Electronic Commerce 2012 Managerial

and Social Networks Perspectives 7th

Edition Turban Solutions Manual
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 Turban- Electronic Commerce 2012
Instructor’s Manual

Chapter 7
SOCIAL COMMERCE
Learning Objectives
Upon completion of this chapter, you will be able to:
1. Understand the Web 2.0 revolution, its characteristics and the context of social media.
2. Describe the fundamentals of social commerce, its drivers and landscape.
3. Describe the major models of social shopping.
4. Explain how advertising and promotions are conducted in social networking
environments.
5. Understand how market research is conducted in social networking environments.
6. Describe how customer service, customer support, and CRM can be facilitated by
social networking.
7. Describe the major social commerce activities that can be conducted within and by
enterprises.
8. Define crowdsourcing and describe its use in social commerce.
9. Describe the commercial applications conducted in virtual worlds in general and in
Second Life in particular.
10. Review the social commerce activities and relationship with e-entertainment and
gaming.
11. Describe and discuss the major implementation issues of social commerce including
strategy, security, and ROI.
12. Understand the major risks, concerns, and barriers of deploying social commerce
applications.

Content
Opening Case: How Starbucks Drives Millions to Its Coffee Shops Using Social Media
7.1 The Web 2.0 and Social Media Revolution
7.2 The Fundamentals of Social Commerce and Social Networking
7.3 Social Shopping: Concepts, Benefits, and Models
7.4 Social Advertising: From Viral Advertising to Location-Based
Advertisement/Marketing
7.5 Market Research and Strategy in Social Networks
7.6 Social Customer Service and CRM
7.7 Enterprise Applications: From Community Building to Collaboration
7.8 Crowdsourcing: Collaborative Intelligence for Problem Solving and Content
Creation
7.9 Social Commerce: Applications in Virtual Worlds
7.10 Entertainment, Multimedia Sharing, and Social Games
7.11 Justification, Risks, Other Implementation Issues, and Strategy
Managerial Issues
Closing Case: F-Commerce: Business Activities on Facebook

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Answers to Pause/Break Section Review Questions

Section 7.1 Review

1. Differentiate Web 2.0 from the traditional Web.

Important features of Web 2.0 that are related to social commerce are the technology’s
dynamic content, rich user experiences, metadata, scalability, open source basis, and
user’s freedom.

2. List five major characteristics of Web 2.0 and briefly discuss them.

These characteristics are presented in Online File W1.3.

3. What is user-generated content? Why is it an important concept?

User-generated content is created by end-users. It allows the users to express themselves,

but also generates interest and traffic that a business can use.

4. Why is Web 2.0 considered a revolution?

Web 2.0 tools (social software) and social networks are changing the way people
communicate, collaborate, work, and live; the change is very rapid and significant, so we
can classify it as a revolution.

5. Define social media, social marketing, social capital, and social media marketing.

• Social media – The online platforms and tools that people use to share opinions,
experiences, insights, perceptions, and various media, including photos, videos, and
music, with each other
• Social marketing – A combination of social policy and marketing practices to achieve
a set of social behavioral goals within a target audience
• Social capital – A sociological concept that refers to connections within and between
social networks. The core idea is that social networks have value. Just as physical
capital or human capital can increase productivity (both individual and collective), so
can social contacts affect the productivity of individuals and groups.
• Social media marketing – A term that describes use of social media platforms such as
networks, online communities, blogs, wikis, or any other online collaborative media
for marketing, market research, sales, CRM, and customer service. It may incorporate
ideas and concepts from social capital, Web 2.0, social media, and social marketing.

6. Distinguish between social networking and social network sites.

The difference is the activity (social networking) versus the location (social networking
sites).

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7. List the major social networking spaces.

These spaces are listed with examples on page 303.

8. Describe the social graph.

A term coined by Mark Zuckerberg of Facebook, which originally referred to the social
network of relationships between users of the social networking service provided by
Facebook. The idea was for Facebook to benefit from the social graph by taking
advantage of the relationships between individuals that Facebook provides, to offer a
richer online experience. This definition was expanded to refer to a social graph of all
Internet users.

Section 7.2 Review

1. Define social commerce.

The delivery of e-commerce activities and transactions through social networks and/or
via Web 2.0 software.

2. List some major origins of social commerce (per Exhibit 7.2).

Origins are detailed in Exhibit 7.2. Examples include the growth of social networks, e-
commerce and marketing.

3. List the major blocks in the landscape of social commerce.

Representative risk factors are: difficulties in justification, security and privacy issues,
possibilities of fraud, integration with existing IT systems, legal concerns, quality of
UGC, and a waste of time by community members.

4. List five benefits of social commerce to the consumer and five to vendors.

Many benefits are listed in Exhibit 7.4.

5. Describe mobile social commerce.

Members converse and connect with one another using cell phones or other mobile
devices.

Section 7.3 Review

1. Define social shopping and describe its drivers.

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A method of e-commerce where shoppers’ friends become involved in the shopping

experience. Social shopping attempts to use technology to mimic the social interactions
found in physical malls and stores.

2. List the major benefits of social shopping.

• You can discover products/services you never knew existed (e.g., see this next.com).
• You can interact with vendor (brand) representatives (e.g., feature available at
stylehive.com/blog).
• Your confidence and trust in online shopping increases.
• You can get super deals via group buying, daily specials, and more. Join Groupon just
to see the super deals.
• You can exchange shopping tips with your friends, fans, and others.
• You can build and share wish lists.
• You can have camaraderie shopping with peers with similar tastes.
• You can learn from others’ experience.
• You can get simplified comparisons, even in real-time.

3. List the major models of social shopping. Briefly describe their function.

• Social recommendations, ratings and reviews, comparisons, and conversations

• Group buying and shopping together
• Deal purchases (flash sales), such as daily deals
• Shopping communities and clubs
• Peer-to-peer models (e.g., money lending)
• Location-based shopping (presented in Section 7.4)
• F-commerce; shopping at Facebook (see this chapter’s closing case)
• Shopping with Twitter
• Other innovative models

4. Describe ratings, reviews, and recommendations.

This is user generated content about a product or service.

5. How are ratings and reviews being conducted?

In many cases, they are entered online by consumers.

6. Relate recommendations to social reviews and ratings.

These are closely related to ratings and reviews and are sometimes integrated with them.

7. Describe social marketplaces and direct sales.

Social marketplace – An online community that harnesses the power of one’s social
networks for the introduction, buying, and selling of products, services, and resources,

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including one’s own creations. Also may refer to a structure that resembles a social
network but is focused on individual members.

This marketplace allows for direct sales, leaving out a distributor.

8. Define group buying. How does it work with flash deals? (Hint: Groupon.)

A group must choose to purchase a volume of goods/services that is enough to incent the
seller to sell at a reduced price.

9. Define social communities and social clubs as they relate to marketing. How do they
work?

These are affinity groups, and they can be marketed to as a niche. They may participate
in group buys, or may represent a specialized market.

10. Describe Kaboodle.

Kaboodle is the largest social community. It is a free service that lets users collect
information from the Web and store it on a Kaboodle list that can be shared with others.

11. Define social marketplaces. What is going on there?

An online community that harnesses the power of one’s social networks for the
introduction, buying, and selling of products, services, and resources, including one’s
own creations. Also may refer to a structure that resembles a social network but is
focused on individual members.

12. What is the future of social shopping?

Opinions will vary, but many may focus on new technologies or integrations of existing
technologies/services.

Section 7.4 Review

1. Describe advertisement in social commerce.

Advertisement in social sites is an attempt to capitalize on the potential customer base.

These ads help to provide revenue to the social sites.

2. Define social ads and social apps.

• Social ads – Advertisement placed in paid-for media space on social media platforms
such as Facebook, YouTube, and Twitter, as well as on blogs and forums
• Social apps – Branded online applications that support social interactions and user
contributions

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3. Define viral marketing.

