Online Auctions, Virtual Communities, and Web Portals

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CHAPTER 6

• Online Auctions, Virtual Communities, and Web
  Portals

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Auction Overview

• How companies are using the Web to do things that
  they have never done before
• Online auctions can cater to a narrow interest or
  provide a general auction site that has sections
  devoted to specific interests

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Origin of Auction

• 500BC, Babylon
• Bid for woman they wished to marry
• 1744 Sothebys, 1766 Chrities
• How
• Offers an item or items for sale
• Does not establish a price
• Buyers offer bids
• Managed by auctioneer

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English Auctions

• Ascending-price auction
• Minimum bid
• Reserve price
• Yankee auction
• Allot the quantity of items separately according
  to the bidders order
• Example
• 9 items
• 855, 833, 814
• 5,3,1

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Dutch Auctions

• Bidding starts at a high price and drops until a
  bidder accepts the price
• Descending-price auctions
• Use a clock to drop the price with each tick
• Better for seller
• Fear of losing the item to another bidder
• Particularly good for moving large number of
  commodity items quickly
• But
• Do not increase sales
• Customers are confused
• Example

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Other Auctions

• First-Price Sealed-Bid Auctions
• Submit bids independently
• Highest bidder wins
• Second-Price Sealed-Bid Auctions
• Highest bidder is awarded the item at the price
  bid by the second-highest bidder
• 1996 Nobel Prize in Economics
• Open-Outcry Double Auctions
• Buy and sell offers are shouted by traders
  standing on the trading pit
• Sealed-Bid Double Auctions
• Buyers and sellers submit combined price-quantity
  bids
• Auctioneer matches bids
• Reserve (Seller-Bid) Auctions
• Multiple sellers submit price bids to an
  auctioneer who represents a single buyer
• The price go down as the bidding continues until
  no seller is willing to bid lower

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Online Auctions and Related Businesses

• General Consumer Auctions
• Specialty Consumer Auctions
• Business-to-business Auctions

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General Consumer Auctions

• eBay
• Computerized version of English Auction
• Bidders do not know who placed which bid until
  the auction is over
• Minimum bid increment
• Proxy bid
• Categories of items
• Smart Search features
• eBay Store
• Enhanced and extra-cost services
• Security
• TRUSTe
• Rating System

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Specialty Consumer Auctions

• Identify special-interest market targets and
  create specialized Web auction sites
• Examples
• Ubid, computer equipments
• PotteryAuction.com, pottery
• StubHub, event ticket
• Winebid, wine
• Cigarbid.com
• Golf Club Exchange

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Consumer Reserve Auctions and Group Purchasing
Sites

• Reverse bid

Fill form
Route
Reply
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Consumer Reserve Auctions and Group Purchasing
Sites (cont)

• Example
• Princline.com
• Group purchasing site
• Seller post an item with a price
• The posted price ultimately decreases as the
  number of bids increases
• Branded products with well-established
  reputations
• Cannibalize product sales in existing channel

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Business-to-Business Auctions

• B2B online auction
• Distribute excess inventory
• Liquidation broker
• A new and more effective channel-internet
• Model one
• Ingram Micro
• A major distributor of computers and related
  equipment to Value Added Reseller
• Model two
• Smaller firms sell their obsolete inventory
  through an independent third-party auction site
• A growing number of hospitals and other
  organizations are using online auctions to fill
  temporary employment openings

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Business-to-Business Reverse Auctions

• Supply Chain Characteristics that support reverse
  auctions
• Suppliers are highly competitive
• Product features can be clearly specified
• Suppliers are willing to reduce the margin they
  earn on this product
• Suppliers are willing to participate in reverse
  auctions
• Supply Chain Characteristics that discourage
  reverse auctions
• Product is highly complex or requires regular
  changes in design
• Product has customized features
• Long-term strategic relationships are important
  to buyers and suppliers
• Switching costs are high

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Auction Related Services

• Auction Escrow Services
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• Auction Directory and Information Services
• Auction Software
• Auction Consignment Services
• Payment Processing Services

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Virtual Community and Web Portals

• Celluar-satellite communication
• Electronic market place
• Software agent

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Mobile Communication Technology

• Devices PDA,notebook,mobile phone
• WAP(Wireless Application Protocol)
• Allows web apges formatted in HTML to be
  displayed on small screens
• GPS (Global Positioning Services)
• GPRS/CDMA

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Electronic Marketplaces

• Example
• AvantGo
• Provide PDAs with downloads of Web site contents,
  news, restaurant reviews, and maps

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Intelligent Software Agent

• Why intelligent?
• Programs that search the Web and find items for
  sale that meet a buyers specifications
• Some focused on particular category
• Best Book Buys
• Search more than 20 online bookstores for the
  best prices on books
• Agent research
• MIT Media Lab Software Agents Group
• Carnegie Mellon Intelligent Software Agents Lab

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Virtual Communities

• Different forms
• Usenet news-groups
• Char rooms
• Web based communities
• Virtual learning Community
• Moodle
• uPortal
• Google Answers
• Gives people a place to ask questions that are
  then answered by an expert for a fee

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Web Community Consolidation

• How to make money
• Offer something sufficiently valuable to justify
  a charge for membership
• Otherwise
• Sold to sites that have other revenue-generating
  activities

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Web Communities in the Second Wave of Electronic
Commerce

• Sole purpose community
• Friend making community
• Profit-focused
• Strategies that build on a combination of virtual
  communities and other activities are called Web
  Portal revenue models

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Web Portal Revenue Model

• Advertising-supported Web Portals
• Mixed-Revenue Web Portals
• Internal Web Portals