Arial Online Auctions, Virtual Communities, and Web Portals

1
Chapter 6

• Arial Online Auctions, Virtual Communities,and
  Web Portals

2
Objectives

• Origins and key characteristics of the seven
  major auction types
• Strategies for Web auction sales and
  auction-related businesses
• Virtual communities and Web portals

3
Auction Origins

• Earliest written records are from Babylon and
  date from 500BC
• Auctions became common activities in 17th century
  England
• 18th century saw birth of two British auction
  houses which are still major auction firms today
• British settlers in colonies brought auctions
  with them

4
English Auction

• Starting at a low price
• Bidding increases until no bidder is willing to
  bid higher

5
Dutch Auction

• Starting from a high price
• Bidding automatically decreases until the bidder
  accepts the price
• Example Coldwater Creek uses Dutch
• auctions to sell closeout items on its site

6
First-price sealed bid auction

• Secret bidding process
• The highest bidder pays the amount of the highest
  bid

7
Second-price sealed bid auction(Vickery Auction)

• Secret bidding process
• The highest bidder pays the price of the
  second-highest bid

8
Double auction(open-outcry)

• Buyers and sellers declare combined
  price-quantity bids
• The auctioneer matches seller offers (lowest to
  highest) with buyer offers (highest to lowest)
• Buyers and sellers can modify their bids based on
  knowledge gained from other bids

9
Double auction(sealed-bid)

• Buyers and sellers declare combined
  price-quantity bids
• The auctioneer (specialist) matches seller offers
  (lowest to highest) with buyer offers (highest to
  lowest)
• Buyers and sellers cannot modify their bids

10
Reverse auction(seller-bid)

• Multiple sellers submit price bids to an
  auctioneer that represents a single buyer
• Bids are for a given amount of a specific item
  that the buyer wants to purchase
• Prices go down as the bidding continues until no
  seller is willing to bid lower

11
Online Auctions and Related Businesses

• General Consumer Auctions
• Specialty Consumer Auctions
• Consumer Reverse Auctions and Group Purchasing
  Sites
• Business-to-Business Auctions
• Business-to Business Reverse Auctions
• Auction-Related Services

12
General Consumer Auctions

• eBay

13
eBay

• Most common format is a computerized version of
  the English auction
• eBay English auction allows sellers to set a
  reserve price
• eBay also offers
• Private auctions
• Dutch auctions
• Proxy bidding
• eBays success is due to
• First-mover-advantage
• Advertising (100 million annually)
• Competition
• Yahoo! Auctions
• Amazon.com

14
Specialty Consumer Auctions

• Online auctions that identify special-interest
  market targets and meet the needs of those
  targets
• Examples include
• uBid
• PotteryAuction.com
• JustBeads.com
• StubHub
• Cigarbid.com
• Golf Club Exchange
• Winebid

15
Consumer Reverse Auctions and Group Purchasing
Sites

• Consumer Reverse Auctions
• Online auctions where the buyer (bidder)
  specifies what he/she is looking for then
  merchants contact the buyer with offers to supply
  the item at a particular price
• Often called a reverse bid
• The buyer can then accept the lowest offer or the
  offer that best meets his/her needs
• Example
• Respond.com
• Group Purchasing Sites
• Seller posts an item with a price and as more
  bids for that item are made the site negotiates a
  lower price with the items provider for the
  multiple buyers
• Effect much like a consumer reverse auction
• Examples
• Mercata (Closed in 2001)
• LetsBuyIt.com

16
Business-to-Business Auctions

• Business-to-Business Auctions evolved to meet a
  specific existing need
• A way to dispose of unusable or excess inventory
• Large businesses usually create their own auction
  site to sell excess inventory
• Examples
• Ingram Micro
• CompUSA Auctions
• Smaller businesses usually sell their excess
  inventory through a third-party auction site
• Examples
• DoveBid
• GB RetailExchange
• SmartBargins.com