Word-of-mouth (WOM) method by which customers promote a product (service) by

telling others (frequently their friends) about it.

4. Describe viral blogging.

Viral (word-of-mouth) marketing done by bloggers.

5. Define geolocation and geosocial networks.

• Geolocation – The identification of the real-world geographic location of an Internet-

connected computer, mobile device, Web site visitor, or other
• Geosocial networking – A type of social networking in which geographic services
and capabilities such as geocoding and geotagging are used to enable additional social
dynamics

6. How does location-based advertising work?

LBS reports a user’s position using GPS. This data is then applied to listings on
advertisers near that location. Adds for businesses near the user are then provided to the
user.

7. Describe how Foursquare works.

Foursquare can find your location and tell your friends where they can find you.

8. List some concerns of LBS advertising.

Some concerns include privacy concerns, especially if users have not opted-in.

9. Describe viral videos.

Any video that is passed electronically, from person to person, regardless of its content.

10. How is Twitter used for advertisement?

It is generally used to create word-of-month about a product or service.

11. Describe mobile advertisement.

Advertisements on cell phones and other mobile devices

Section 7.5 Review

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1. How can a social network be used to conduct market research?

It allows the marketer to directly access feedback and perceptions of users from a social
networking site.

2. How is conversational marketing used for market research?

Using Web 2.0 tools, marketers solicit feedback from users.

3. Describe social analytics.

Gathering and analyzing data from social networking sites.

4. Define and describe social intelligence.

Social intelligence refers to the ability of humans to interact with each other effectively.

5. What is data, text, and Web mining used for?

These techniques are used to find partners in customer perceptions.

6. What can be mined in social media?

A variety of types of customer perceptions.

7. How is Facebook used for market research?

Examples include evaluating feedback, marketing mixes, test marketing and surveys.

8. How is Twitter used for market research?

Examples include evaluating posts, finding opinion makers and evaluating trends.

Section 7.6 Review

1. Define social customers and describe their properties.

Members of social networks who do social shopping and understand their rights and how
to use the wisdom and power of crowdsourcing and communities to their benefit.

2. Why and how are customers empowered by social networks?

It gives customers access to a large amounts of information and unbiased reviews.

3. What are the needs of social customers?

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Social customers need to feel empowered, and need to be able to contribute their
opinions.

4. How are these needs fulfilled?

Sites or firms associated with social networks provide access to information and the
ability to contribute.

5. Describe social CRM; how does it differ from traditional CRM?

Social CRM is a customer engagement strategy in support of companies’ defined goals

that attempts to optimize the customer experience. Generally social tools are used,
allowing for interaction between both the customer and company as well as between
customers. Traditional CRM focuses primarily on customer-company interactions and
stores only customer information.

Section 7.7 Review

1. Define a business network and an enterprise social network.

• Business social network – A social network whose primary objective is to facilitate

business connections and activities
• Enterprise social network – A business network focused on a single company

2. List various categories of enterprise applications in social networks.

• To build better customer and employee relationships

• To increase revenue
• To facilitate recruiting and retention
• To increase business and marketing opportunities
• To build and nurture a community
• To reduce operation and travel costs
• To improve knowledge management (increase speed and access to knowledge)
• To gain expert advice (internally and externally)
• To improve knowledge management
• To reduce communication and improve collaboration

3. What are the benefits of enterprise social networking for companies? For employees?

Companies are able to distribute information and build a corporate culture. Employees
are able to learn and interact with their colleagues.

4. Define public business-oriented network. Provide an example.

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A social network that is open to the public, but focused on business activities. LinkedIn
is an example.

5. What is an entrepreneur network?

A business social network focused on entrepreneurial activities.

6. What are the major features of effective enterprise social networking?

These features are listed on pages 342 and 343.

7. Describe IBM’s SocialBlue.

IBM’s SocialBlue is an internal social networking site that gives IBM employees a rich
connection to the people they work with on both a personal and a professional level.

8. List all the ways that an organization can interface with social networking.

Companies can use social tools in a wide variety of ways. These are summarized on
pages 345 and 346.

9. List social networking applications in HRM.

Social networking applications can be used within HRM to assist in finding and
recruiting workers, as well as training them.

10. How can social networking facilitate problem solving?

The systems can connect individuals within an organization, making it easier for them to
work together.

11. Relate social networking to knowledge management.

Social tools can be used to collect, store and deliver knowledge needed within an
organization.

Section 7.8 Review

1. Define crowdsourcing; provide four examples.

The act of outsourcing tasks, traditionally performed by an employee or contractor, to an

undefined, large group of people or community (a “crowd”), through an open call.
Examples of applications include using groups to create content, solve problems, or even
do research and development.

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2. List Howe’s four categories of applications.

1. Collective intelligence
2. Crowd creation
3. Crowd voting
4. Crowd supporting and funding

3. What are the major benefits of crowdsourcing? (List five to seven benefits.)

• Problems can be explored at comparatively little cost, and often very quickly.
• Payment is by results or even omitted.
• The organization can tap a wider range of talent than might be present in its own
organization.
• By listening to the crowd, organizations gain firsthand insight on their customers’
desires.
• The community may feel a brand-building kinship with the crowdsourcing
organization, which is the result of an earned sense of ownership through contribution
and collaboration.
• Crowdsourcing taps into the global world of ideas, helping companies work through a
rapid design process.

4. Describe the crowdsourcing process.

1. Identify the issue (problem) you want to investigate or solve.

2. Identify the target crowd.
3. Broadcast to the unknown crowd.
4. Engage the crowd in an innovative and creative process (e.g., idea generation).
5. User-generated content is then submitted. (This may include submission of
opinions, voting, new ideas, suggestions, and so forth).
6. Evaluate the submitted material—by the initiator of the request or by the crowd
(voting on the submitted content or on a few finalists selected by the company).

5. List some issues and concerns regarding crowdsourcing implementation.

Many concerns exist including the role of individuals within the crowd and the overall
reliability of answers generated. The text lists several other issues on page 355.

6. Why is Wikipedia considered crowdsourcing?

Wikipedia is crowdsourcing because it relies on the public to help create and edit its
entries.

Section 7.9 Review

1. What are the features of virtual worlds that businesses can make use of in deploying
their virtual world applications?

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• Shared space
• 3-D visualization (graphical user interface)
• Immediacy
• Interactivity
• Persistence
• Socialization and community formation

2. From a business application perspective, virtual worlds can be visualized as a

multidimensional space. Briefly describe different dimensions of virtual world space.
• Social space
• Entertainment space
• Transaction space
• Experimental/demonstration space
• Collaboration space
• Smart agents space
• Fantasy space

3. Outline a few examples of business applications of virtual worlds.

The text outlines several applications beginning on page 358. Some examples include
storefronts, advertising and content creation.

4. Discuss different ways of making real or virtual money in virtual worlds (see also
Chapters 1 and 2).

A variety of methods exist and include direct sales of tangible goods, direct sales of
intangible goods, service subscriptions, and fees for services.

5. What kind of educational and training activities do virtual worlds such as Second Life
support?

• Simulation
• Distance Learning
• Class Meetings
• Exploration
• Visualization
• Imaginative Scenarios
• Information Dissemination

6. What are the major concerns and limitations of virtual worlds?

• Slow adoption
• Technically difficult to develop in
• Fraud and security issues

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• Performance issues

Section 7.10 Review

1. Relate entertainment to social commerce.

Entertainment can be used as a driver for commerce, or paying for entertainment can be
commerce itself.

2. Describe Mixi, Last.fm, and Pandora.

All of these services provide online music streaming.

3. Describe eFan, Hulu, Moontoast, and Funny or Die.

All of these services provide streaming of video content.

4. Relate the iPhone to entertainment on the Web.

iPhones provide easy access to web-content without a computer.

5. Define social games; what types do you recognize?

A video game played in a social network. Students will recognize a variety of games.

