Electronic Commerce

Online Auctions

MIS 6453 -- Spring 2006

Instructor: John Seydel, Ph.D.

Student Objectives

Summarize key characteristics of the major auction types Discuss revenue models and strategies for online auction sitesAddress how the second wave of ecommerce has spawned auction-related businesses Discuss characteristics of virtual communitiesUnderstand web portals and their associated challenges

AgendaSome old business

Discuss B2B eCommerce via the Bray team Address questions about HTML exercises

Next, a discussion of online auctions, via the Guynes & Davis teamAs warranted, some final overview and summary comments regarding

B2b ecommerce Online auctions and virtual communities

If time: Some guidelines for HTML source code Bulleted lists in HTML

Auction BasicsCharacterizing auctions; a given auction can be either

Conducted by/for seller or conducted by/for buyer, and Sealed bid or open bid, and English or Dutch, and First price or Vickrey (second price) , and Single auction or double auction

Some terms Reserve price Winner’s curse Yankee auction (multiple units involved) Private valuation Shill bidding

Economics perspectives Pareto efficiency Consumer/ producer surplus (?)

Online AuctionsUsing the Web to do things that haven’t been done before at all Expected to account for 50% of all ecommerce dollar volume by 2007Three categories

General consumer (eBay) Specialty consumer; market segmentation (uBid) B2B (CompUSA)

Revenue models Charge

Buyer Seller

Advertising Subscription, for additional support, enhancements

Consider eBay (most widely known site) English auction Open bid (more or less) Conducted by/for seller First price Single auction

How Online Auctions Work

Reserve price (to start the bidding)?Minimum bid increments/decrements Proxy bid can trigger bidding Automatic bidding possible (limit set)

Need to generate critical mass to be effective (hence, first-mover advantage)Guarantee policy (or escrow service)

Fraud Concerns for Online Auctions

Consumers: getting what they pay for (15% fraud rate) Receipt of the goods Condition of the goods

Sellers: getting the money Greater potential losses than consumer losses Stolen credit cards

Some solutions Ratings

Buyers rate sellers Sellers rate buyers Research sellers’ records

Escrow services Hold the money Hold the product and inspect Sell buyer’s insurance

Auction-Related ServicesRepresent 2nd wave of ecommerce

Escrow services Directories

Market value support For buyers For sellers (reserve prices)

Site listings Software

Page development Image management Sniping

Consignment servicesRevenue models

Fees based upon value: escrow; consignment Advertising: directories; sniping software Subscription: software

B2B AuctionsMost online auctions are C2C general auctions

Essentially online garage sales Trading collectibles also

However, B2B auctions are evolving and providing services that make business more efficient

Online version of liquidation broker concept Build buying/selling power for smaller businesses Result in disintermediation

Replaces traditional liquidation brokers Reduce costs along industry value chain

Three models Liquidation broker

Large company (Ingram Micro) Small company (often conducted by liquidation brokers)

C2C model applied to business Where markets have been inefficient Bring new buyers and sellers together

B2B Reverse Auctions

Facilitate low-cost procurementCriticized for being a step backward Pit suppliers against one another on

basis of price (recall Deming’s 4th point?)

Other aspects ignored But specs can be extensive and rigid Also, multicriteria bidding approaches can

be used

Note guidelines

Some Successful B2B Auction Applications

Band-X (airtime for telco firms)ISE (by eTrade and AmeriTrade)Ariba (private procurement software)BidShift (HR scheduling software)

Virtual CommunitiesAnother 2nd wave opportunity for making money on the Web: online communitiesRecall the 7 Cs; in parcticular, community, connectivity, and communicationConsider the textbook example: on-demand translation of newspaper article Example of what’s possible with 2nd wave Requisite technologies exist but have yet to be

“assembled” Cellular/satellite communications (WAP) Electronic marketplaces (sell ads that appear with

downloaded content) Intelligent shopping agents

Search the Web Create and search databases of all kinds

Using Portals to Enable Virtual Communities

Virtual communities are often combined with portals

Virtual learning communities (e.g., Blackboard) Provide common meeting place

Initially, a common bond existed: Internet usage (communities of geeks?)Now, sites exist for the sole purpose of community

For various special interest groups Many opportunities exist and are appearing over time

Revenue models Advertising Subscriptions Free in exchange for information

Boosting Advertising Revenues

Advertisers no longer pay in advance; they want proof of effectiveness Need to increase “stickiness” The longer a visitor stays, the greater

the likelihood of conversion

Requires additional features: chat rooms, email, calendar functions

Some Guidelines for Source Code

Use lowercase for tags & attributesQuote attribute valuesUse relative references for resources on same serverAlways use closing tagsNest elements properly; close in reverse order of openingUse indentation consistently and to make code readableNo more than 80 characters per line of code; break long tags into multiple lines, typically one per attributeAvoid deprecated elements, e.g., <font>Use no spaces in file namesTreat all URLs and other resource names as if case-sensitive

Summary of Objectives

Summarize key characteristics of the major auction types Discuss revenue models and strategies for online auction sitesAddress how the second wave of ecommerce has spawned auction-related businesses Discuss characteristics of virtual communitiesUnderstand web portals and their associated challenges

Appendix

Supply Chain Characteristics and Reverse Auctions

The 7 Cs of the Customer Interface

Context

Site’s layout and design

Commerce

Site’s capability to enable commercial transactions

Connection

Degree site is linked to other sites

Communication

The ways sites enable site-to-user communication or two-

way communication

Customization

Site’s ability to self-tailor to different users or to allow

personalization

Community

The ways sites enable user-to-user communication

Content

Text, pictures, sound and video that webpages contain

The 7 Cs – Community

BazaarBazaar

Theme ParkTheme Park

ClubClub

ShrineShrine

TheatreTheatre

CafeCafe

Apparent archetypes:

Wander thru vast array of interest areas; no interaction

Finite group of interest areas

Focused on particular interest area; high member interaction

High focus with minimal member interaction

Particular focus with moderate member interaction

Focus on common interest area with considerable interaction

Comparative Stickiness of Websites