Online Auctions, Virtual communities, and Web portals
Auction Overview
In an auction, a seller offers an item for sale, but does not establish a price
Bidders
– Potential buyers
Bids
– Prices bidders are willing to pay for an item
Shill bidders
– Can artificially inflate the price of an item
English Auctions
In 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
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
Dutch Auctions
• Dutch auctions are also called descending-price auctions
Form of open auction in which bidding starts at a high price and drops until a bidder accepts the price
Often better for the seller
Good for moving large numbers of commodity items quickly
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
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
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 auctionsites
General Consumer Auctions
Most common format used on eBay
– Computerized version of the English auction
eBay English auction
– Allows a seller to set a reserve price
– Bidders are listed
– Bid amounts are not disclosed until after the auction
– Allows sellers to specify that an auction be made private
Consumer Reverse Auctions and Group Purchasing Sites
Reverse bid
– Buyer can accept the lowest offer or the offer that best matches the buyer’s criteria
Priceline.com
– Completes many of its transactions from an inventory
– Operates more as a liquidation broker
Group purchasing site
– Seller posts an item with a price
– As individual buyers enter bids, the site can negotiate a better price with the item’s provider
– Posted price ultimately decreases as the 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
Ingram Micro
– Major distributor of computers and related equipment to value-added resellers
– Often finds itself with outdated items that it formerly turned over to liquidation brokers
– Now it auctions those items to its established customers
– Auction prices it receives average about 60 percent of the items’ costs
Business-to-business Reverse Auctions
The U.S. Navy and the federal government’s General Services Administration are experimenting with reverse auctions
The need for trust and long-term strategic relationships with suppliers makes reverse auctions less attractive in some industries
The use of reverse auctions replaces trusting relationships with a bidding activity that pits suppliers against each other
Auction Related Services
Auction escrow services
– An independent party that holds a buyer’s payment until the buyer receives the 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 software
– For sellers
Software offers 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 consignment services
– Create an online auction for an item
– Handle the transaction
– Remit the balance of the proceeds
Virtual Communities and Web
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 can serve people who want to buy and sell a wide range of products and services
AvantGo
– Provides PDAs with downloads of Web site contents, news, restaurant reviews, and maps
Intelligent Software Agents
Intelligent software agents are programs that search the Web and find items for sale that meet a buyer’s specifications
Some software agents focus on a particular category of product
Simon
– One of the best shopping agents currently available
Virtual Communities
A virtual community is a gathering place for people and businesses that does not have a physical existence
They exist on the Internet in variousforms:
– Usenet newsgroups
– Chat rooms
– Web sites
They offer people a way to connect with each other and discuss common issues and interests
Virtual learning community
– One form of a virtual community
Virtual communities can help companies, their customers, and their suppliers plan, collaborate, and transact business
Google Answers
– Gives people a place to ask questions that are answered by an expert for a fee
The Second Wave of E-Commerce: Social Networking
As the Internet and Web grew:
– Experiences of online communication faded
– New phenomenon in online communication began
Internet no longer focus of community (became a tool)
Enabled communication among community members
Social networking sites
– New Web site category designed to facilitate interactions among people
Web logs (Blogs)
– Web sites containing individual commentary on current events or specific issues
– Form of social networking site
Encourage interaction among people
Visitors add comments
Early blogs focused on technology topics
2004: blogs used as political networking tool
2008: all major candidates using blogs
– Communicating messages, organizing volunteers, raising money
Idea-based social networking
Idea-based virtual communities
Create communities based on connections between ideas
More abstract, participants more engaging
Example: del.icio.us siteOne-word bookmarks tags describe Web pages
Focus: ideas, contributions of all community members
Example: 43 Things
Show promise for re-creating essence of original Internet communities
Revenue Models for Web Portals and Virtual Communities
Web portals are so named because the goal is to be every Web surfer’s doorway to the Web
One rough measure of stickiness is how long each user spends at the site
Nielsen//NetRatings determine site popularity by measuring the number of unique visitors
Web portals
High visitor counts can yield high advertising rates
Companies that run Web portals add sticky features such as chat rooms, e-mail, and calendar functions
Mixed Revenue Portals and Virtual Communites
Time Warner’s AOL unit
– One of the most successful Web portals
– Charges 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
ecommerce and website development 