17
Business-to-Business Auctions

• Online securities exchanges are posing a threat
  to time-honored organizations such as the NYSE
  and Chicago Board of Trade
• The International Securities Exchange
• Funded by electronic brokers
• ETrade
• Ameritrade
• ArcaEx
• These and others pose a threat to physical
  securities exchanges because of their lower fees
• Hospital and other organizations are now using
  online auctions to fill temporary employment
  openings
• Example
• BidShift sells software to companies that lets
  them operate their own shift auctions

18
Business-to-Business Reverse Auctions

• Work the same as Consumer Reverse Auctions
• Suppliers bid to supply a company with a product
• These auctions are debated widely in the
  business world today
• Supply Chain Characteristics that Support
• Supplies are highly competitive
• Product features can be clearly specified
• Suppliers are willing to reduce the margin they
  earn on this product
• Suppliers are willing to participate in reverse
  auctions
• Supply Chain Characteristics that Discourage
• Product is highly complex or requires regular
  changes in design
• Product has customized features
• Long-term strategic relationships are important
  to buyers and suppliers
• Switching costs are high

19
Auction-Related Services

• Auction Escrow Services
• Independent party holds a buyers payment until
  the buyer receives the product
• Some take the delivery and inspect the product
  for the buyer
• Most escrow agents are appraisers who are
  qualified to judge quality
• Escrow services charge a fee ranging from 5 to
  50

20
Auction-Related Services

• Auction Directory and Information Services
• Offer guidance for new auction participants
• Some offer e-mail newsletters relating to the
  online auction industry
• Some offer a search engine that specializes in
  auction sites
• Some offer information about the market value of
  a wide variety of products

21
Auction-Related Services
22
Auction-Related Services

• Auction Software
• Buyers and sellers both use software to help
  manage their online auctions
• Sellers use software that automate tasks such as
  image hosting, advertising, and page design
• Buyers use software to place bids or many
  products at once

23
Auction-Related Services

• Seller software
• Andale
• AuctionHawk
• Vendio
• Buyer software
• Cricket Sniping Software

24
Auction-Related Services

• Auction Consignment Services
• Companies take items people and crate an online
  auction for that item
• They also handle the transaction and
• A small fee is taken out of the profits ranging
  from 10 to 40 percent

25
Auction-Related Services
26
Virtual Communities and Web Portals

• Mobile Communications Technology
• Notebooks, PDAs, and mobile phones can be connect
  to the internet via satellite communication
  technology
• Wireless Application Protocol
• Allows HTML web pages to be viewed on devices
  with small screens

27
Virtual Communities and Web Portals

• Intelligent Software Agents
• Programs that search the Web and find items that
  meet the buyers specifications
• Different software agents focus on different
  product categories
• Agents can also track the ratings of buyer and
  seller reputations

28
Virtual Communities and Web Portals

• Virtual Communities
• A gathering place with no physical existence
• Usenet news groups, chat rooms, and web sites
• Virtual Learning Community
• Blackboard
• Google Answers
• People can have their questions answered by an
  expert

29
Virtual Communities and Web Portals

• Early Web Communities
• WELL
• Whole Earth Lectronic Link
• Began as a dialog among the authors and readers
  of the Whole Earth Review in 1985
• Members pay a monthly fee to participate
• Salon.com purchased WELL in 1999

30
Virtual Communities and Web Portals

• Web Portal Revenue Models
• Advertising-Supported Web Portals
• Nielsen/NetRatings
• High visitor counts can yield high advertising
  rates for these sites
• The demographic information provided by portals
  makes the potential for targeted marketing very
  high

31
Virtual Communities and Web Portals

• Web Portal Revenue Models
• Mixed-Revenue Web Portals
• Time Warners AOL unit
• Charges a fee while running advertising on the
  site
• Many portals struggling with advertising have
  started to use fee based revenue as well

32
Virtual Communities and Web Portals

• Web Portal Revenue Models
• Internal Web Portals
• Used by large organizations to provide
  information to employees
• Can save money by replacing paper memos and
  newsletters
• Can create a Q A page