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Chapter 10
Strategies for Web Auctions,
Virtual Communities, and
Web Portals
Electronic Commerce
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10
Objectives
 Key
characteristics of the six major
auction types
 Strategies for general and specific
consumer Web auction sites
 Strategies for business-to-business
Web auction sites
2
10
Objectives
 How
businesses use virtual
communities to increase brand
awareness and sales
 Strategies
for Web portal sites
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10
Auction Basics
 Earliest
known auctions were in
Babylon around 500 B.C.
 Entire Roman Empire was auctioned in
193 A.D. after the death of Emporer
Pertinax
 Buddhist temples held auctions to sell
the possessions of deceased monks
 Auction firms Sotheby’s and Christie’s
began in the 17th century
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10
Auction Basics
 English Auctions
Bidders publicly announce their
successively higher bids until no higher bid
is offered
 Minimum price can be used to set the
price at which the auction will begin
 Reserve price is the minimum price the
seller will accept
 Yankee auctions allow the bidder to
choose the quantity of multiple items
offered at the auction
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
10
Auction Basics
 Dutch Auctions
Form of open auction in which bidding
starts at a high price and drops until a
bidder accepts the price
 Usually the seller offers a number of
similar items for sale
 Good for moving large numbers of
commodity items quickly

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10
Auction Basics
 Sealed-Bid Auctions

Bidders submit their bids independently
and are usually prohibited from sharing
information with each other
 First-price

sealed-bid
Highest bidder wins
 Second-price


sealed bid
Highest bidder wins, but at the second-highest
bidder’s price
Encourages all bidders to bid their private
valuations, reducing collusion
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10
Auction Basics
 Double Auctions
Buyers and sellers each submit combined
price-quantity bids to an auctioneer
 The auctioneer matches the seller’s offer
(lowest price, then up) to the buyer’s offers
(highest price, then down)
 New York Stock Exchange conducts
sealed-bid double auctions of stocks and
bonds

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Six Major Auction Types
Figure 10-1
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10
Web Auction Strategies
 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
 15% of the survey’s respondents stated
that they would never use an on-line
auction site
 Analysts and researchers predict the
on-line auctions will account for 30% of
all e-commerce by 2002
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10
General Consumer Auctions
 eBay
Search for specific items
 Browse by categories of items
 Seller options include bold-face type and
featured listings
 Rating system to provide feedback to
alleviate fears concerning seller reliability

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eBay Home Page
Figure 10-2
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10
Additional General
Consumer Auctions
 Auction
Universe, owned by Classified
Ventures, a partnership of eight major
newspapers
Apartments.com
 Cars.com
 NewHomeNetwork.com

 Yahoo!
and Excite have created
auctions based on the eBay model
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Excite Auctions Home Page
Figure 10-3
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14
10
Additional General
Consumer Auctions
 Amazon.com
Offers “Auctions Guarantee” to reimburse
any buyer for merchandise purchased that
was not delivered, or “materially different”
than represented
 Provides escrow service for items over
$250

 Klik-Klok

Dutch Auction
Short time-period auctions for quantity
offerings
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Klik-Klok Dutch Auction in Progress
Figure 10-4
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10
Specialty Consumer Auctions
 Technology-related
items auction sites
Haggle Online
 CNET.com
 ZDNet
 Onsale uBid, and Bid.com

 Numerous
specialty auction sites
Golf Club Exchange
 Cigar-Bid.com

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Golf Club Exchange Web Auction
Figure 10-5
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10
Business-to-Business Auctions
 Typically
used to dispose of excess
inventory
 Large companies use liquidation
specialists to find buyers for unusable
inventory, create their own auction sites
 Smaller companies often sell their
excess inventory to liquidation brokers,
who, in turn, create auction sites
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CompuUSA Auctions Home Page
Figure 10-6
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10
Examples of Third-Party Auction
Sites
 Auction

Computer equipment
 Going,

IT
Going...Sold!
Laboratory equipment
 FastParts.Com

Electronic components
 J.R.

Metals Quick Bid Auction
Steel
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10
Auction-Related Services
 Escrow

service
Independent party holds buyer’s payment
until the item is received and the buyer is
satisfied with the purchase
 Directory

of available auctions
Auction Guide
 Guidance

for new auction participants
AuctionInsider
 Links
to auctions sorted by category
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AuctionInsider Directory
Figure 10-7
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Seller-Bid Auctions and
Group Purchasing Sites
 Reverse

Sellers of goods and services bid the
prices at which they are willing to sell
 Group

auctions
purchasing sites
Items are posted with a price, as the
number of bids increase, the seller
negotiates a better price with the item’s
provider
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Virtual Community Strategies
 Gathering
places for people and
businesses that does not have a
physical existence
Usenet newsgroups
 Chat rooms
 Web sites

 Helps
companies, customers, and
suppliers plan, collaborate, transact
business, and interact in a mutually
beneficial way
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Milpro Business-to-Business Virtual Community Site
Figure 10-8
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Web Communities
 WELL
Whole Earth ‘lectronic Link
 Predates the web, began as a series of
dialogs among San Francisco authors and
readers
 Purchased by Salon.com

 GeoCities
Free web space for members
 Sells advertising to generate revenue
 Owned by Yahoo!

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Web Communities
 Tripod
Similar to GeoCities
 Owned by Lycos

 Theglobe.com
Created by Cornell University students
 News feeds, art gallery

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Web Portal Strategies
 Combinations
of virtual communities,
search engines, and Web directories
 Provide a high degree of “stickiness”
that is extremely attractive to
advertisers
 Examples include AOL, Excite,
Infoseek, Lycos, MSN, Netscape
Netcenter, Snap, and Yahoo!
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10
Web Portal Strategies
 Typically
ask members to provide
demographic information about
themselves
 Very high potential for targeted
marketing
 High visitor counts yield high
advertising rates
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homebid.com Home Page
Figure 10-9
10-9
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