.

End of Part II n Questions? Comments?