Electronic Commerce

1
Electronic Commerce
MIS 6453 -- Spring 2006

• Online Auctions

Instructor John Seydel, Ph.D.
2
Student Objectives

• Summarize key characteristics of the major
  auction types
• Discuss revenue models and strategies for online
  auction sites
• Address how the second wave of ecommerce has
  spawned auction-related businesses
• Discuss characteristics of virtual communities
• Understand web portals and their associated
  challenges

3
Agenda

• Some old business
• Discuss B2B eCommerce via the Bray team
• Address questions about HTML exercises
• Next, a discussion of online auctions, via the
  Guynes Davis team
• As warranted, some final overview and summary
  comments regarding
• B2b ecommerce
• Online auctions and virtual communities
• If time
• Some guidelines for HTML source code
• Bulleted lists in HTML

4
Auction Basics

• Characterizing auctions a given auction can be
  either
• Conducted by/for seller or conducted by/for
  buyer, and
• Sealed bid or open bid, and
• English or Dutch, and
• First price or Vickrey (second price) , and
• Single auction or double auction
• Some terms
• Reserve price
• Winners curse
• Yankee auction (multiple units involved)
• Private valuation
• Shill bidding
• Economics perspectives
• Pareto efficiency
• Consumer/ producer surplus (?)

5
Online Auctions

• Using the Web to do things that havent been done
  before at all
• Expected to account for 50 of all ecommerce
  dollar volume by 2007
• Three categories
• General consumer (eBay)
• Specialty consumer market segmentation (uBid)
• B2B (CompUSA)
• Revenue models
• Charge
• Buyer
• Seller
• Advertising
• Subscription, for additional support,
  enhancements
• Consider eBay (most widely known site)
• English auction
• Open bid (more or less)
• Conducted by/for seller
• First price
• Single auction

6
How Online Auctions Work

• Reserve price (to start the bidding)?
• Minimum bid increments/decrements
• Proxy bid can trigger bidding
• Automatic bidding possible (limit set)
• Need to generate critical mass to be effective
  (hence, first-mover advantage)
• Guarantee policy (or escrow service)

7
Fraud Concerns for Online Auctions

• Consumers getting what they pay for (15 fraud
  rate)
• Receipt of the goods
• Condition of the goods
• Sellers getting the money
• Greater potential losses than consumer losses
• Stolen credit cards
• Some solutions
• Ratings
• Buyers rate sellers
• Sellers rate buyers
• Research sellers records
• Escrow services
• Hold the money
• Hold the product and inspect
• Sell buyers insurance

8
Auction-Related Services

• Represent 2nd wave of ecommerce
• Escrow services
• Directories
• Market value support
• For buyers
• For sellers (reserve prices)
• Site listings
• Software
• Page development
• Image management
• Sniping
• Consignment services
• Revenue models
• Fees based upon value escrow consignment
• Advertising directories sniping software
• Subscription software

9
B2B Auctions

• Most online auctions are C2C general auctions
• Essentially online garage sales
• Trading collectibles also
• However, B2B auctions are evolving and providing
  services that make business more efficient
• Online version of liquidation broker concept
• Build buying/selling power for smaller businesses
• Result in disintermediation
• Replaces traditional liquidation brokers
• Reduce costs along industry value chain
• Three models
• Liquidation broker
• Large company (Ingram Micro)
• Small company (often conducted by liquidation
  brokers)
• C2C model applied to business
• Where markets have been inefficient
• Bring new buyers and sellers together

10
B2B Reverse Auctions

• Facilitate low-cost procurement
• Criticized for being a step backward
• Pit suppliers against one another on basis of
  price (recall Demings 4th point?)
• Other aspects ignored
• But specs can be extensive and rigid
• Also, multicriteria bidding approaches can be
  used
• Note guidelines

11
Some Successful B2B Auction Applications

• Band-X (airtime for telco firms)
• ISE (by eTrade and AmeriTrade)
• Ariba (private procurement software)
• BidShift (HR scheduling software)

12
Virtual Communities

• Another 2nd wave opportunity for making money on
  the Web online communities
• Recall the 7 Cs in parcticular, community,
  connectivity, and communication
• Consider the textbook example on-demand
  translation of newspaper article
• Example of whats possible with 2nd wave
• Requisite technologies exist but have yet to be
  assembled
• Cellular/satellite communications (WAP)
• Electronic marketplaces (sell ads that appear
  with downloaded content)
• Intelligent shopping agents
• Search the Web
• Create and search databases of all kinds

13
Using Portals to Enable Virtual Communities

• Virtual communities are often combined with
  portals
• Virtual learning communities (e.g., Blackboard)
• Provide common meeting place
• Initially, a common bond existed Internet usage
  (communities of geeks?)
• Now, sites exist for the sole purpose of
  community
• For various special interest groups
• Many opportunities exist and are appearing over
  time
• Revenue models
• Advertising
• Subscriptions
• Free in exchange for information

14
Boosting Advertising Revenues

• Advertisers no longer pay in advance they want
  proof of effectiveness
• Need to increase stickiness
• The longer a visitor stays, the greater the
  likelihood of conversion
• Requires additional features chat rooms, email,
  calendar functions

15
Some Guidelines for Source Code

• Use lowercase for tags attributes
• Quote attribute values
• Use relative references for resources on same
  server
• Always use closing tags
• Nest elements properly close in reverse order of
  opening
• Use indentation consistently and to make code
  readable
• No more than 80 characters per line of code
  break long tags into multiple lines, typically
  one per attribute
• Avoid deprecated elements, e.g., ltfontgt
• Use no spaces in file names
• Treat all URLs and other resource names as if
  case-sensitive

16
Summary of Objectives

• Summarize key characteristics of the major
  auction types
• Discuss revenue models and strategies for online
  auction sites
• Address how the second wave of ecommerce has
  spawned auction-related businesses
• Discuss characteristics of virtual communities
• Understand web portals and their associated
  challenges

17
Appendix
18
Supply Chain Characteristics and Reverse Auctions
19
The 7 Cs of the Customer Interface
20
The 7 Cs Community
Apparent archetypes

• Wander thru vast array of interest areas no
  interaction
• Finite group of interest areas
• Focused on particular interest area high member
  interaction
• High focus with minimal member interaction
• Particular focus with moderate member interaction
• Focus on common interest area with considerable
  interaction

21
Comparative Stickiness of Websites