Business Strategy B2B

b2b

Auctions

Online Auctions and Related Businesses

Virtual Communities and Web Portals

Online auctions provide a business opportunity that is perfect for the Web. The sites that provide these can charge both the buyers and the sellers, as well as sell advertising. Auction sites are relatively easy to develop and can yield profits early in its life. Online auctions capitalize on the fact that the Internet can reach anywhere and everywhere. In a traditional auction, a seller puts an item up for sale. Buyers are given an opportunity to look at it and then bid on it. The bidders each have price valuations, which are the amounts a person is willing to pay for an item. Some people use shill bidders to artificially inflate the price of an item by making bids on behalf of the seller.
There are many types of auctions. An English auction, or open auction, is one in which the bidders publicly announce their successive higher bids until there are no higher bids. This is called an ascending-price auction. It is possible to put a reserve price on your item so that it

will not sell below your minimum price. Another way to ensure getting the price you want for an item is to place a minimum bid on the item. English auctions that offer multiple units of an item for sale and allow bidders to specify the quantity are called yankee auctions. Once the auction is over and the winner gets his items, any leftover items are distributed to the lower bidders.
A Dutch auction is a form of open auction where the bidding starts at a high price and drops until a bidder accepts the price. These are descending-price auctions. Most online retailers have discovered that this style auction is not conducive to the Web because it does not increase sales or generate interest in the products well enough to justify the costs. It can also be confusing to the buyer. Other auction types are first-price sealed-bid auctions, second-price sealed-bid auctions, open-outcry double auctions, sealed bid double auctions, and reverse auctions.

Online auctions have become one of the fastest growing segments of online business today. The traffic includes millions of people. These auctions are considered consumer-to-business because the bidders at a general auction may be businesses, but usually they are just people. There are three categories of auction Web sites: general consumer auctions, specialty consumer auctions, and business-to-business auctions.

General consumer auctions are sites that anyone can join in and buy and sell goods. EBay is the most popular example of this type. These parties must agree to the sites Terms of Service. The seller pays a listing fee and a percentage of the final price, and buyers pay nothing. Sellers can also choose from a variety of other services at additional fees to help convince the buyers to bid on their item. Sellers can set a reserve price or a minimum bid. A feature offered to buyers is the minimum bid increment, usually 3 percent of the bid amount. It also allows you make a proxy bid, or a maximum bid, and allow the server to bid on your behalf. One of the disadvantages of online auctions are that is may be difficult to attract buyers and sellers. Yahoo also began running online auctions, as did Amazon. Neither has been as successful as eBay but they have created new ideas

to make the online auction process better. By using an escrow service, a guarantee is provided to the buyer and seller by using a third party person to hold the money until the product is received. Specialty consumer auctions target special-interest markets and create specialized Web auction sites that meet the needs of these customers. These auctions began by featuring technology items such as computers and electronics, but have expanded to include any

market segment, like pottery, bead, or even event tickets. These sites have an advantage by identifying a strong market segment and catering to it.

Consumer reserve auctions use the reverse bid system. This involves the buyer filling out a form and then the site routes the request to buyers to fill the bid. An example of this is Priceline.com. Another type of site is a group purchasing site. The seller posts an item with a price and the buyers bid on the item. This type of site builds up a number of buyers and forces the seller to reduce the price. The products that are ideal for this should be higher value items with well-known brands and good reputations.

Business-to-business auctions were developed to help companies dispose of unusable or excess inventory. Large companies may have liquidation specialists to find buyers, while small businesses may just sell to liquidation brokers. There are three models used for these types of auctions: large company, small company, and consumer online auctions. These can be used for anything from stock trading to filling temporary job openings. Business-to-business reverse auctions are another option. Most companies do not refer to use them.

The Internet reduces transaction costs and offers efficient means of communication. This has led to the creation of other ways to make money on the Web: virtual communities and Web portals. The key elements to make these possible are mobile communications technology, electronic marketplaces, and software agents. Mobile communications technology includes cell phones and air cards that allow access to Internet from anywhere. This provides an opportunity for mobile business. Some companies provide services that use intelligent software agents to search the Web and find items that meet a buyer’s specifications.

Virtual communities are gathering places for people and businesses that do not have a physical existence. These include newsgroups, chatrooms, and Web sites. These offer people with similar interests a place to connect with each other. Another type is the virtuallearning community which allows students to take classes over the Internet. These communities can help businesses communicate with each other as

well. Web logs or blogs have become predominant onthe net. These are sites that contain content written by an individual. They can literally be about anything.

Businesses have begun to incorporate blogging into their sites to give the visitor a more personal experience. Other examples of virtual communities are social networking sites. These sites have exploded in popularity and Facebook has become the number one way to advertise your product on the Web. These sites can be used for finding friends or people with common interests or for business networking.

There are several revenue models for Web portals and virtual communities. The advertising-supported model uses these sites to gather information about the users and then targets certain advertising at them. One of the most important items that encourage advertising is the stickiness of the site. One way to determine a site’s stickiness is how long a user stays on a site. Nielson/Net ratings determine a site’s popularity. Another model is the mixed-revenue model. This model

charges a fee to the users to access the site and sells advertising as well. Some portals may offer some free services but charge for others. The process of converting free members to paying members is called monetizing.

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