6. Describe social games in social networks.

Some social games are available within social networks. These games help to draw users
back to the network and allow users to play with others.

7. What are some of the business (commerce) aspects of social games?

These games can either provide direct revenue to the developer/network or provide a
draw to the network.

Section 7.11 Review

1. List some major implementation issues.

Implementation can be complex. Issues may include technical challenges,

marketing/adoption challenges and service/support challenges.

2. List some difficulties in SC justification.

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Some examples include difficulty in quantifying the market and potential benefits, as
well as the threat of completion in a fast-moving area.

3. Solis’s Compass includes four components. List two in each category and briefly
describe them (consult Online File W7.6).

The compass includes emotions, channels, platforms, and players.

• Emotions
o Empathy – understanding another
o Empowerment – providing authority
• Channels
o Syndication – one to many
o Aggregation – many to one
• Platforms
o Mobile – all mobile apps
o Blogs – provide quick information
• Players
o Advocates/stakeholders – hold a stake in the brand
o Bloggers/market makers – help shape brand perception

4. List and briefly describe three risk factors (consult Online File W 7.7).

• User comments may not be positive and this cannot be controlled

• A small number of users may become a huge support draw
• A small group may control the larger group

5. List the major elements in a successful implementation strategy for social commerce.

1. Learn and understand the environment inside and outside the organization.
2. Experiment with a small-scale project so you can observe and learn.
3. Assess the results of the experiment.
4. Develop or abandon the project.

Answers to EC Application Case Questions

EC Application Case 7.1: REVENUE SOURCES AT

YOUTUBE
Questions

1. Enter linkedin.com and explore. Why do you think the site is so successful?

Student opinions will vary, but should be based on the robust number of features
available.

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2. What features are related to recruiting and job finding?

Several exist including profiles indicating interest, and the ability to potentially contact
out-of-network prospects or employers.

3. How does “LinkedIn Answers” work? Try to use it by posting a query. Report the
results.

Student experiences will vary based on the type of question asked.

4. Conduct an investigation to find the revenue model of the company.

Student responses will vary. Major revenue appears to come from advertisements,
partnerships and subscription sales.

5. Several companies have attempted to clone LinkedIn with little success. Why do you
think LinkedIn is dominating?

Student opinions will vary, but it could be the network effect of LinkedIn’s large user
base.

EC Application Case 7.2: WIKIPEDIA

Questions

1. Wikipedia is a nonprofit organization. Search and find its revenue model.

Currently donations are the major model.

2. What drives Wikipedia?

The company desires to provide freely-available knowledge.

3. Discuss the issue of quality—the problems and solutions.

The issue of quality relates to crowdsourcing content – while the content is diverse and
free, it is limited by the ability of contributors. One solution is the editorial board.

4. Research the problem of copyright.

Student research will vary, but the primary issue is the posting or use of content that
does not belong to the poster.

5. Research the relationship between Wikipedia and Wikia.

Wikia is the wiki software used by Wikipedia..

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EC Application Case 7.3: REVENUE SOURCES AT

YOUTUBE
Questions

1. List the different advertising models on YouTube.

Examples include text ads, in-video ads, and fees for brand-based content.

2. List the success factors from these cases.

Factors include the size of the user base, the ability to market to specific groups, and the
social networks involved.

3. What are the benefits for the advertisers?

They are able to tap the customers using the system and target advertising.

Answers to Discussion Questions

1. How do business-oriented networks and enterprise social networks differ.

The difference is in their focus, based on a business area or specific company and their
openness.

2. Discuss the potential business use of Twitter (by major categories).

Twitter can be used to both distribute information and create word-of-mouth about a
business, product or service.

3. What are some of the risks companies may face if they decide to use public social
networks?

Student examples will vary, but will focus on the public nature of these groups and the
difficulty in controlling what is said.

4. Discuss the role of crowdsourcing in idea generation and market research.

Crowdsourcing can be used to help identify new trends, needs and customer
perceptions. These new ideas can then be translated into products and services.

5. How can marketers use social networks for viral marketing?

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Marketers can take advantage of the user-base of a social networking system to help
easily spread viral marketing items.

6. Why are advertisers so interested in social networks?

They represent an emerging new marketing channel.

7. Compare group buying to shopping together.

Group buying requires the group to make the same selection, while shopping together
only requires the group to be in the same location.

8. Identify and discuss Facebook’s revenue model.

The model is based on secondary income streams, like advertising.

9. Corporate social networking: Booster or time-waster? What are the pitfalls of

enterprise social networking? Discuss.

Student perceptions and responses will vary. Students will likely discuss the benefits of
additional exposure, but will also focus on costs and possible negative consequences.

10. Review any two Socialcast user case studies at

socialcast.com/resources/customer_stories.html and discuss the following:
a. What benefits the companies that embraced Socialcast have realized.
b. Lessons learned from these cases.

Student perceptions and responses will vary based on who they select.

11. Review the features of Socialtext (socialtext.com). Discuss how you would make use
of this platform in a small enterprise in retail, manufacturing, or financial services.

Student perceptions and responses will vary based on the potential application.

12. Enter youtubetrafficsystem.net. Watch the video case “How Sam Got to the Top”
(video 3). Discuss how Sam drove 3.5 million viewers to watch his fitness video.

Student perceptions and responses will vary based on their opinions of the tactics used.

13. What real value do virtual worlds present to commercial users and businesses?

Social worlds provide both a new market location for businesses, as well as a new
market category of goods and services.

14. Enter thesocialcustomer.com. Pick five posts and discuss each briefly.

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Answers will vary based on topics selected.

15. How can crowdsourcing reduce risks to merchants?

It can allow merchants to more easily test market goods and advertising to make the
optimum selection.

Topics for Class Discussion and Debates

1. The crowdsourcing model works well with designers like this: (1) Come up with
something that you need designing for. (2) Turn it into a competition between amateur
and professional designers. (3) Decide on a winner, either by vote or executive decision.
This is all at little to no cost for the person looking for the design. Now, think about the
future of the graphic industry in general. What will be the fate of large design firms that
are competing for the business of high-profile clients when the clients are now paying
tiny, one-time fees to amateur designers? Is basing your business on crowdsourcing a
viable model? Discuss.

Student opinions will vary. The crowdsourcing model hurts existing firms, but large-
scale crowdsourcing may not be viable.

2. Discuss the business value of social networking. As a start, read Tom Davenport’s
“Where’s the ‘Working’ in Social Networks”
(blogs.harvardbusiness.org/davenport/2007/10/wheres_the_working_in_social_n.html)
and Brett Bonfield’s “Should Your Organization Use Social Networking Sites”
(techsoup.org/learningcenter/internet/page7935.cfm).

Student opinions will vary. The discussion will center on the benefits of social
networking versus the cost of time to the business.

3. What are the potential major legal issues that business applications in virtual worlds
might encounter? Refer to online resources, including the Virtual World Law blog
virtualworldlaw.com.

Student opinions will vary. New issues are being identified, but one of the largest is
jurisdiction.

4. Idea generation by the employees or customers using crowdsourcing is becoming

popular. Some say it is only an electronic suggestion box. Others disagree. Discuss.

Student opinions will vary. The debate will focus on how helpful crowdsourcing can be,
and if it can be used to develop an idea fully.

5. Despite the promise of virtual worlds and the increased computing and graphic
capabilities of personal computers, high-speed Internet access, and corporate interest in

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exploiting these worlds, why have virtual worlds not taken off, been adopted, or used
widely. (Compare for example with Facebook, Twitter, blogs, or wikis.) What aspects
hinder their adoption? What are the critical success factors? Discuss.

Student opinions will vary based on their perceptions. Some issues with adoption include
the learning curve and benefits to the user.

6. Read the Bernoff and Schadler article “Empowered: In a World Where One Angry
Tweet Can Torpedo a Brand, Corporations Need to Unleash Their Employees to Fight
Back.” Then, discuss the top strategies employed by Best Buy including Twelpforce. Also
discuss how other companies empower employees.

