1. IMS 6485: Auctions, Portals, & Communities 1 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Topics Common themes Dynamic pricing models and auctions Internet auction popularity Types of auctions & auction considerations The eBay case Portals Communities Common themes revisited

2. IMS 6485: Auctions, Portals, & Communities 2 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Auctions, Portals, & Communities on the Value Chain? Where do these topics fall?

3. IMS 6485: Auctions, Portals, & Communities 3 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU What Do These Topics Have in Common? Why do you think that these three topics are included in one chapter? –Auctions –Portals –Communities "They are each based on feelings of shared interest and self-identification—in short, a sense of community." Could the same thing be said about shoppers at Wal Mart on Saturday morning?

4. IMS 6485: Auctions, Portals, & Communities 4 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Auctions The book (correctly) identifies auctions as "dynamic pricing models". What are other examples of dynamic pricing models? –Volume discounts –Members-only pricing –Price discrimination –Others? How are the prices "dynamic" in each instance? What determines how the final price is set? How are airline seat prices set?

5. IMS 6485: Auctions, Portals, & Communities 5 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Auctions (cont.) What has been the historical (pre-Internet) role of auctions? When do we see them used? When are they typically not used? Why would a seller expose themselves to the risk of an unexpectedly low price at an auction? What conditions must be true for an auction to be a viable selling and buying strategy

6. IMS 6485: Auctions, Portals, & Communities 6 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Dynamic Pricing Many forms of dynamic pricing, including auctions, are used when the seller does not know how much the buyer may value the item In other cases, the seller may know things about the buyer that causes them to think they can charge more, or must charge less, to get the buyer's business –What is price discrimination –Name examples of price discrimination Legal Illegal

7. IMS 6485: Auctions, Portals, & Communities 7 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Dynamic Pricing (cont.) Any market where haggling or negotiation takes place represents a dynamic pricing scenario Marked prices for products were sticky when it was difficult to change the physical price What has been the history of technologies that enabled dynamic pricing of goods (pre-Internet)?

8. IMS 6485: Auctions, Portals, & Communities 8 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Dynamic Pricing (cont.) What are the fundamental advantages to the seller of dynamic pricing?

9. IMS 6485: Auctions, Portals, & Communities 9 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Dynamic Pricing (cont.) Consumers usually resent dynamic pricing –May account for prevalence of fixed pricing strategies in many US markets that would be dynamic elsewhere –Trend toward fixed price auto sales, a traditionally dynamically priced market segment

10. IMS 6485: Auctions, Portals, & Communities 10 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Auctions Why have Internet-enabled auctions become so popular? –Liquidity (matching sellers with buyers) –Price discovery –Price transparency –Market Efficiency—the market clears –Lower transaction costs –Consumer aggregation/Network Effects Consumers do not resent (or at least don't blame the seller) over the inherent dynamic pricing in auctions

11. IMS 6485: Auctions, Portals, & Communities 11 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU How Do Auctions Affect Us? Do we want to use auction sources for procurement (upstream in the value chain)? Do we want to use auctions to sell products or services? –Routine method of sale? –Special case method? Do we want to host auctions for some other purpose: –Revenue? –Community building? –Brand enhancement? –Etc?

12. IMS 6485: Auctions, Portals, & Communities 12 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Different Types of Auctions—Advantages of Each Sealed bid—best bid wins Vickrey auction—highest bid wins but pays price of 2d highest bid English auction—traditional Dutch auction—falling price auction Dutch Internet—ascending price, multiple unit, lowest 'clearing' price is paid by all winners Japanese auction—like English but buyers must bid at each level Yankee auction—multiple unit. Price and quantity bid determine winnner Reverse auction—like English but sellers bid down prices Group buying—Like Yankee auction but sellers are bidding low prices with quantities Name your own price Double auction—stock markets

13. IMS 6485: Auctions, Portals, & Communities 13 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Auction Considerations Type of Product—Prices difficult to discover, perishable, commodity Product Life Cycle—late Channel Issues—Don't compete with existing channel Type of Auction to choose Initial Price Setting—Set low to rope in buyers Bid Increments—Low increments to maintain momentum Length of Auction Number of Items to Offer— Keep lot sizes lower if possible Price Allocation Rules— Differ by whether public or private Closed (private) vs. Public Bidding Rules

14. IMS 6485: Auctions, Portals, & Communities 14 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Consumer Behavior at Auctions See interesting discussion of –Psychology of auctions –Fraud and abuse –Trust What personal experience and opinions do you have with each of these issues?

15. IMS 6485: Auctions, Portals, & Communities 15 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU eBay Wow!!! Don't you wish you had…? What made eBay work? –Auctions an important early driver of eBay's success –What application of business case issues do we see in eBay? –What eCommerce issues apply to eBay? "eBay now bills itself as a trading platform" –What is the nature of eBay's expansion? –What were the key enablers? Is eBay a merchant or a service provider?

16. IMS 6485: Auctions, Portals, & Communities 16 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Portals What is a portal? What are their revenue models –Past? –Present? Why are they so valuable? –What single aspect of a portal has the most effect on value? –How has this aspect affected the development efforts for portals?

17. IMS 6485: Auctions, Portals, & Communities 17 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Lessons from the Yahoo Case What are they? How important is content in Yahoo's portal? –What has Yahoo been doing to manage content cost? –Why can this be successful? Scalability

18. IMS 6485: Auctions, Portals, & Communities 18 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Communities How do virtual communities compare with physical communities? Can you form a relationship with someone you've never met? –"Some argue that virtual communities are an adequate, even superior, replacement for traditional communities…" –What do you think?

19. IMS 6485: Auctions, Portals, & Communities 19 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Communities and Business Models How do communities generate revenue (and how much)? –For profit? –Just enough to support the community? Read the discussion of moral boundaries between commerce and community? –Is this a moral issue or one of consumer preference?

20. IMS 6485: Auctions, Portals, & Communities 20 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Types of Communities What are the revenue models or motivations for the managers of each of these types of communities? –General communities –Practice communities –Interest communities –Affinity communities Self and group identification –Sponsored communities

21. IMS 6485: Auctions, Portals, & Communities 21 Dr. Lawrence West, MIS Dept., University of Central Florida LWEST@BUS.UCF.EDU Portals & Communities How are portals and communities similar and different? Which characteristic of each adds value to the other? Can characteristics of either add value to auction sites?