MIS Research Center Seminar Series
8:30 AM - 11:15 AM
1st Floor Auditorium, Carlson School of Management

Abstract

Consumer Group Buying on the Web

Online group buying discounts are a dynamic pricing mechanism that virtualizes the approach of traditional discount shopping clubs. They allow consumers to purchase a single item in an individual transaction while enjoying the benefits of group discounts. This cooperative commerce permits consumers to obtain lower and lower prices depending upon the size of the buying group. It also helps sellers to lower customer acquisition costs, balance supply and demand, achieve greater customer reach, reduce credit risk, and offload excess or outmoded inventory. Such a market mechanism allows consumers to become actively involved in the price discovery process, resulting in an equilibrium between supply and demand, increased market efficiency, and a greater likelihood that transactions will occur. In online auctions, such as eBay, consumers place their bids and the final transaction is the highest price offered at the end of the auction. By contrast, under a group buying market microstructure, consumers have the opportunity to collaborate to obtain lower prices rather than bidding against one another.

Consumer group buying on the Web is not a new concept. In 1999 and 2000, during Web 1.0, a number of companies implemented group buying business models, but none of them succeeded or survived for various reasons. Most importantly, their timing was simply too early. At that time, B-to-C commerce was still in its infancy; there were approximately 300 million home Internet connections worldwide; broadband penetration was very low; search engine and pay-for-performance advertising had barely begun; open source development was relatively new; and the consumer culture of seeking bargains by shopping on the Web had barely developed. Now, all that has changed. B-to-C commerce has grown from $20 billion in 1999 to $117 billion in 2004. Today, there are approximately a billion household Internet connections worldwide. In 1999, broadband household penetration was under five percent in the U.S. Currently, broadband service is approaching 40 million U.S. households, and it is subscribed to by about 60 percent of those with Internet connections. Worldwide there are 150 million broadband users.

Technology Entrepreneurship in a Rapidly Changing Marketplace

Technology entrepreneurship isn't what is used to be. The pace of innovation and development is now so rapid , so unpredictable and so much less costly than it once was, that it is virtually impossible to calculate the proper balance between risk and reward. A spate of recent developments have caused this unsettling, almost cataclysmic, change in the marketplace. They include the free flow of knowledge and ideas enabled by the Internet and search engine technology in particular; the changes resulting from the new global telecommunications infrastructure; other effects of globalization, most notably the spread of Western-like commercial structures and technology education into India and China; the maturation of the open source movement; the impact of democratization and capitalism on formerly Communist countries; and flow of venture capital from West to East. As a result of these and other related events, we do not know where technology entrepreneurship will arise from, when, by whom and at what cost. Such uncertainty will have a dramatic impact on entrepreneurs and the burden they carry to attract investment capital, as well as the decisions of venture capitalists, private equity firms and bankers as to how, with whom, where and how much of their funds should be invested.

Biography

Alan S. Davis has 30 years of entrepreneurial and operational experience in the media and technology industries. He is presently CEO of RadioLink Networks, which has designed a paradigm-breaking low cost, high frequency digital microwave radio for the cellular backhaul market that will increase capacity up to fourfold within the same frequency. He also is currently leading the fund raising efforts of Communications Technology, which is developing a series of ASIC based chip sets that will eliminate virtually all major sources of noise on DSL and voice frequency lines, while significantly increasing DSL throughput, range and power efficiency.

Alan founded Nashoba Communications and was the General Partner of this highly regarded cable television company. Widely considered one of the most innovative and successful cable TV companies in the industry, Nashoba was sold to Cablevision Systems for nearly $100 million in 1994 and returned investors more than 15x their original capital. Alan subsequently co-founded and was CEO of several cutting edge technology companies, including GlobaLAN, one of the first WiFi service companies, and SANgate Systems (now Sepaton), an early SAN-based data storage management company, presently a leader in virtual tape technology.

Mr. Davis is a lawyer and has had extensive experience as a corporate and tax attorney, litigator and lobbyist in Boston and Washington D.C. law firms. He graduated Magna Cum Laude, Phi Beta Kappa from the University of Massachusetts at Amherst and earned a J.D. from Georgetown University Law Center.