Student opinions will vary. The issue centers on corporate control of messaging versus
the ablity to enlist employees to help.

7. Debate: Should companies build in-house social networks for external activities (e.g.,
marketing, CRM) or use existing public social networks?

Student opinions will vary. The debate will focus on the issues of control versus network
size.

8. Debate: Some research suggests that the use of public social networks by employees
can be good for a business because employees develop relationships and share
information, which increases productivity and innovation. Others say it is a waste of time
and ban the use of Facebook, YouTube, and other such sites.

Student opinions will vary. The discussion will center on the benefits of social
networking versus the cost of time to the business.

9. Debate: Do Facebook privacy concerns really require government regulations?

(Consult Prince 2010.)

Student opinions will vary based on perceptions of required privacy.

10. Debate the pros and cons of the following: In order to control content and employee
time, Manchester United and other companies do not allow employees to generate any
content on its private social network site nor on public ones (e.g., Facebook).

Student opinions will vary. The discussion will center on the benefits of social
networking versus the cost of time to the business.

Internet Exercises
(Note: URLs may change over time; please check the Internet Exercises on the
Turban Web site for possible updates: www.pearsonhighered.com/turban.)

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1. Enter the Web site of a social network service (e.g., myspace.com or facebook.com).
Build a homepage. Add a chat room and a message board to your site using the free tools
provided. Describe the other capabilities available. Make at least five new friends.

Student experiences and perceptions will vary based on the service selected.

2. Enter vivapets.com and dogster.com and compare their offerings.

Student reports will vary – both sites sell toys for pets.

3. Enter twitter.com, facebook.com, and linkedin.com and list the major sources of
revenue for each.

Student reports will vary. All appear to be supported by secondary advertising and
partnership revenue.

4. Enter xing.com and linkedin.com and compare their functionalities (capabilities). Also,
enter ryze.com and view the video tutorial on networking. Compare Ryze’s capabilities
with those of LinkedIn.com. Write a report.

Student reports will vary based on what features are selected.

5. Enter chicstar.com. Why is it an online entertainment service? What are the benefits to
viewers? Compare this site to starz.com.

Student experiences and perceptions will vary.

6. Enter advertising.com. Find the innovative/scientific methods that are offered and
related to social commerce.

Student experiences and perceptions will vary. Several articles are available.

7. Enter the paulgillin.com blog and find information related to enterprise applications of
social commerce technologies. Write a report.

Student reports will vary based on the content selected.

8. Enter pandora.com. Find out how you can create and share music with friends. Why is
this a social commerce application?

Student experiences and perceptions will vary. The system is social since it allows
sharing.

9. Enter webkinz.com and compare its activities to that of facebook.com. Enter nielsen-
online.com and find the average stay time on both social network sites.

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Chapter 7 Page 20

Student findings will vary based on the time of the review.

10. Enter smartmobs.com. Go to the blogroll. Find three blogs related to social
commerce, and summarize their major features.

Student experiences and perceptions will vary based on which blogs are selected.

11. Enter mashable.com and review the latest news regarding social networks and
network strategy. Right a report.

Student reports will vary based on when the review is completed.

12. Enter usocial.com and softcity.com. Identify all the methods/tools they offer to
increase social engagement/marketing and advertising. Write a report.

Student reports will vary based on the features compared.

13. Enter comblu.com. Explore its products and discuss the role of a social marketing
dashboard.

Student experiences and perceptions will vary. Comblu is a social marketing company.

14. Enter secondlife.com and find the commercial activities of the following avatars:
Fizik Baskerville, Craig Altman, Shaun Altman, FlipperPA Peregrine, and Anshe Chung.
Describe briefly what they represent.

Student experiences and perceptions will vary. Results will be based on when the report
is completed.

15. Enter crmbuyer.com/edpick/69895.html and identify five strategies suggested for

improved customer service.

Student reports will vary. Trust and customer care are featured.

16. Enter thisnext.com. What are the features of the site. What do you like? Dislike?

Student experiences and perceptions will vary.

17. Enter en.wikipedia.org/wiki/Mixi and look at mixi’s features that are similar to those
offered by other social networks. Relate it to online entertainment.

Student reports will vary based on which networks are compared.

18. Enter ning.com. Explore its capabilities and discuss how it is related to social
network sites.

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Chapter 7 Page 21

Student experiences and perceptions will vary. The site allows you to create your own
network.

19. Enter fordstory.com. Find what is going on there. Also, watch the Fiesta video. Write
a report.

Student reports will vary based on their perceptions of the products.

20. Enter bazaarvoice.com. Summarize its major services. Examine SocialConnect and
TweetConnect in particular.

Student experiences and perceptions will vary.

21. Enter blippy.com and find the services it provides to customers.

Student reports will vary, services offered are currently expanding.

22. Enter ehow.com and find “How to Use Twitter to Conduct Market Research.” Follow
instructions on a topic related to social commerce. Write a report.

Student reports will vary based on individual research.

Team Assignments and Role Playing

1. Assignment for the Opening Case
Read the opening case, find some new material about Starbucks and social commerce
and answer the following questions:
a. Why is Starbucks putting such an emphasis on social media?

It views it as a primary advertising method for its target market.

b. List the specific social networking activities done by the company.

Examples include Facebook, LinkedIn, Twitter, YouTube/Flicker and Foursquare.

c. What are the differences and similarities between Starbucks’ own social
network and its pages on Facebook, LinkedIn, and other social networks?

It provides services specific to its business and its content. These services are
similar to services on other networks, but the Starbucks’ social network lacks
many of the features other provide.

d. Why did Starbucks fail with Foursquare?

The company did not understand or utilize the benefits of the system.

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Chapter 7 Page 22

e. How are ideas generated at My Starbucks Idea? By whom?

It allows suggestions from customers.

f. What did you learn about social media strategy?

Student responses will vary.

2. Each group is assigned to a social network that has business activities on it (e.g.,
LinkedIn, Xing, Facebook, Second Life, etc.). Each group will then register with
hellotxt.com to find out what is going on in the site with regard to recent business
activities. Write a report and make a class presentation. With Hello TXT, you log on to
the site and enter your text message into the dashboard. You then select the sites you
want to update with your new status message, and Hello TXT does the rest, reaching out
to your various pages to add your new status message. It is a great centralized way to
keep all your various profiles as up-to-date as possible, and it is designed to update your
LinkedIn status by answering the question “What are you working on?”

Student reports will vary based on the network assigned.

3. Facebook is increasingly offering marketing tools (e.g., Open Graph, Social Plug-ins).
Identify all the tools offered. Each group concentrates on the implication in one of the
following areas: advertising and search engine optimization (SEO), shopping, market
research, customer service, CRM, and others. Make a class presentation.

Student reports will vary based on the time of the report and the tools selected.

4. Your group signs in to secondlife.com and creates an avatar(s). Each member is

assigned to explore a certain business area (e.g., virtual real estate, educational
activities, tourism). Make sure the avatar interacts with other people’s avatars. Write a
report.

Student reports will vary based on the research conducted.

5. Each group adopts one or two of the following companies that actively advertise and
engage on Facebook and Twitter: Coca-Cola, Starbucks, Ford, Pepsi, Disney, Victoria’s
Secret, iTunes, Toyota, Sony, or P&G. Find what advertisement methods they use and
how they do their campaigns.

Student reports will vary based on the company profiled.

6. Watch the tutorial video “Doing Business in Second Life” (blip.tv/file/24281), and
answer:
a. What can you do commercially on SL?
b. How much will it cost you?

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Chapter 7 Page 23

c. How can you attract people to your SL page?

d. What can you do there that you cannot do on Facebook or Twitter?
e. What are the major benefits to companies? Consumers?
f. What is the downside?
g. What are IBM, Dell, and Coke doing in SL?

