1 10 Chapter 10 Strategies for Web Auctions, Virtual Communities, and Web Portals Electronic Commerce

2 10 Objectives u Key characteristics of the six major auction types u Strategies for general and specific consumer Web auction sites u Strategies for business-to-business Web auction sites

3 10 Objectives u How businesses use virtual communities to increase brand awareness and sales u Strategies for Web portal sites

4 10 Auction Basics u Earliest known auctions were in Babylon around 500 B.C. u Entire Roman Empire was auctioned in 193 A.D. after the death of Emporer Pertinax u Buddhist temples held auctions to sell the possessions of deceased monks u Auction firms Sotheby’s and Christie’s began in the 17 th century

5 10 Auction Basics u English Auctions l Bidders publicly announce their successively higher bids until no higher bid is offered l Minimum price can be used to set the price at which the auction will begin l Reserve price is the minimum price the seller will accept l Yankee auctions allow the bidder to choose the quantity of multiple items offered at the auction

6 10 Auction Basics u Dutch Auctions l Form of open auction in which bidding starts at a high price and drops until a bidder accepts the price l Usually the seller offers a number of similar items for sale l Good for moving large numbers of commodity items quickly

7 10 Auction Basics u Sealed-Bid Auctions l Bidders submit their bids independently and are usually prohibited from sharing information with each other u First-price sealed-bid v Highest bidder wins u Second-price sealed bid v Highest bidder wins, but at the second-highest bidder’s price v Encourages all bidders to bid their private valuations, reducing collusion

8 10 Auction Basics u Double Auctions l Buyers and sellers each submit combined price-quantity bids to an auctioneer l The auctioneer matches the seller’s offer (lowest price, then up) to the buyer’s offers (highest price, then down) l New York Stock Exchange conducts sealed-bid double auctions of stocks and bonds

9 10 Six Major Auction Types Figure 10-1

10 Web Auction Strategies u 1999 PC Computing magazine survey reported that 37% of people responding had made purchases and 12% had sold items using an on-line auction service u 15% of the survey’s respondents stated that they would never use an on-line auction site u Analysts and researchers predict the on-line auctions will account for 30% of all e-commerce by 2002

11 10 General Consumer Auctions u eBay l Search for specific items l Browse by categories of items l Seller options include bold-face type and featured listings l Rating system to provide feedback to alleviate fears concerning seller reliability

12 10 eBay Home Page Figure 10-2

13 10 Additional General Consumer Auctions u Auction Universe, owned by Classified Ventures, a partnership of eight major newspapers l Apartments.com l Cars.com l NewHomeNetwork.com u Yahoo! and Excite have created auctions based on the eBay model

14 10 Excite Auctions Home Page Figure 10-3

15 10 Additional General Consumer Auctions u Amazon.com l Offers “Auctions Guarantee” to reimburse any buyer for merchandise purchased that was not delivered, or “materially different” than represented l Provides escrow service for items over $250 u Klik-Klok Dutch Auction l Short time-period auctions for quantity offerings

16 10 Klik-Klok Dutch Auction in Progress Figure 10-4

17 10 Specialty Consumer Auctions u Technology-related items auction sites l Haggle Online l CNET.com l ZDNet l Onsale uBid, and Bid.com u Numerous specialty auction sites l Golf Club Exchange l Cigar-Bid.com

18 10 Golf Club Exchange Web Auction Figure 10-5

19 10 Business-to-Business Auctions u Typically used to dispose of excess inventory u Large companies use liquidation specialists to find buyers for unusable inventory, create their own auction sites u Smaller companies often sell their excess inventory to liquidation brokers, who, in turn, create auction sites

20 10 CompuUSA Auctions Home Page Figure 10-6

21 10 Examples of Third-Party Auction Sites u Auction IT l Computer equipment u Going, Going...Sold! l Laboratory equipment u FastParts.Com l Electronic components u J.R. Metals Quick Bid Auction l Steel

22 10 Auction-Related Services u Escrow service l Independent party holds buyer’s payment until the item is received and the buyer is satisfied with the purchase u Directory of available auctions l Auction Guide u Guidance for new auction participants l AuctionInsider u Links to auctions sorted by category

23 10 AuctionInsider Directory Figure 10-7

24 10 Seller-Bid Auctions and Group Purchasing Sites u Reverse auctions l Sellers of goods and services bid the prices at which they are willing to sell u Group purchasing sites l Items are posted with a price, as the number of bids increase, the seller negotiates a better price with the item’s provider

25 10 Virtual Community Strategies u Gathering places for people and businesses that does not have a physical existence l Usenet newsgroups l Chat rooms l Web sites u Helps companies, customers, and suppliers plan, collaborate, transact business, and interact in a mutually beneficial way

26 10 Milpro Business-to-Business Virtual Community Site Figure 10-8

27 10 Web Communities u WELL l Whole Earth ‘lectronic Link l Predates the web, began as a series of dialogs among San Francisco authors and readers l Purchased by Salon.com u GeoCities l Free web space for members l Sells advertising to generate revenue l Owned by Yahoo!

28 10 Web Communities u Tripod l Similar to GeoCities l Owned by Lycos u Theglobe.com l Created by Cornell University students l News feeds, art gallery

29 10 Web Portal Strategies u Combinations of virtual communities, search engines, and Web directories u Provide a high degree of “stickiness” that is extremely attractive to advertisers u Examples include AOL, Excite, Infoseek, Lycos, MSN, Netscape Netcenter, Snap, and Yahoo!

30 10 Web Portal Strategies u Typically ask members to provide demographic information about themselves u Very high potential for targeted marketing u High visitor counts yield high advertising rates

homebid.com Home Page Figure 10-9