1. E-Commerce: The Second Wave Fifth Annual Edition
Chapter 6:
Online Auctions, Virtual Communities, and Web Portals

2. Objectives In this chapter, you will learn about:
Origins and key characteristics of the seven major auction types
Strategies for Web auction sites and auction- related businesses
Virtual communities and Web portals
E-Commerce: The Second Wave, Fifth Annual Edition

3. Origins of Auctions In an auction Bidders Bids Shill bidders
Seller offers an item for sale, but does not establish price
Bidders
Potential buyers
Bids
Prices bidders are willing to pay for an item
Shill bidders
Can artificially inflate the price of an item
E-Commerce: The Second Wave, Fifth Annual Edition

4. English Auctions
Bidders publicly announce their successive higher bids until no higher bid is forthcoming
Open auction
Bids are publicly announced
Minimum bid
The price at which an auction begins
Reserve price
Minimum acceptable price
E-Commerce: The Second Wave, Fifth Annual Edition

5. English Auctions (Continued)
Yankee auctions
English auctions that offer multiple units of an item for sale
Disadvantages
Winning bidders tend not to bid their full private valuations
Bidders risk becoming caught up in the excitement of competitive bidding
E-Commerce: The Second Wave, Fifth Annual Edition

6. Dutch Auctions
tid=12
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
E-Commerce: The Second Wave, Fifth Annual Edition

7. Coldwater Creek Dutch Auction of Closeout Merchandise
E-Commerce: The Second Wave, Fifth Annual Edition

8. Other Types of Auctions
Sealed-bid auctions
Bidders submit their bids independently
Second-price sealed-bid auction
Highest bidder is awarded the item at the price bid by the second-highest bidder
Open-outcry double auctions
Buy and sell offers are shouted by traders standing in a small area on the exchange floor
E-Commerce: The Second Wave, Fifth Annual Edition

9. Other Types of Auctions (Continued)
Double auction
Buyers and sellers each submit combined price-quantity bids to an auctioneer
Reverse (Seller-Bid) Auctions
Multiple sellers submit price bids to an auctioneer who represents a single buyer
Bids are for a given amount of a specific item that the buyer wants to purchase
E-Commerce: The Second Wave, Fifth Annual Edition

10. 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
E-Commerce: The Second Wave, Fifth Annual Edition

11. 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
Bid amounts are not disclosed until after auction
Allows sellers to specify that an auction be made private
E-Commerce: The Second Wave, Fifth Annual Edition

12. 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, Diamond
Gain an advantage by identifying a strong market segment with readily identifiable products
E-Commerce: The Second Wave, Fifth Annual Edition

13. 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
E-Commerce: The Second Wave, Fifth Annual Edition

14. Consumer Reverse Auctions and Group Purchasing Sites (Continued)
Group purchasing site - LetsBuyIt
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
E-Commerce: The Second Wave, Fifth Annual Edition

15. 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
E-Commerce: The Second Wave, Fifth Annual Edition

16. 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
E-Commerce: The Second Wave, Fifth Annual Edition

17. CompUSA Auctions Home Page
E-Commerce: The Second Wave, Fifth Annual Edition

18. Business-to-Business Reverse Auctions
U.S. Navy and the federal government’s General Services Administration
Experimenting with reverse auctions
Need for trust and long-term strategic relationships with suppliers
Makes reverse auctions less attractive in some industries
Use of reverse auctions
Replaces trusting relationships with a bidding activity that pits suppliers against each other
E-Commerce: The Second Wave, Fifth Annual Edition

19. Supply Chain Characteristics and Reverse Auctions
E-Commerce: The Second Wave, Fifth Annual Edition

20. Auction-Related Services
Auction escrow services - Escrow.com
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 – Auctionguide.com
E-Commerce: The Second Wave, Fifth Annual Edition

21. Auction-Related Services (Continued)
Auction software
For sellers Vendio
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 - Sniping
E-Commerce: The Second Wave, Fifth Annual Edition

22. Auction-Related Services (Continued)
Auction consignment services
Create online auction for an item
Handle the transaction
Remit balance of proceeds
Picture it SOLD
E-Commerce: The Second Wave, Fifth Annual Edition

23. Portion of Andale Products Page
E-Commerce: The Second Wave, Fifth Annual Edition

24. 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
E-Commerce: The Second Wave, Fifth Annual Edition

25. Web Page Displayed on a PDA
E-Commerce: The Second Wave, Fifth Annual Edition

26. Electronic 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
E-Commerce: The Second Wave, Fifth Annual Edition

27. AvantGo Channels Subscription Page
E-Commerce: The Second Wave, Fifth Annual Edition

28. 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
Simon
One of the best shopping agents currently available
E-Commerce: The Second Wave, Fifth Annual Edition

29. 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
E-Commerce: The Second Wave, Fifth Annual Edition

30. 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
E-Commerce: The Second Wave, Fifth Annual Edition

31. JA-SIG uPortal Home Page
E-Commerce: The Second Wave, Fifth Annual Edition

32. Google Answers Page
E-Commerce: The Second Wave, Fifth Annual Edition

33. Early Web Communities The WELL ( “whole earth ’lectronic link”) Tripod
One of the first Web communities
Predates the Web
Tripod
Founded in 1995 in Massachusetts
Offered its participants free Web page space, chat rooms, news and weather updates, and health information pages
E-Commerce: The Second Wave, Fifth Annual Edition

34. 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
E-Commerce: The Second Wave, Fifth Annual Edition

35. 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
E-Commerce: The Second Wave, Fifth Annual Edition

36. 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, , and calendar functions
E-Commerce: The Second Wave, Fifth Annual Edition

37. Stickiness of Popular Web Sites
E-Commerce: The Second Wave, Fifth Annual Edition

38. Mixed Revenue Portals Time Warner’s AOL unit Yahoo!
One of the most successful Web portals
Charged a fee to users and has always run advertising on its site
Yahoo!
Now charges for the Internet phone service originally offered at no cost
E-Commerce: The Second Wave, Fifth Annual Edition

39. 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
E-Commerce: The Second Wave, Fifth Annual Edition

40. Summary Companies are now using Web to
Operate auction sites, create virtual communities, and serve as Web portals
Consumer online auction business
Dominated by eBay
B2B auctions
Give companies a new and efficient way to dispose of excess inventory
B2B reverse auctions
Provide an effective procurement tool
E-Commerce: The Second Wave, Fifth Annual Edition

41. Summary New companies have formed that
Capitalize on Web’s ability to bring together geographically dispersed people and organizations
Organizations are using mobile commerce to
Sell goods and services to users of handheld devices
Companies are using internal Web portals to
Communicate with employees
E-Commerce: The Second Wave, Fifth Annual Edition