Student reports will vary. This is an interesting video with details that students will
respond to differently.

7. Enter ehow.com/how_4630584_advertise-secondlife-event.html and read the article

“How to Advertise a ‘Second Life’ Event.” Follow the instructions and advertise a
restaurant of your choice. Write a report. Relate your work to the following SL features:
affiliate program, Second Life Marketplace, blogs, and forums. Also look at
secondlife.com/shop/learn. Write a report.

Student reports will vary based on the research conducted.

8. Have the group research the issue of “How Levi’s and Facebook Prompt Your Friends
to Improve Your Buying Experience.” Start with web-
strategist.com/blog/2010/04/30/social-commerce-breakdownhow-levis-and-facebook-
prompt-your-friends-toget-
you-to-buy. Find out why Levi’s is considered to be at level 6 or 7 while most brands are
still at level 1. See also store.levi.com.

Student reports will vary based on the research conducted. In general, the idea is that
some brands allow for and encourage input from a social circle to help a customer make
an “optimal” buying decision.

9. The class will investigate group buying in China and India. What is the prospect for
group buying in Asia? (Start with Madden’s article “China Pioneers Group Buying
Discounts Without Groupon” at joomabc. com/Web site-clone/news/item/45-china-
pioneersgroup- buying-discounts-without-groupon).

Student reports will vary based on the research conducted.

Closing Case: F-COMMERCE: BUSINESS ACTIVITIES ON

FACEBOOK
1. Why conduct business on Facebook?

The site has a very large user-base.

2. List five major advertising options on Facebook.

• Facebook connect

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Chapter 7 Page 24

• Facebook “like” button

• Facebook Ads
• Facebook Page
• Facebook Aps

3. What is the purpose of the “Like” button?

To signal interest in a piece of content.

4. How are product recommendations generated on Facebook?

Generally through recommendations generated and shared by users, or through partners

like Amazon.

5. How can person-to-person transactions be conducted on Facebook?

This is generally through the Facebook Marketplace.

6. What tools are provided by Facebook to facilitate selling and buying?

• Facebook credit
• Open graph and social graph
• Product recommendations
• Merchant shopping aids
• Facebook Places (for mobile)
• Facebook Deals
• End-to-end Facebook store within a fan page
• Social bar
• Docs.com
• “Presence” location-based data
• Sponsored stories

7. What are “Sponsored Stories”? Who benefits? How?

This is content that is sponsored by an advertiser that may help to push a product or
service.

8. What are some of the implementation issues?

There are several issues and student selection will vary.

9. Enter donnygamble.com/social-commerce and read the article “Social Commerce:

How Facebook Will Change Online Shopping Forever.” Explain the blogger’s opinion.

Student perceptions will vary.

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Chapter 7 Page 25

10. There are several hundreds of travel apps on Facebook. Identify some of them.

Student selection will vary.

11. Find “Where I’ve Been” and discuss its popularity.

Student responses will vary.

Copyright © 2012 Pearson Education, Inc., Publishing as Prentice Hall

Another random document with
no related content on Scribd:
 The Alabama Claims.

During this year the long disputed Alabama Claims of the United
States against Great Britain, arising from the depredations of the
Anglo-rebel privateers, built and fitted out in British waters, were
referred by the Treaty of Washington, dated May 8th, 1871, to
arbitrators, and this was the first and most signal triumph of the plan
of arbitration, so far as the Government of the United States was
concerned. The arbitrators were appointed, at the invitation of the
governments of Great Britain and the United States, from these
powers, and from Brazil, Italy, and Switzerland. On September 14th,
1872, they gave to the United States gross damages to the amount of
$15,500,000, an amount which has subsequently proved to be really
in excess of the demands of merchants and others claiming the loss
of property through the depredations of the rebel ram Alabama and
other rebel privateers. We append a list of the representatives of the
several governments:
Arbitrator on the part of the United States—Charles Francis
Adams.
Arbitrator on the part of Great Britain—The Right Honorable Sir
Alexander Cockburn, Baronet, Lord Chief Justice of England.
Arbitrator on the part of Italy—His Excellency Senator Count
Sclopis.
Arbitrator on the part of Switzerland—Mr. Jacob Stampfli.
Arbitrator on the part of Brazil—Baron D’Itajuba.
Agent on the part of the United States—J. C. Bancroft Davis.
Agent on the part of Great Britain—Right Honorable Lord
Tenterden.
Counsel for the United States—Caleb Cushing, William M.
Evarts, Morrison R. Waite.
Counsel for Great Britain—Sir Roundell Palmer.
Solicitor for the United States—Charles C. Beaman, Jr.
 The Force Bill.

The 42d Congress met March 4, 1871, the Republicans having

suffered somewhat in their representation. In the Senate there were
57 Republicans, 17 Democrats; in the House 138 Republicans, 103
Democrats. James G. Blaine was again chosen Speaker. The most
exciting political question of the session was the passage of the
“Force Bill,” as the Democrats called it. The object was more rigidly
to enforce observance of the provisions of the 14th Amendment, as
the Republicans claim; to revive a waning political power in the
South, and save the “carpet-bag” governments there, as the
Democrats claimed. The Act allowed suit in the Federal courts
against any person who should deprive another of the rights of a
citizen, and it made it a penal offense to conspire to take away any
one’s rights as a citizen. It also provided that inability, neglect, or
refusal by any State governments to suppress such conspiracies, or
their refusal to call upon the President for aid, should be deemed a
denial by such State of the equal protection of the laws under the
14th Amendment. It further declared such conspiracies “a rebellion
against the government of the United States,” and authorized the
President, when in his judgment the public safety required it, to
suspend the privilege of habeas corpus in any district, and suppress
any such insurrection by the army and navy.
 President Hayes’s Civil Service Order.

Executive Mansion, Washington, June 22, 1877.

Sir:—I desire to call your attention to the following paragraph in a
letter addressed by me to the Secretary of the Treasury, on the
conduct to be observed by the officers of the General Government in
relation to the elections:
“No officer should be required or permitted to take part in the
management of political organizations, caucuses, conventions or
election campaigns. Their right to vote and to express their views on
public questions, either orally or through the press, is not denied,
provided it does not interfere with the discharge of their official
duties. No assessment for political purposes on officers or
subordinates should be allowed.”
This rule is applicable to every department of the Civil Service. It
should be understood by every officer of the General Government
that he is expected to conform his conduct to its requirements.

Very respectfully, R. B. Hayes.

