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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