E-Commerce: The Second WaveFifth Annual Edition

Chapter 6

Online Auctions, Virtual Communities, and Web Portals

Origins of Auctions

• In an auction– Seller offers an item for sale, but does not

establish price

• Bidders– Potential buyers

• Bids– Prices bidders are willing to pay for an item

English Auctions (e.g. eBay)

• Bidders publicly announce their successive higher bids until no higher bid is forthcoming

• Open auction (vs. private auction)

– Bids are publicly announced

• Minimum bid

– The price at which an auction begins

• Reserve price

– Minimum acceptable price (not announced on eBay until bids exceed it)

English Auctions (Continued)

• Yankee auctions

– English auctions that offer multiple units of an item for sale

– Called Dutch on eBay

• Disadvantages

– Winning bidders tend not to bid their full private valuations

– Bidders risk becoming caught up in the excitement of competitive bidding

Dutch Auctions

• Also called descending-price auctions

• Form of open auction in which bidding starts at a high price and drops until bidder accepts price

• Often better for the seller

• Good for moving large numbers of commodity items quickly

• Not same as Dutch on eBay

Online Auctions and Related Businesses

• Three categories of auction Web sites

– General consumer auctions

– Specialty consumer auctions

– Business-to-business auctions

• Largest number of transactions

– Occurs on general consumer auction sites

General Consumer Auctions

• Most common format used on eBay – Computerized version of the English auction

• eBay English auction– Allows seller to set a reserve price

– Bidders are listed (unless Private)

– Bid amounts are not disclosed until after auction

– Allows sellers to specify that an auction be made private

Specialty Consumer Auctions

• Specialized Web auction sites– Meet the need of special interest market

segments

• Specialty consumer auction sites – Golf Club Exchange, Cigarbid.com, and

Winebid

– Gain an advantage by identifying a strong market segment with readily identifiable products

Consumer Reverse Auctions and Group Purchasing Sites

• Reverse bid

– Buyer can accept lowest offer or the offer that best matches buyer’s criteria

• Priceline.com

– Completes many of its transactions from an inventory

– Operates more as a liquidation broker

Consumer Reverse Auctions and Group Purchasing Sites (Continued)

• Group purchasing site

– Seller posts an item with a price

– As individual buyers enter bids, site can negotiate better price with the item’s provider

– Posted price ultimately decreases as number of bids increases

Business-to-Business Auctions

• Liquidation brokers

– Firms that find buyers for unusable inventory items

• Online auctions

– Logical extension of inventory liquidation activities to a new and more efficient channel, the Internet

Business-to-Business Auctions (Continued)

• Ingram Micro

– Major distributor of computers and related equipment to value-added resellers

– Often finds itself with outdated items turned over to liquidation brokers

– Now auctions those items to its established customers

– Auction prices received average about 60 percent of the items’ costs

Auction-Related Services

• Auction escrow services

– An independent party that

• Holds buyer’s payment until buyer receives purchased item and is satisfied with it

• Auction directory and information services

– Offer guidance for new auction participants

– Offer helpful hints and tips for more experienced buyers and sellers along with directories of online auction sites

Auction-Related Services (Continued)

• Auction software

– For sellers

• Software offer services that can help with or automate tasks such as image hosting

– For buyers

• Software observes auction progress and places a bid high enough to win the auction

Auction-Related Services (Continued)

• Auction consignment services

– Create online auction for an item

– Handle the transaction

– Remit balance of proceeds

Virtual Communities and Web Portals

• Cellular-satellite communications technology

– Can be packaged with

• Notebook computers

• Personal digital assistants (PDAs)

• Mobile phones

• Wireless Application Protocol (WAP)

– Allows Web pages formatted in HTML to be displayed on devices with small screens

Electronic Marketplaces

• Marketplaces

– Can serve people who want to buy and sell a wide range of products and services

• AvantGo

– Provide PDAs with downloads of Web site contents, news, restaurant reviews, and maps

Intelligent Software Agents

• Programs that search the Web and find items for sale that meet a buyer’s specifications

• Some software agents

– Focused on a particular category of product

• mySimon

– One of the best shopping agents currently available

Virtual Communities

• Gathering place for people and businesses that does not have physical existence

• Exist on the Internet in various forms

– Usenet newsgroups

– Chat rooms

– Web sites

• Offer people a way to connect with each other and discuss common issues and interests

Virtual Communities (Continued)

• Virtual learning community

– One form of virtual community

• Can help companies, their customers, and their suppliers plan, collaborate, and transact business

• Google Answers

– Gives people a place to ask questions then answered by an expert for a fee

Web Community Consolidation

• Virtual communities for consumers

– Can succeed as money-making propositions if

• They offer something sufficiently valuable to justify a charge for membership

• Web portal revenue models

– Strategies that build on a combination of virtual communities and other activities

Web Portal Revenue Models

• Advertising supported web portals

– One rough measure of stickiness

• How long each user spends at the site

– Nielsen//NetRatings

• Determines site popularity by measuring the number of unique visitors

Web Portal Revenue Models (Continued)

• Web portals

– High visitor counts can yield high advertising rates

– Companies that run Web portals

• Believe in the power of portals

• Add sticky features such as chat rooms, e-mail, and calendar functions

Internal Web Portals

• Run on intranets

• Can save significant amounts of money by

– Replacing the printing and distribution of paper memos, newsletters, and other correspondence

• Can become a good way of creating virtual community among employees