Some of the protests were strong, and it is difficult to say whether

Curtis, Julian, or Eaton—its three leading advocates—or the
politicians, had the best of the argument. It was not denied, however,
that a strong and very respectable sentiment had been created in
favor of the reform, and to this sentiment all parties, and the
President as well, made a show of bowing. It was fashionable to
insert civil service planks in National and State platforms, but it was
not such an issue as could live in the presence of more exciting ones;
and while to this day it has earnest and able advocates, it has from
year to year fallen into greater disuse. Actual trial showed the
impracticability of some of the rules, and President Grant lost
interest in the subject, as did Congress, for in several instances it
neglected to appropriate the funds necessary to carry out the
provisions of the law. President Arthur, in his message, to Congress
in December, 1881, argued against its full application, and showed
that it blocked the way to preferment, certainly of the middle-aged
and older persons, who could not recall their early lessons acquired
by rote; that its effect was to elevate the inexperienced to positions
which required executive ability, sound judgment, business aptitude,
and experience. The feature of the message met the endorsement of
nearly the entire Republican press, and at this writing the sentiment,
at least of the Republican party, appears to favor a partial
modification of the rules.
The system was begun January 1st, 1872, but in December, 1874,
Congress refused to make any appropriations, and it was for a time
abandoned, with slight and spasmodic revivals under the
administration of President Hayes, who issued the foregoing order.
By letter from the Attorney-General, Charles Devens, August 1,
1877, this order was held to apply to the Pennsylvania Republican
Association at Washington. Still later there was a further exposition,
in which Attorney-General Devens, writing from Washington in
October 1, 1877, excuses himself from active participation in the
Massachusetts State campaign, and says: “I learn with surprise and
regret that any of the Republican officials hesitate either to speak or
vote, alleging as a reason the President’s recent Civil Service order.
In distinct terms that order states that the right of officials to vote
and express their views on public questions, either orally or through
the press, is not denied, provided it does not interfere with the
discharge of their official duties. If such gentlemen choose not to
vote, or not to express or enforce their views in support of the
principles of the Republican party, either orally or otherwise, they, at
least, should give a reason for such a course which is not justified by
the order referred to, and which is simply a perversion of it.”
Yet later, when the interest in the Pennsylvania election became
general, because of the sharp struggle between Governor Hoyt and
Senator Dill for Governor, a committee of gentlemen (Republicans)
visited President Hayes and induced him to “suspend the operation
of the order” as to Pennsylvania, where political contributions were
collected.
And opposition was manifested after even the earlier trials.
Benjamin F. Butler denounced the plan as English and anti-
Republican, and before long some of the more radical Republican
papers, which had indeed given little attention to the subject, began
to denounce it as a plan to exclude faithful Republicans from and
permit Democrats to enter the offices. These now argued that none of
the vagaries of political dreamers could ever convince them that a
free Government can be run without political parties; that while
rotation in office may not be a fundamental element of republican
government, yet the right of the people to recommend is its corner-
stone; that civil service would lead to the creation of rings, and
eventually to the purchase of places; that it would establish an
aristocracy of office-holders, who could not be removed at times
when it might be important, as in the rebellion for the
Administration to have only friends in public office; that it would
establish grades and life-tenures in civic positions, etc.
For later particulars touching civil service, see the Act of Congress
of 1883, and the regulations made pursuant to the same in Book V.
 Amnesty.

The first regular session of the 42d Congress met Dec. 4th, 1871.
The Democrats consumed much of the time in efforts to pass bills to
remove the political disabilities of former Southern rebels, and they
were materially aided by the editorials of Horace Greeley, in the New
York Tribune, which had long contended for universal amnesty. At
this session all such efforts were defeated by the Republicans, who
invariably amended such propositions by adding Sumner’s
Supplementary Civil Rights Bill, which was intended to prevent any
discrimination against colored persons by common carriers, hotels,
or other chartered or licensed servants. The Amnesty Bill, however
was passed May 22d, 1872, after an agreement to exclude from its
provisions all who held the higher military and civic positions under
the Confederacy—in all about 350 persons. The following is a copy:
Be it enacted, etc., (two-thirds of each House concurring therein,)
That all legal and political disabilities imposed by the third section of
the fourteenth article of the amendments of the Constitution of the
United States are hereby removed from all persons whomsoever,
except Senators and Representatives of the Thirty-sixth and Thirty-
seventh Congress, officers in the judicial, military, and naval service
of the United States, heads of Departments, and foreign ministers of
the United States.
Subsequently many acts removing the disabilities of all excepted
(save Jefferson Davis) from the provisions of the above, were passed.
 The Liberal Republicans.

An issue raised in Missouri gave immediate rise to the Liberal

Republican party, though the course of Horace Greeley had long
pointed toward the organization of something of the kind, and with
equal plainness it pointed to his desire to be its champion and
candidate for the Presidency. In 1870 the Republican party, then in
control of the Legislature of Missouri, split into two parts on the
question of the removal of the disqualifications imposed upon rebels
by the State Constitution during the war. Those favoring the removal
of disabilities were headed by B. Gratz Brown and Carl Schurz, and
they called themselves Liberal Republicans; those opposed were
called and accepted the name of Radical Republicans. The former
quickly allied themselves with the Democrats, and thus carried the
State, though Grant’s administration “stood in” with the Radicals. As
a result the disabilities were quickly removed, and those who
believed with Greeley now sought to promote a reaction in
Republican sentiment all over the country. Greeley was the
recognized head of this movement, and he was ably aided by ex-
Governor Curtin and Col. A. K. McClure in Pennsylvania; Charles
Francis Adams, Massachusetts; Judge Trumbull, in Illinois; Reuben
E. Fenton, in New York; Brown and Schurz in Missouri, and in fact
by leading Republicans in nearly all of the States, who at once began
to lay plans to carry the next Presidential election.
They charged that the Enforcement Acts of Congress were
designed more for the political advancement of Grant’s adherents
than for the benefit of the country; that instead of suppressing they
were calculated to promote a war of races in the South; that Grant
was seeking the establishment of a military despotism, etc. These
leaders were, as a rule, brilliant men. They had tired of
unappreciated and unrewarded service in the Republican party, or
had a natural fondness for “pastures new,” and, in the language of
the day, they quickly succeeded in making political movements
“lively.”
In the spring of 1871 the Liberal Republicans and Democrats of
Ohio—and Ohio seems to be the most fertile soil for new ideas—
prepared for a fusion, and after frequent consultations of the various
leaders with Mr. Greeley in New York, a call was issued from
Missouri on the 24th of January, 1872, for a National Convention of
the Liberal Republican party to be held at Cincinnati, May 1st. The
well-matured plans of the leaders were carried out in the nomination
of Hon. Horace Greeley for President and B. Gratz Brown for Vice-
President, though not without a serious struggle over the chief
nomination, which was warmly contested by the friends of Charles
Francis Adams. Indeed he led in most of the six ballots, but finally all
the friends of other candidates voted for Greeley, and he received
482 to 187 for Adams. Dissatisfaction followed, and a later effort was
made to substitute Adams for Greeley, but it failed. The original
leaders now prepared to capture the Democratic Convention, which
met at Baltimore, June 9th. By nearly an unanimous vote it was
induced to endorse the Cincinnati platform, and it likewise finally
endorsed Greeley and Brown—though not without many bitter
protests. A few straight-out Democrats met later at Louisville, Ky.,
Sept. 3d, and nominated Charles O’Conor, of New York, for
President, and John Quincy Adams, of Massachusetts, for Vice-
President, and these were kept in the race to the end, receiving a
popular vote of about 30,000.
The regular Republican National Convention was held at
Philadelphia, June 5th. It renominated President Grant
unanimously, and Henry Wilson, of Massachusetts, for Vice-
President by 364½ votes to 321½ for Schuyler Colfax, who thus
shared the fate of Hannibal Hamlin in his second candidacy for Vice-
President on the ticket with Abraham Lincoln. This change to Wilson
was to favor the solid Republican States of New England, and to
prevent both candidates coming from the West.
 Civil Service Reform.

