E-Commerce Management Issues: Universal Tube vs. Google

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Executive Summary

In August 2006, 68 million Internet users have mistaken the company’s official website for YouTube, a popular online video site. This has caused severe interruptions in the workings of the company’s official website, causing an eventual shutdown. Adding a new server did not help. The company had to add more capacity.

Another side of the problem, which might eventually prove to be a windfall, is that Google plans to buy YouTube for $1.65 billion.

Introduction

The purpose of this report is to provide the most sound solutions to given problem, taking into account the latest e-commerce management issues as those are related to given problem. One assumption made in this report, is that the company, Universal Tube & Rollform Equipment Corporation, has a large network of business contacts.

Advice to CEO

This problem presents an opportunity for company’s diversification. This is explored in more detail in the section of this report entitled “Advantages Stemming Out of the Given Problem.” But diversification is a long-term goal, meaning that it should be considered only after more basic steps have been taken. The first of them would be to email customers. Those emails would tell customers the nature of the problem and also express our company’s deep concern. They might also contain the name of the new domain, the name of which is suggested in the paragraph below.

Considering the facts that “eighty percent of business conducted on the Net today takes place between firms… rather than with individual consumers” (DuBrin, 2009, p.493), and that Universal Tube “sells used machines that make tubes” (DuBrin, 2009, p.508), it becomes evident that the company’s large network of business contacts means that the most important of its partners and customers can be reached via the official emails of their companies. Thus, the current situation does not pose any serious risks, because the very fact that it has been identified implies many ways of correcting it; not to mention an even brighter side of this issue, which lies in the fact that the established companies usually eschew “the medium of a large buyer exchange” (DuBrin, 2009, p.495).

In our case, it means that the company might need to establish a temporary website which would provide services to the selected customers. This website might even take a form of “members only” platform, in which only the customers with previously issued usernames and passwords would be allowed. This would help create a feeling of closeness and would promote customer loyalty. Another way of alleviating the difficulties of given case and promoting customer loyalty would be to hire additional call center personnel and work with company’s most loyal customers through the phone. This is especially important considering the fact that “despite conducting business over the Internet, many customers want to follow up with telephone calls” (DuBrin, 2009, p.495).

Our case has illustrated this tendency, as at the climax of this problem, “at least 50 customers called during the week to point out the problem” (DuBrin, 2009, p.508). While the costs of hiring additional personnel may be significant, they can keep the company from losing its most loyal customers. Those 50 customers who have called do seem loyal, because they could have easily accessed the website of some other company which offers the same services. Yet another way of alleviating the difficulties of given case would be “to obtain a domain name, such as one ending in ‘.co.uk’ for Britain. Several surveys indicate that up to 80 percent of Europeans shop first at Web sites with local domains” (DuBrin, 2009, p.495). This would help the company’s long-term profitability, while establishing a more reliable-looking domain name.

My another advice to CEO would be to talk to the press in order to increase the mass media coverage of given problem, so that more people might learn about it. Its beneficial impact would be that of increasing the number of people who know about the given issue, thereby driving additional traffic to the website and increasing the number of “hits”. Thus, the website’s value would increase and the company would be able to sell its domain name for an even bigger sum of money. Thus, I would advise the company to try to sell its domain. However, before doing so, it might be beneficial to expand its operations by filing a lawsuit and thus attracting more mass media coverage. But while doing this, it would be also necessary to send a number of emails and letters to the regular customers, informing them about the establishment of new website, “utubeequipment.com” – thus, I would suggest the establishment of new website with the given name, which is especially opportune in that most of the people, at least in terms of its customers, regard the company as the maker of “machines that make tubes” (DuBrin, 2009, p.508). A creative solution to finding the best option among the above-mentioned ones woud be to directly ask the consumers which of the above options of solving the problem they prefer. This could be done through the survey, which would be located on the temporary website built for its selected, most loyal customers. Thus, since they have already shown their loyalty, they might as well show more of their loyalty by opting to participate in the survey, which could also be conducted through the phone.

However, the online version of survey seems less intrusive and more cost-effective, especially considering the relatively inexpensive cost of online surveys, even when those are conducted by Survey Monkey or Zoomerang, “two most popular online survey providers” (West, 2008). To be more exact, “Zoomerang… has a professional subscription of $599 a year and allows you to use your own in-house list… while SurveyMonkey… costs $19.95 a month for a professional subscription but has a free standard package” (West, 2008). The fact that “80 percent of the Fortune 100 have active SurveyMonkey subscriptions” (West, 2008), seems to attest to the fact they do provide significant benefits. While all of the above proposed solutions may seem costly, it is necessary to understand that “there are many pieces you need to build before you can make money online” (Kha, 2000,.p.24).

Universal Tube Versus Google

The costs of litigation may be significant. However, considering the fact that “Google…. plans to buy YouTube for $US1.65 billion,” the litigation may yield significant profits, and will most likely result in at least partial compensation of company’s damages, since the company’s domain name, www.utube.com, has been established earlier than that of YouTube. In addition, the results of similar case involving the domain name, www.delta.com, seem to point out to the great likelihood of at least partial compensation. Therefore, the company should pursue legal action against the owner of YouTube.

