Chapter 6 Online Auctions Virtual Communities and Web

Chapter 6: Online Auctions, Virtual Communities, and Web Portals

Auction Overview ü In an auction, a seller offers an item for sale, but does not establish a price ü Bidders ä Potential buyers ü Bids ä Prices bidders are willing to pay for an item ü Shill bidders ä Can artificially inflate the price of an item

English Auctions ü In English auctions, bidders publicly announce their successive higher bids until no higher bid is forthcoming ü Open auction ä Bids are publicly announced ü Minimum bid ä The price at which an auction begins ü Reserve price ä Minimum acceptable price ü Yankee auctions ä English auctions that offer multiple units of an item for sale ü Disadvantages ä Winning bidders tend not to bid their full private valuations ä Bidders risk becoming caught up in the excitement of competitive bidding

Dutch Auctions ü Dutch auctions are also called descending-price auctions ü Form of open auction in which bidding starts at a high price and drops until a bidder accepts the price ü Often better for the seller ü Good for moving large numbers of commodity items quickly

Other Types of Auctions ü Sealed-bid auctions ä Bidders submit their bids independently ü Second-price sealed-bid auction ä Highest bidder is awarded the item at the price bid by the secondhighest bidder ü Open-outcry double auctions ä Buy and sell offers are shouted by traders standing in a small area on the exchange floor ü Double auction ä Buyers and sellers each submit combined pricequantity bids to an auctioneer ü Reverse (seller-bid) auctions ä Multiple sellers submit price bids to an auctioneer who represents a single buyer ä Bids are for a given amount of a specific item that the buyer wants to purchase

Online Auctions and Related Businesses ü Three categories of auction Web sites: ä General consumer auctions ä Specialty consumer auctions ä Business-to-business auctions ü Largest number of transactions occurs on general consumer auction sites

General Consumer Auctions ü Most common format used on e. Bay ä Computerized version of the English auction ü e. Bay English auction ä Allows a seller to set a reserve price ä Bidders are listed ä Bid amounts are not disclosed until after the auction ä Allows sellers to specify that an auction be made private

Specialty Consumer Auctions ü Specialized Web auction sites meet the need of special interest market segments ü Specialty consumer auction sites gain an advantage by identifying a strong market segment with readily identifiable products ä Golf Club Exchange, Cigarbid. com, and Winebid Exercise: Go to some of the above auction sites. What are the similarities? Differences? (Note: you can use the links in Chap 6 of the On-line Companion)

Consumer Reverse Auctions and Group Purchasing Sites ü Reverse bid ä Buyer can accept the lowest offer or the offer that best matches the buyer’s criteria ü Priceline. com ä Completes many of its transactions from an inventory ä Operates more as a liquidation broker ü Group purchasing site ä Seller posts an item with a price ä As individual buyers enter bids, the site can negotiate a better price with the item’s provider ä Posted price ultimately decreases as the number of bids increases

Business-to-Business Auctions ü Liquidation brokers ä Firms that find buyers for unusable inventory items ü Online auctions ä Logical extension of inventory liquidation activities to a new and more efficient channel, the Internet ü Ingram Micro ä Major distributor of computers and related equipment to value-added resellers ä Often finds itself with outdated items that it formerly turned over to liquidation brokers ä Now it auctions those items to its established customers ä Auction prices it receives average about 60 percent of the items’ costs

Business-to-Business Reverse Auctions ü The U. S. Navy and the General Services Administration are experimenting with reverse auctions ü The need for trust and long-term strategic relationships with suppliers makes reverse auctions less attractive in some industries ü The use of reverse auctions replaces trusting relationships -- bidding activity pits suppliers against each other

Auction-Related Services ü Auction escrow services ä An independent party that holds a buyer’s payment until the buyer receives the purchased item and is satisfied with it ü Auction directory and information services ä Offer guidance for new auction participants ä Offer helpful hints and tips for more experienced buyers and sellers along with directories of online auction sites ü Auction software ä For sellers ä Software offers services that can help with or automate tasks such as image hosting ä For buyers ä Software observes auction progress and places a bid high enough to win the auction ü Auction consignment services ä Create an online auction for an item ä Handle the transaction ä Remit the balance of the proceeds

Virtual Communities and Web Portals ü Cellular-satellite communications technology can be packaged with: ä Notebook computers ä Personal digital assistants (PDAs) ä Mobile phones ü Wireless Application Protocol (WAP) ä Allows Web pages formatted in HTML to be displayed on devices with small screens

Intelligent Software Agents ü Intelligent software agents are programs that search the Web and find items for sale that meet a buyer’s specifications ü Some software agents focus on a particular category of product ü Simon ä One of the best shopping agents currently available Exercise (E 4) Use My. Simon, Best Web Buys, or another Web pricing Robot to find sources for a product of interest (book, DVD, other) That you want to buy. Evaluate the results provided by the robot In terms of how useful the robot wa sin helping you with your purchase.

Virtual Communities ü A virtual community is a gathering place for people and businesses that does not have a physical existence ü Virtual learning community ü They exist on the Internet in various forms: ü Virtual communities can help companies, their customers, and their suppliers plan, collaborate, and transact business ä Usenet newsgroups ä Chat rooms ä Web sites ü They offer people a way to connect with each other and discuss common issues and interests ä One form of a virtual community ü Google Answers ä Gives people a place to ask questions that are answered by an expert for a fee

Revenue Models for Web Portals and Virtual Communities ü Web portals are so named because the goal is to be every Web surfer’s doorway to the Web ü One rough measure of stickiness is how long each user spends at the site ü Nielsen//Net. Ratings determine site popularity by measuring the number of unique visitors

Revenue Models for Web Portals and Virtual Communities (continued) ü Web portals ä High visitor counts can yield high advertising rates ä Companies that run Web portals add sticky features such as chat rooms, e-mail, and calendar functions

Exercise (E 6) ü The chapter discusses the stickiness of Web sites that have many visitors. Inter. Active. Corp is a company that appears on lists of sites with a large number of visitors that have a high degree of stickiness. ü Visit the company’s site and explore it to learn which Web sites it owns List two Inter. Active. Corp sites that you believe have a high degree of stickiness. Why? ä You can use the link at: http: //www. iac. com/

Internal Web Portals ü Run on intranets ü Can save significant amounts of money by replacing the printing and distribution of paper memos, newsletters, and other correspondence ü Can become a good way of creating a virtual community among employees