After considerable and very able agitation by Geo. W. Curtis, the

editor of Harper’s Weekly, an Act was passed March 3d, 1871,
authorizing the President to begin a reform in the civil service. He
appointed a Commission headed by Mr. Curtis, and after more than
a year’s preparation this body defeated a measure which secured
Congressional approval and that of President Grant.
The civil service law (and it is still a law though more honored now
in the breach than the observance) embraced in a single section of
the act making appropriations for sundry civil expenses for the year
ending June 30, 1872, and authorize the President to prescribe such
rules and regulations for admission into the civil service as will best
promote the efficiency thereof, and ascertain the fitness of each
candidate for the branch of service into which he seeks to enter.
Under this law a commission was appointed to draft rules and
regulations which were approved and are now being enforced by the
President. All applicants for position in any of the government
departments come under these rules:—all classes of clerks, copyists,
counters; in the customs service all from deputy collector down to
inspectors and clerks with the salaries of $1200 or more; in
appraisers’ offices all assistants and clerks; in the naval service all
clerks; all lighthouse keepers; in the revenue, supervisors, collectors,
assessors, assistants; in the postal really all postmasters whose pay is
over $200, and all mail messengers. The rules apply to all new
appointments in the departments or grades named, except that
“nothing shall prevent the reappointment at discretion of the
incumbents of any office the term of which is fixed by law.” So that a
postmaster or other officer escapes their application. Those specially
exempt are the Heads of Departments; their immediate assistants
and deputies, the diplomatic service, the judiciary, and the district
attorneys. Each branch of the service is to be grouped, and admission
shall always be to the lowest grade of any group. Such appointments
are made for a probationary term of six months, when if the Board of
Examiners approve the incumbent is continued. This Board of
Examiners, three in number in each case, shall be chosen by the
President from the several Departments, and they shall examine at
Washington for any position there, or, when directed by an Advisory
Board, shall assign places for examination in the several States.
Examinations are in all cases first made of applicants within the
office or department, and from the list three reported in the order of
excellence; if those within fail, then outside applicants may be
examined. In the Federal Blue Book, which is a part of this volume,
we give the Civil Service Rules.
When first proposed, partisan politics had no part or place in civil
service reform, and the author of the plan was himself a
distinguished Republican. In fact both parties thought something
good had been reached, and there was practically no resistance at
first to a trial.
The Democrats resisted the passage of this bill with even more
earnestness than any which preceded it, but the Republican
discipline was almost perfect, and when passed it received the
prompt approval of President Grant, who by this time was classed as
“the most radical of the radicals.” Opponents denounced it as little if
any less obnoxious than the old Sedition law of 1798, while the
Republicans claimed that it was to meet a state of growing war in the
South—a war of races—and that the form of domestic violence
manifested was in the highest degree dangerous to the peace of the
Union and the safety of the newly enfranchised citizens.
 The Credit Mobilier.

At the second session of the 42d Congress, beginning Dec. 2, 1872,

the speaker (Blaine) on the first day called attention to the charges
made by Democratic orators and newspapers during the Presidential
campaign just closed, that the Vice-President (Colfax), the Vice-
President elect (Wilson), the Secretary of the Treasury, several
Senators, the Speaker of the House, and a large number of
Representatives had been bribed, during the years 1867 and 1868, by
Oakes Ames, a member of the House from Massachusetts; that he
and his agents had given them presents of stock in a corporation
known as the Credit Mobilier, to influence their legislative action for
the benefit of the Union Pacific Railroad Company.
Upon Speaker Blaine’s motion, a committee of investigation was
appointed by Hon. S. S. Cox, of New York, a noted Democrat
temporarily called to the Chair.
After the close of the campaign, (as was remarked by the Republic
Magazine at the time) the dominant party might well have claimed,
and would have insisted had they been opposed to a thorough
investigation and a full exposure of corruption, that the verdict of the
people in the late canvass was sufficient answer to these charges; but
the Republican party not merely granted all the investigations
sought, but summoned on the leading committee a majority of its
political foes to conduct the inquest.
The committee consisted of Messrs. Poland, of Vermont;
McCreary, of Iowa; Banks, of Massachusetts; Niblack, of Indiana,
and Merrick, of Maryland.
Messrs. Poland and McCreary—the two Republicans—were
gentlemen of ability and standing, well known for their integrity,
moderation, and impartiality. General Banks was an earnest
supporter of Horace Greeley, upon the alleged ground that the
Republican organization had become effete and corrupt: while
Messrs. Niblack and Merrick are among the ablest representatives of
the Democratic party; in fact, Mr. Merrick belonged to the extreme
Southern school of political thought.
Having patiently and carefully examined and sifted the entire
testimony—often “painfully conflicting,” as the committee remarked
—their report ought to be considered a judicial document
commanding universal approval, yet scraps of the testimony and not
the report itself were used with painful frequency against James A.
Garfield in his Presidential canvass of 1880. There has not been a
state paper submitted for many years upon a similar subject that
carried with it greater weight, or which bore upon its face a fuller
realization of the grave responsibilities assumed, and it is the first
time in the political history of the United States that an all important
investigation has been entrusted by the dominant party to a majority
of its political foes.
The report of the committee gives the best and by far the most
reliable history of the whole affair, and its presentation here may aid
in preventing partisan misrepresentations in the future—
misrepresentations made in the heat of contest, and doubtless
regretted afterwards by all who had the facilities for getting at the
facts. We therefore give the

OFFICIAL REPORT OF THE CREDIT MOBILIER

INVESTIGATING COMMITTEE.

Mr. Poland, from the select committee to investigate the alleged

Credit Mobilier bribery, made the following report February 18,
1873:
The special committee appointed under the following resolutions
of the House to wit:
Whereas, Accusations have been made in the public press,
founded on alleged letters of Oakes Ames, a Representative of
Massachusetts, and upon the alleged affidavits of Henry S. McComb,
a citizen of Wilmington, in the State of Delaware, to the effect that
members of this House were bribed by Oakes Ames to perform
certain legislative acts for the benefit of the Union Pacific Railroad
Company, by presents of stock in the Credit Mobilier of America, or
by presents of a valuable character derived therefrom: therefore,
Resolved, That a special committee of five members be appointed
by the Speaker pro tempore, whose duty it shall be to investigate
whether any member of this House was bribed by Oakes Ames, or
any other person or corporation, in any matter touching his
legislative duty.
Resolved, further, That the committee have the right to employ a
stenographer, and that they be empowered to send for persons and
papers;
beg leave to make the following report:
In order to a clear understanding of the facts hereinafter stated as
to contracts and dealings in reference to stock of the Credit Mobilier
of America, between Mr. Oakes Ames and others, and members of
Congress, it is necessary to make a preliminary statement of the
connection of that company with the Union Pacific Railroad
Company, and their relations to each other.

