Electronic Commerce

Chapter 6:
Online Auctions, Virtual
Communities, and Web Portals
 Origins of Auctions
 In an auction
 Seller offers an item for sale, but does not establish
price
 Bidders
 Potential buyers
 Bids
 Prices bidders are willing to pay for an item
 Auctioneer
 Person who manage the auction
 Shill Bidders
 People employed by the seller or auctioneer where
they can make bids on behalf of the seller

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 :Types of Auctions
 English Auctions
 Dutch Auctions
 First-Price Sealed-Bid Auctions
 Second-price sealed-bid auction
 Open-outcry double auctions
 Double auction
 Reverse auction

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 English Auctions
 Bidders publicly announce their successive higher bids
until no higher bid is forthcoming
 Ascending-price auction
 Open auction
 Bids are publicly announced
 Minimum bid
 The price at which an auction begins
 Reserve price
 Minimum acceptable price
 Yankee auction

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 3rd
for 85$ Highest price
Highest price 5 Take 1 item
Take 5 items items

for 81$
4
items

for 83$
3
items
items to sell 9

2nd Highest price

Take 3 items

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 Dutch Auctions

 Also called descending-price auctions

 Form of open auction in which bidding
starts at a high price and drops until
bidder accepts price
 Often better for the seller

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 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
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 Other Types of Auctions
(Continued)
 Double auction
 Buyers and sellers each submit combined
price-quantity bids to an auctioneer
 Reverse (Seller-Bid) Auctions
 Multiplesellers 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

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 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 auction sites

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 General Consumer Auctions
 Most common format used on eBay
 Computerized version of the English auction
 eBay English auction
 Allows seller to set a reserve price
 Bidders are listed

 Bid amounts are not disclosed until after

auction
 Allows sellers to specify that an auction be

made private

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Specialty Consumer Auctions
 Specialized Web auction sites
 Meetthe need of special interest
market segments

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 Business-to-Business Auctions
 Two methods to distribute excess inventory
 Large companies sometimes have liquidation
specialists who find buyers for these unusable
inventory items

 Smaller businesses often sell their unusable and

excess inventory to liquidation brokers

 Liquidation brokers: Firms that find buyers for

unusable inventory items

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 Business-to-Business Auctions
 In the large companies, the business
creates its own auction site that sells
excess inventory.
 In the small companies, a third-party Web
auction site takes the place of the
liquidation broker and auctions excess
inventory listed on the site by a number of
smaller sellers

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 Auction-Related Services
 1- Auction escrow services
 An independent party that
 Holds buyer’s payment until buyer receives
purchased item and is satisfied with it
 2- 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

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 Auction-Related Services
(Continued)
 3- Auction software
 For sellers:
 Software and services that can automate tasks such
as image hosting, advertising, page design, feedback
management, report tracking, and email
management
 For buyers
 Software observes auction progress and places a bid
high enough to win the auction
 Sniping software

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Auction-Related Services
(Continued)

 4- Auction consignment services

 Create online auction for an item

 Handle the transaction

 Takes fee that ranges from 10 percent to 40

percent of the selling price

 Items that do not sell are returned or donated

to charity.

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 Virtual Communities and Web Portals

 companies have developed two other

new approaches to making money on
the Internet and the Web:

 Virtual
communities
 Web portals.

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 Virtual Communities
 Gathering place for people and businesses that
does not have physical existence.

 Exist on the Internet in various forms

 Usenet newsgroups
 Chat rooms
 Web sites
 Offer people a way to connect with each other
and discuss common issues and interests

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 Virtual Communities (cont)
 Virtual communities for consumers
 Can succeed as money-making propositions
if
 They offer something sufficiently valuable to
justify a charge for membership

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 :Virtual Communities examples
 Virtual learning community
 One form of virtual community
 Communities that can help companies,
their customers, and their suppliers
plan, collaborate, and transact business
 Google Answers
 Givespeople a place to ask questions then
answered by an expert for a fee

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Google Answers Page

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Web Portal
 Sites that uses an advertising
revenue generation model and
includes all the features offered by
virtual community sites, like search
engine sites, Web directories, and
other information providing sites,
and entertainment sites.

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Web Portal Revenue Models
 Advertising-supported Web portals

 Mixed-Revenue Web portals

 Internal Web portals

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Web Portal Revenue Models
(Continued)

 Web portals
 High
visitor counts can yield high
advertising rates
 Companies that run Web portals
 Believe in the power of portals
 Add sticky features such as chat rooms, e-
mail, and calendar functions

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Stickiness of Popular Web Sites

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Mixed-Revenue Web portals
 charged a fee to its users and has
always run advertising on its site

 Many Web portals that have

struggled with their advertising-
supported revenue models have
been moving toward this strategy

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 Internal Web Portals
 Run on intranets

 Can save significant amounts of money by

 Replacing
the printing and distribution of paper
memos, newsletters, and other correspondence

 Can become a good way of creating virtual

community among employees

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