Advantages Stemming Out of the Given Problem

There are two major ways in which Universal Tube can capitalize on the confusion created by YouTube visitors: advertisement and diversification. Revenue from advertisement can become a second form of income for Universal Tube. Taking into account the fact that Universal Tube “has about $12 million in annual sales” (DuBrin, 2009, p.508), it is clear that the revenue from advertisement cannot become the company’s main source of income. However, the revenue from advertisement can supplement the company’s main source of income. Thus, Parmy Olson, “London Bureau Chief at Forbes.com” (Forbes 2011), writes that “one wonders if it might have been worth finding the extra cash to sustain utube.com, considering most online advertisers would likely come stampeding at the sound of 68 million hits a month (Olson, 2006).”

Another windfall, which stems from the above one and can be likewise taken advantage of, is the company’s diversification, which seems to have been already spurred without any costs. Thus, the company will need to take very few steps in order to capitalize on its benefits. Moreover, there is a wide variety of noted economists who support an idea of diversification. Three of them, Sam Kirschner, Eldon Mayer, and Lee Kessler, have co-authored a highly acclaimed book called The Investor’s Guide to Hedge Funds (2006), in which they write that “diversification…. is at the heart of Modern Portfolio Theory (MPT) and drives contemporary portfolio construction and optimization” (p.16).

Moreover, the Markowitz model, which lies at the core of MPT and for which its authors have received the Nobel Prize, “establishes that the risk of a portfolio is lower than the average of the risks of each asset taken individually and gives quantitative evidence of the contribution of diversification” (Amenc and Le Sourd, 2003 p.77). The theoretical economists, however, are not the only ones who believe in the benefits of diversification. The vast majority of companies believe in the benefits of diversification too. Thus, Gary E. Clayton, a noted economist who has taught economics at various colleges and universities, writes in his economics textbook, Economics: Principles and Practices (1999), that “firms believe that if they do not ‘put all their eggs in one basket,’ their overall sales will be protected” (p.65). It is indeed true. In our case, the diversification has been virtually effectuated. Thus, our firm can save on the costs. It is especially easy with Google AdSense, which, according to its official website “is a free program that empowers online publishers to earn revenue by displaying relevant ads on a wide variety of online content”(Google). Thus, it is free and can be easily utilized without any major investments. It’s additonal advantage is that it is widely used and thus seems to be reliable.

Indeed, Ross Walker, “an assistant research professor with the San Diego Supercomputer Center (SDSC) at UC San Diego”(San Diego Supercomputer Center, 2011), writes on his personal website that “Google AdSense is the current leader in content-sensitive web-based marketing” (Walker, 2010). However, Google AdSense is not the only program that allows to earn revenue by means of displaying ads on one’s website. There are many different alternative programs, some of which include AdBrite, Bidvertiser, Chitika, Infolinks, Pocket Cents, and Dynamic Oxygen.

After having examined their relative benefits, however, I have come to conclusion that the most competitive online advertising solution next to Google AdSense is AdBrite, because it allows “to monetize all traffic to your site, not just traffic that clicks on your ads…. and has more relaxed terms and conditions than Adsense” (Walker, 2010). Thus, it would be beneficial to try both AdSense and AdBrite. What is especially important to note about this type of revenue is that it is not correlated to company’s main source of revenue – “used machines that make tubes” (DuBrin, 2009, p.508). Thus, it can increase the company’s borrowing power. It is especially evident when one considers the opinion of “Diamond (1984), who has forcefully argued that diversification may bring substantial incentive benefits when projects are independent… ” by letting “the borrower… cross-pledge the incomes of various projects” (Tirole, 2006, p.158). However, this type of revenue is not a necessary consequence of just having the website running. While all of the above solutions and their beneficial effects might be easy to reach, their implementation can be tricky. Thus, it is necessary to understand exactly how the web advertisement business will be integrated into the old business. It might be even necessary to rethink the whole business model and Internet strategy. What is especially important to understand is the branding aspect of it, as “being everything to everybody in the digital economy is fruitless (Kha, 2000,.p.42)”. Thus, it would be necessary to identify a certain niche of companies that would be interested in cooperation.

Hazards of E-commerce

Before going into the discussion of e-commerce hazards, as those are related to given problem, it is important to note that e-commerce has in many ways become an indelible part of our everyday life. Not only we go to Web for news and other pieces of information, be it stock quotes or news, but we also go to Web for such essential things as bank statements. This shows that no matter how dangerous e-commerce is, it is still the future, or at least so the statistics show, as “Goldman Sachs’ estimate of the total value of e-commerce in 2004 was $3.48 Trillion” (Lincolnshire Chamber of Commerce, 2007).