The company called the “Credit Mobilier of America” was

incorporated by the Legislature of Pennsylvania, and in 1864 control
of its charter and franchises had been obtained by certain persons
interested in the Union Pacific Railroad Company, for the purpose of
using it as a construction company to build the Union Pacific road.
In September, 1864, a contract was entered into between the Union
Pacific Company and H. M. Hoxie, for the building by said Hoxie of
one hundred miles of said road from Omaha west.
This contract was at once assigned by Hoxie to the Credit Mobilier
Company, as it was expected to be when made. Under this contract
and extensions of it some two or three hundred miles of road were
built by the Credit Mobilier Company, but no considerable profits
appear to have been realized therefrom. The enterprise of building a
railroad to the Pacific was of such vast magnitude, and was beset by
so many hazards and risks that the capitalists of the country were
generally averse to investing in it, and, notwithstanding the liberal
aid granted by the Government it seemed likely to fail of completion.
In 1865 or 1866, Mr. Oakes Ames, then and now a member of the
House from the State of Massachusetts, and his brother Oliver Ames
became interested in the Union Pacific Company and also in the
Credit Mobilier Company as the agents for the construction of the
road. The Messrs. Ames were men of very large capital, and of known
character and integrity in business. By their example and credit, and
the personal efforts of Mr. Oakes Ames, many men of capital were
induced to embark in the enterprise, and to take stock in the Union
Pacific Company and also in the Credit Mobilier Company. Among
them were the firm of S. Hooper & Co., of Boston, the leading
member of which, Mr. Samuel Hooper, was then and is now a
member of the House; Mr. John B. Alley, then a member of the
House from Massachusetts, and Mr. Grimes, then a Senator from the
State of Iowa. Notwithstanding the vigorous efforts of Mr. Ames and
others interested with him, great difficulty was experienced in
securing the required capital.
In the spring of 1867 the Credit Mobilier Company voted to add 50
per cent. to their capital stock, which was then two and a half
millions of dollars; and to cause it to be readily taken each subscriber
to it was entitled to receive as a bonus an equal amount of first
mortgage bonds of the Union Pacific Company. The old stockholders
were entitled to take this increase, but even the favorable terms
offered did not induce all the old stockholders to take it, and the
stock of the Credit Mobilier Company was never considered worth its
par value until after the execution of the Oakes Ames contract
hereinafter mentioned.
On the 16th day of August, 1867, a contract was executed between
the Union Pacific Railroad Company and Oakes Ames, by which Mr.
Ames contracted to build six hundred and sixty-seven miles of the
Union Pacific road at prices ranging from $42,000 to $96,000 per
mile, amounting in the aggregate to $47,000,000. Before the
contract was entered into it was understood that Mr. Ames was to
transfer it to seven trustees, who were to execute it, and the profits of
the contract were to be divided among the stockholders in the Credit
Mobilier Company, who should comply with certain conditions set
out in the instrument transferring the contract to the trustees. The
Ames contract and the transfer to trustees are incorporated in the
evidence submitted, and therefore further recital of their terms is not
deemed necessary.
 Substantially, all the stockholders of the Credit Mobilier complied
with the conditions named in the transfer, and thus became entitled
to share in any profits said trustees might make in executing the
contract.
All the large stockholders in the Union Pacific were also
stockholders in the Credit Mobilier, and the Ames contract and its
transfer to trustees were ratified by the Union Pacific, and received
the assent of the great body of stockholders, but not of all.
After the Ames contract had been executed, it was expected by
those interested that by reason of the enormous prices agreed to be
paid for the work very large profits would be derived from building
the road, and very soon the stock of the Credit Mobilier was
understood by those holding it to be worth much more than its par
value. The stock was not in the market and had no fixed market
value, but the holders of it, in December, 1867, considered it worth at
least double the par value, and in January and February, 1868, three
or four times the par value, but it does not appear that these facts
were generally or publicly known, or that the holders of the stock
desired they should be.
The foregoing statement the committee think gives enough of the
historic details, and condition and value of the stock, to make the
following detailed facts intelligible.
Mr. Oakes Ames was then a member of the House of
Representatives, and came to Washington at the commencement of
the session, about the beginning of December, 1867. During that
month Mr. Ames entered into contracts with a considerable number
of members of Congress, both Senators and Representatives, to let
them have shares of stock in the Credit Mobilier Company at par,
with interest thereon from the first day of the previous July. It does
not appear that in any instance he asked any of these persons to pay
a higher price than the par value and interest, nor that Mr. Ames
used any special effort or urgency to get these persons to take it. In
all these negotiations Mr. Ames did not enter into any details as to
the value of the stock or the amount of dividend that might be
expected upon it, but stated generally that it would be good stock,
and in several instances said he would guarantee that they should get
at least 10 per cent. on their money.
 Some of these gentlemen, in their conversations with Mr. Ames,
raised the question whether becoming holders of this stock would
bring them into any embarrassment as members of Congress in their
legislative action. Mr. Ames quieted such suggestions by saying it
could not, for the Union Pacific had received from Congress all the
grants and legislation it wanted, and they should ask for nothing
more. In some instances those members who contracted for stock
paid to Mr. Ames the money for the price of the stock, par and
interest; in others, where they had not the money, Mr. Ames agreed
to carry the stock for them until they could get the money or it
should be met by the dividends.
Mr. Ames was at this time a large stockholder in the Credit
Mobilier, but he did not intend any of these transactions to be sales
of his own stock, but intended to fulfill all these contracts from stock
belonging to the company.
At this time there were about six hundred and fifty shares of the
stock of the company, which had for some reason been placed in the
name of Mr. T. C. Durant, one of the leading and active men of the
concern.
Mr. Ames claimed that a portion of this stock should be assigned
to him to enable him to fulfill engagements he had made for stock.
Mr. Durant claimed that he had made similar engagements that he
should be allowed stock to fulfill. Mr. McComb, who was present at
the time, claimed that he had also made engagements for stock
which he should have stock given him to carry out. This claim of
McComb was refused, but after the stock was assigned to Mr. Ames,
McComb insisted that Ames should distribute some of the stock to
his (McComb’s) friends, and named Senators Bayard and Fowler,
and Representatives Allison and Wilson, of Iowa.
It was finally arranged that three hundred and forty-three shares
of the stock of the company should be transferred to Mr. Ames to
enable him to perform his engagements, and that number of shares
were set over on the books of the company to Oakes Ames, trustee, to
distinguish it from the stock held by him before. Mr. Ames at the
time paid to the company the par of the stock and interest from the
July previous, and this stock still stands on the books in the name of
Oakes Ames, trustee, except thirteen shares which have been
transferred to parties in no way connected with Congress. The
committee do not find that Mr. Ames had any negotiation whatever
with any of these members of Congress on the subject of this stock
prior to the commencement of the session of December, 1867, except
Mr. Scofield, of Pennsylvania, and it was not claimed that any
obligation existed from Mr. Ames to him as the result of it.
In relation to the purpose and motives of Mr. Ames in contracting
to let members of Congress have Credit Mobilier stock at par, which
he and all other owners of it considered worth at least double that
sum, the committee, upon the evidence taken by them and submitted
to the House, cannot entertain doubt. When he said he did not
suppose the Union Pacific Company would ask or need further
legislation, he stated what he believed to be true. But he feared the
interests of the road might suffer by adverse legislation, and what he
desired to accomplish was to enlist strength and friends in Congress
who would resist any encroachment upon or interference with the
rights and privileges already secured, and to that end wished to
create in them an interest identical with his own. This purpose is
clearly avowed in his letters to McComb, copied in the evidence. He
says he intends to place the stock “where it will do most good to us.”
And again, “we want more friends in this Congress.” In his letter to
McComb, and also in his statement prepared by counsel, he gives the
philosophy of his action, to wit, “That he has found there is no
difficulty in getting men to look after their own property.” The
committee are also satisfied that Mr. Ames entertained a fear that,
when the true relations between the Credit Mobilier Company and
the Union Pacific became generally known, and the means by which
the great profits expected to be made were fully understood, there
was danger that congressional investigation and action would be
invoked.
The members of Congress with whom he dealt were generally
those who had been friendly and favorable to a Pacific Railroad, and
Mr. Ames did not fear or expect to find them favorable to movements
hostile to it; but he desired to stimulate their activity and
watchfulness in opposition to any unfavorable action by giving them
a personal interest in the success of the enterprise, especially so far
as it affected the interest of the Credit Mobilier Company. On the 9th
day of December, 1867, Mr. C. C. Washburn, of Wisconsin,
introduced in the House a bill to regulate by law the rates of
transportation over the Pacific Railroad.
Mr. Ames, as well as others interested in the Union Pacific road,
was opposed to this, and desired to defeat it. Other measures
apparently hostile to that company were subsequently introduced
into the House by Mr. Washburn of Wisconsin, and Mr. Washburne
of Illinois. The committee believe that Mr. Ames, in his distributions
of stock, had specially in mind the hostile efforts of the Messrs.
Washburn, and desired to gain strength to secure their defeat. The
reference in one of his letters to “Washburn’s move” makes this quite
apparent.
The foregoing is deemed by the committee a sufficient statement
of facts as to Mr. Ames, taken in connection with what will be
subsequently stated of his transactions with particular persons. Mr.
Ames made some contracts for stock in the Credit Mobilier with
members of the Senate. In public discussions of this subject the
names of members of both Houses have been so connected, and all
these transactions were so nearly simultaneous, that the committee
deemed it their duty to obtain all evidence in their power, as to all
persons then members of either House, and to report the same to the
House. Having done this, and the House having directed that
evidence transmitted to the Senate, the committee consider their
own power and duty, as well as that of the House, fully performed, so
far as members of the Senate are concerned. Some of Mr. Ames’s
contracts to sell stock were with gentlemen who were then members
of the House, but are not members of the present Congress.
The committee have sought for and taken all the evidence within
their reach as to those gentlemen, and reported the same to the
House. As the House has ceased to have jurisdiction over them as
members, the committee have not deemed it their duty to make any
special finding of facts as to each, leaving the House and the country
to their own conclusions upon the testimony.
In regard to each of the members of the present House, the
committee deem it their duty to state specially the facts they find
proved by the evidence, which, in some instances, is painfully
conflicting.