OIM 210 Exam #3 (Amazon, Network Effects, Social Media, Google)

Professor Nora Junaid Fall 2025 UMass Amherst

How long did Amazon go without turning a profit and how much did it lose?

Seven years, losing over $3 billion.

Why did analysts call Amazon “Amazon.toast”?

They believed traditional retailers would crush early dot-coms using superior logistics and brand power.

What was Jeff Bezos’ approach to early Amazon profitability?

He ignored short-term Wall Street pressure and invested long-term in infrastructure, technology, and new markets.

Name three major personal investments Bezos made through Bezos Expeditions.

Blue Origin, Twitter, and Uber.

What newspaper did Bezos buy in 2013?

The Washington Post.

What are the three pillars of Amazon’s business wheel?

Selection, customer experience, and low prices.

How does customer experience feed Amazon’s growth?

A great experience attracts more customers, which brings more sellers, creating scale and reinforcing growth.

What kind of network effect does Amazon’s marketplace create?

A two-sided network effect between buyers and third-party sellers.

How does Amazon use customer data?

To personalize experiences, optimize operations, predict demand, and reduce costs.

What was Amazon’s early warehousing system like?

Inefficient and costly until redesigned with data-driven processes.

What do Kiva robots do in Amazon warehouses?

Bring shelves to workers, increasing speed and reducing human walking time.

Why does Amazon avoid placing similar items next to each other on shelves?

To reduce picking errors.

What does Amazon’s packing software determine automatically?

Box size, packing materials, tape, and weight validation.

How many robots does Amazon use in fulfillment centers?

Over 100,000.

What is the cash conversion cycle (CCC)?

The time between paying suppliers and collecting customer payments.

Why does Amazon benefit from a short or negative CCC?

It collects money immediately while delaying payments to suppliers, boosting liquidity.

What risks do companies with slow CCCs face?

Liquidity issues and needing short-term loans.

What cultural principle does Amazon use for decision-making?

“Data wins arguments.”

Why does Amazon acquire other companies?

To expand offerings, eliminate potential threats, and experiment with new categories.

Name four major Amazon acquisitions.

Zappos, Audible, Goodreads, LoveFilm.

Why is Amazon building its own logistics infrastructure?

To reduce costs, gain control, and speed up delivery.

How do Amazon Go stores eliminate checkout lines?

Customers scan an app and sensors track items, automatically charging upon exit.

How much did Amazon pay for Whole Foods?

$13.7 billion.

What percentage of the Whole Foods acquisition was goodwill?

About 70%.

What technology powers Kindle screens?

e-Ink, which is readable in sunlight and uses very little power.

Why does Amazon sell Kindle devices at low or break-even prices?

To make money on digital content instead of hardware.

Why did the Fire Phone fail?

It was overpriced and users were already committed to iOS/Android ecosystems.

When was AWS launched?

2006.

How much revenue did AWS generate in 2020?

Over $45 billion.

Why is cloud computing attractive to businesses?

Lower costs, scalability, expertise, and flexibility (including hybrid cloud).

What is a network effect?

When a product or service gains value as more people use it.

What are the three sources of network effects value?

Exchange, staying power, and complementary benefits.

What is the exchange benefit in network effects?

Value increases when users can communicate, transact, or share with more people.

What is staying power?

The long-term viability of a product or service that keeps users from switching.

What increases staying power?

High switching costs and user investment.

Why did users stick with Windows despite flaws?

High switching costs and investment in software and training.

What are complementary benefits?

Additional products or services that add value to a platform.

What is a platform?

A product or service that allows third-party complementary goods to be built on it.

What is a one-sided market?

A network with a single group of users (e.g., messaging).

What is a two-sided market?

A network with two distinct groups that benefit from each other (e.g., consoles and game developers).

What are same-side exchange benefits?

Users attracting more users from the same group.

What are cross-side exchange benefits?

One group’s growth increasing the value for another group.

Why do network markets experience fierce early competition?

Once a leader emerges, the market “tips” toward them due to network effects.

What is a winner-take-all market?

A market dominated by one major player.

Why is defeating a dominant network effects leader difficult?