Another statistical indicator of the same trend is that “according to Shop.org, retails sales in general are growing about 3 percent per year, where online growth is in double digits” (DuBrin, 2009, p.493). Thus, overall, the data seems to support the opinion of Effy Oz, former “Professor of Management Science and Information Systems at the Pennsylvania State University” (Penn State Great Valley School of Graduate Professional Studies, 2008), who wrote that “Web technologies have been integrated into the business world to a degree that makes it difficult at times to realize which activities take place inside the organization and which involve information flowing from other places through the Internet. We have become so accustomed to the integration of the Web into our daily activities, especially the commercial ones, that the lines between commerce and e-commerce have been blurred” ( p.301).”

It is also important to note that “virtually every large industrial firm has its own Web site,” (DuBrin, 2009, p.496) from which it is reaping enormous benefits. Therefore, Universal Tube & Rollform Equipment Corporation should keep its website, no matter what the costs are and no matter whether the company can keeps its current domain name or not.

Another important aspect of this case that should be mentioned before embarking onto the description of hazards of e-commerce, is that the complexity of given case stems out of the limitations of current legal system. Indeed, Jacqueline D. Lipton, “Professor of Law at Case Western Reserve University School of Law” (DePaul University College of Law, 2009), wrote that it “raises questions as to how effectively current laws and policies deal with situations where two different companies assert similar interests in one or more domain names.” (2008, p.510).

This case is not the new one, however, so one should look at previous case in order to come to better solutions for the given case. Indeed, “there have been many examples since the inception of the domain name system where several parties with legitimate claims to similar trademarks have battled for corresponding domain names, such as delta.com” (Lipton, 2008, p.510).

Now that we know the context of this case, it is time to consider the hazards of e-commerce as those are related to this case

One of the hazard’s of e-commerce that this case shows is that of the “increased demands placed on managers” (DuBrin, 2009, p.482). While it may seem like something else than “hazard”, it really is a hazard in that it threatens to destroy the firm’s credibility in case the management does not find a proper solution. Thus, this hazard tests managers’ ability to adapt, which is a wider reflection of the fact that “information technology itself changes so rapidly that managers must adapt themselves to the changes” (DuBrin, 2009, p.482).

Another hazard of e-commerce that this case shows is that of the “deterioration of customer service” (DuBrin, 2009, p.491). Thus, some people, having typed “you” instead of “u”, got to the wrong website and were very baffled to find something completely else. Even though it might seem to be a problem caused by the customer, at least in that it has stemmed out of his or her inattention, it really is not the issue here, because in the marketplace the customer is king. No wonder then that “an extensive investigation into self-service technologies uncovered several areas of customer discontent” (DuBrin, 2009, p.491). This seems to point out yet another hazard of e-commerce. Yet another hazard of e-commerce stems from of the previous one: “dealing with baffled consumers” (DuBrin, 2009, p.491). It is a hazard in that it can lead to the loss of potential clients and/or current customers, in case the baffled customers are not taken care of and their problems solved.

Conclusion

It is clear that the windfalls of given case significantly outweigh the problems associated with it. The ways for utilizing those windfalls are indicated in the list of recommendations.

List of Recommendations (in the order of steps decreasing urgency):

Emailing customers company’s apology and explanation of the situation
Establishment of temporary website for selected customers
Hiring additional call center personnel
Diversification via online advertisement
Interviews to mass media
Initiation of litigation against the owner of YouTube
Sale of original domain name.

Reference List

Amenc, Noel and Le Sourd, Veronique. (2003). Portfolio theory and performance analysis. Chichester, John Wiley & Sons.

Clayton, Gary E. (1999) Economics: principles and practices. Westerville, Glencoe/McGraw-Hill.

DePaul University College of Law. (2009). Jacqueline D. Lipton. Web.

DuBrin, A. (2009) Essentials of management. USA, South-Western Cengage Learning.

Forbes. (2011). Web.

Google. Google AdSense. Web.

Lincolnshire Chamber of Commerce. E-Commerce – Business to Consumer (B2C) & Business to Business (B2B). Web.

Kirschne, Sam et al. (2006) The investor’s guide to hedge funds. Hoboken, John Wiley & Sons.

Kha, Le. (2000). Critical Success Factors for Business-to-Consumer E-business: Lessons from Amazon and Dell. Massachusetts Institute of Technology Libraries. Web.

Lipton, Jacqueline D. (2008) A Winning Solution for Youtube and Utube? Corresponding Trademarks and Domain Name Sharing. Harvard Journal of Law & Technology. Web.

Olson, Parmy. (2006) UTube Vs. YouTube: It Gets Ugly. Forbes. Web.

Penn State Great Valley School of Graduate Professional Studies. (2008) Effy Oz. Web.

Tirole, Jean. (2006) The theory of corporate finance. Princeton, Princeton University Press.

San Diego Supercomputer Center. (2011) Ross Walker wins Outstanding Junior Faculty Award. Web.

Walker, Ross. (2010) The Top 10 Alternatives to Google Adsense. Web.

West, Lena. (2008) Survey Says…Online Feedback Key to Success. Ecommerce-guide. Web.

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