Online Auctions, Virtual Communities, and Web Portals
Week of July 3 – June 7
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Online Consumer Auctions:
o
eBay:

By far, the most popular consumer auction (p. 270).

Sellers pay a fee to eBay, usually a percentage of the final selling price
(p. 270).

Buyers and sellers are rated to ensure reliability (p. 270).

Most common format is the English auction (p. 270).

One of the few companies to make money from its beginning (p. 272).

The company is so well-known that it has established lock-in effect. In
other words, its value is greater than new sites. Newer auctions like the
ones mentioned below have had great difficult obtaining a foothold in the
market (p. 275).
o
Yahoo! Auction:

It was initially successful because it did not charge seller’s fees to post
items (p. 274).

However, it never succeeded because there were not enough buyers to
generate bidding action. Although seller saved money in fees, they lost
more money due to few buyers which led to few bids (p. 275).
o
Amazon:

Amazon took seven years to post a profit (p. 274).

Amazon’s big marketing ploy was “Auctions Guarantee”. With this
guarantee, Amazon promised to reimburse any buyer for merchandise
that was different than represented (p. 274).
o
Specialty Consumer Auctions:

Some firms decided not to compete with the well-established firms like
eBay or Yahoo! Auctions. Instead, these firms look to auction off
specialty items. Potteryauction.com, for example, specializes in (you
guessed it) pottery.

Business-to-business Auctions:
o
Sometimes, companies have obsolete inventory or excess materials that they do
not need. Instead of allowing the inventory to ruin or go to waste, these
businesses might auction the extra material off to the highest bidder (p. 279).

Types of Auctions:
o
Terminology (p. 265):

A bid is the price someone is willing to pay for an item.

A private valuation is the amount someone is willing to pay for an item.

An auctioneer is the manager of the auction process.

Shill bidders are people who purposely bid on items to artificially inflate
the bid on an item; this is highly unethical.
o
An English auction is the type of auction most people are accustomed. In this
type of auction, bidders publicly announce their successive higher bids until no
higher bid is forthcoming (p. 265).

A minimum bid is the price at which an auction begins.

The reserve price is the lowest acceptable price that a seller is willing to
accept.

A Yankee auction is a type of English auction in which multiple units of
the item are for sales and allow bidders to specify the quantity they want
to buy. The high bidder gets all the items they specify and any
remaining items go to the next higher bidder.
o
The Dutch auction is a form of open auction in which bidding starts at a high
price and drops until a bidder accepts the price (p. 266).
o
In a sealed-bid auction, bidders submit their bids independently and are usually
prohibited from sharing information with each other (p. 267).
o
The second-price sealed bid auction is the same as the first-price sealed-bid
auction except that the highest bidder is awarded the item at the price bid by the
second-highest bidder (p. 267).
o
In a double-auction, buyers and sellers each submit bids to an auctioneer. The
auctioneer matches the sellers’ offers to the buyers’ offers (p. 268).

Virtual Communities:
o
A virtual community is a gathering place for people and businesses that does not
have a physical presence. They are heralded for their social interaction which is
thought to be similar to that found in a regular community (p. 291).

These communities are usually centered around a common theme such as
answering questions, free Web site space, similar interests, etc.

These communities were essential to the early Web because there were
so few people on the Web. They felt isolated and converged into
communities.
o
WebCT, by the way, is listed by the textbook as an example of a virtual learning
community (p. 291).