Rivals must surpass the leader's product features plus its exchange, switching costs, and complement ecosystem.

Do network effects hurt innovation?

They restrict competition but boost innovation within the dominant standard.

What was the problem with mobile development before iPhone?

Too many hardware and software variations made development costly and risky.

How did the iPhone improve mobile innovation?

It offered a large, unified platform with consistent development standards.

Why was Zoom able to beat WebEx and Teams?

It was easier to install, more reliable, cross-platform, feature-rich, and low-friction.

What early choice made Zoom spread quickly?

No account required to join meetings.

How did Zoom use the freemium model?

The free version included almost all features but limited meetings to 40 minutes.

What did Zoom do after facing security issues?

Paused new features for 90 days to fix security and privacy problems.

What lesson does Zoom’s rise teach?

If incumbents ignore customers, a superior product can seize network effects and win.

What is a blog?

An online journal or discussion page in reverse chronological order.

What are key features of a blog?

Easy publishing, comments, tags, searchability, persistence, and reverse chronology.

What is inbound marketing?

Using valuable content to attract customers naturally.

What are owned, paid, and earned media?

Owned = firm-controlled; Paid = advertisements; Earned = organic public attention.

What is a wiki?

A collaborative website anyone can edit.

What features do wikis have?

Revision history, tagging, edit tracking, notifications, and searchable pages.

Why are wikis useful in organizations?

They improve collaboration and knowledge sharing.

What is a social network?

A service enabling user profiles, connections, and sharing.

What are the two most dominant social networks?

Facebook (personal) and LinkedIn (professional).

What are feeds in social media?

Streams of updates that help spread information virally.

Why can feeds be controversial?

Users may dislike their activity being publicly broadcast.

What is LinkedIn used for?

Professional networking, recruiting, and job searching.

What is a boomerang employee?

A former employee who returns to the organization.

What is Sermo?

A social network for physicians to discuss medical cases.

What is PatientsLikeMe?

A network where chronically ill patients share treatment outcomes.

What is Twitter?

A microblogging service with 280-character messages.

What is a hashtag used for?

Categorizing tweets for discovery.

What is the free rider problem in Twitter’s API?

Third-party apps use Twitter data without generating revenue for Twitter.

What is the wisdom of crowds?

The idea that large groups can produce better insights than individuals.

What is a prediction market?

A crowdsourced forecasting tool where participants predict outcomes.

What is crowdsourcing?

Outsourcing tasks to a large, undefined group via open call.

What is SMART?

Social Media Awareness and Response Team.

What are the three R’s of social media policy?

Representation, Responsibility, Respect.

What is a sock puppet?

A fake online identity used to praise or defend a company.

What is astroturfing?

Fake or paid reviews pretending to be organic.

What is online reputation management?

Managing a firm’s online public perception.

What are the Four Ms of social engagement?

Megaphone, Magnet, Monitoring, Mediation.

What is the embassy approach to social media?

Maintaining consistent branded presence across platforms.

What happened in the Cisco Fatty incident?

A new hire tweeted negatively about Cisco, causing a public PR issue.

What is Google’s core business model?

Matchmaking between users and advertisers.

What funds most of Google’s free services?

Advertising revenue.

What are Google’s moonshots?

Long-term risky technology projects.

What is PageRank?

Google’s original algorithm ranking pages based on inbound links.

What is SEO?

Optimizing a site to rank higher in organic search results.

What is link fraud?

Creating bogus sites to manipulate search rankings.

How many servers does Google operate?

Over 1.4 million.

What is SEM?

Search engine marketing.

What is keyword advertising?

Ads triggered by user search queries.

What is PPC?

Pay-per-click advertising where advertisers pay only for clicks.

What determines ad rank on Google?

Max CPC bid and Quality Score.

What percent of mobile time is in apps?

86%.

What is the Google Display Network?

Google’s ad distribution across millions of sites.

What is AdSense?

Ad targeting on third-party websites.

What is a content adjacency problem?

Ads appearing beside inappropriate content.

Why is Google’s growth challenging?

Core ad markets are maturing.

What is the Semantic Web?

Structured tagging of information for better search interpretation.

What is Google Now?

A predictive assistant that delivers information before the user asks.