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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