In Lewis Carroll's classic novel "Through the looking Glass", the character of Humpty Dumpty asserts,"When I use a word…it means just what I choose to mean -neither more nor less." When we talk about technology, whether it is eAuction or anything else, we tend to use words and phrases that we understand to mean one thing but others may not understand in the same way.

One difficulty is the lack of commonality in naming conventions of the various types of auctions. What some people call a uniform second-price auction is known in financial communities as a Dutch auction, and no end of confusion results.

Exploiting the Internet for commercial benefit has become a key theme for managers at most organizations. Significant advantages are gained for both sellers and buyers. Web based auctioning for selling (forward auctions) as well as procuring goods (reverse auctions) is a rapidly expanding application of the Internet.The advantages, however, must be considered against lower switching costs for auction participants.

A market consists of buyers and sellers and there are several kinds of dynamic pricing available as shown in the following figure.

Therefore, we find in this electronic era, many options are available for a manager for trade. He is many a time perplexed whether to go for a negotiation or barter; whether to go at all for an auction.

We have seen auctions in movies, we have read about them, we have probably participated and believe nothing could be simpler, right? Someone bids, the price go up, someone else bids, and when everyone is silent, the object is sold. Well . . . auctions are much more than that.

Sometimes auctions are a multi-billion dollar business (The Treasury in the UK, US and many other countries regularly auction millions of pounds worth of government bonds). Some bidders spend years mastering strategies that enable them to exploit the misunderstandings of the unwary. Sometimes smart auction principles can be used to buy and sell computer resources in a way that substantially optimizes human time and money. In 2000, more than a trillion dollars worth of goods and securities were sold through Internet auctions.

Let’s take an insight into the web based auctions or the e-auctions.

Auctions on the Internet: What’s Being Auctioned, and How?

Introduction

Auctions on the Internet have become a fascinating new type of exchange mechanism. Every day hundreds of thousands of different auctions take place online, for goods ranging from Star Wars action figures to laboratory ventilation hoods. Internet technology has lowered the costs of organizing an auction and of participating as a bidder, which appears to be causing auctions to be used for more and more transactions over time. Indeed, online auctions currently trade billions of dollars’ worth of goods per year, and are growing at a rate of more than 10% per month.

The online auction business model is one in which participants bid for products and services over the internet.

Strengths of the business Model

The strategic advantages of this business model are: no time constraints, no geographical constraints, Intensity of social interactions, Large number of bidders, Large number of sellers, Network economies and Captures consumers’ surplus.

Weakness of the Business Model

The strategic disadvantages include No Real time inspection, Fraud, Auction Software are required for both buyers and sellers, Long Cycle Time , Monitoring Time .

History of Internet Auctions

These days, many people mistakenly equate the World Wide Web with the Internet, but Internet auctions took place even before the Web was widely available. Before NCSA Mosaic (the first Web browser for the Windows and Macintosh platforms) was released at the end of 1993, there were already a number of auctions taking place on text-based Internet newsgroups and email discussion lists.

The earliest Web-based auctions appear to have been Onsale which started as a merchant site, opened in May 1995, and eBay, opened in September 1995. These were the first to take advantage of the technologies offered by the Web, including the use of automated bids entered through electronic forms, and search engines and click able categories to allow bidders to locate their items of interest. In the past year, two large Web-based companies, Yahoo! and Amazon, have announced their own person-to-person auction services very much like eBay’s. It will be interesting to see whether these well-funded later entrants will be able to take business away from eBay.

Types of Goods Sold

The variety of goods sold at auction on the Internet is quite impressive, a much wider variety of goods than has ever been auctioned before. I have seen auctions of items as diverse as spreadsheet software, darkroom print washers, car stereos, autographed baseballs, used paperback books, sold-out concert tickets, deer-shaped toothpick holders, sofas, clarinets, characters in the Ultima Online virtual gaming world, even a date with an attractive woman looking to raise money for credit-card-debt reduction!

Business-to-Business Auctions

Business-to-business auctions tend to focus on private auctions to a small group of customers rather than on public visibility. Some business-to-business auctions examples are : FastParts (double auctions for surplus electronic parts), Going-Going-Sold and LabX (both English auctions for used laboratory equipment), and Intermodal Exchange (Dutch auctions for cargo containers).

Auctioneers’ Fees

While merchant sites derive their income directly from the sale of their items, agent sites derive their operating revenues from fees charged to buyers and sellers. These fees tend to be an order of magnitude lower for Internet auctions than they are for traditional auction houses. Sotheby’s, for example, charges a buyer’s premium of 15% over the final

bid price, and a standard (though negotiable) seller’s commission of 20% of the bid price.

Auction Formats

A variety of formats are used for online auctioning. The most widely used formats are English, Sealed-bid, Dutch, Double, Multi-unit etc. A few sites use more than one auction format. For example, the Auction Nation site gives sellers a choice between running an ascending-bid auction or a “silent” (or sealed-bid) auction where the high bid is not made public until the closing time.

Time Duration of Auctions

Most listing sites give sellers the opportunity to choose their own auction length. At eBay, for example, sellers can choose a length of 3, 5, 7, or 10 days for their auctions. The very short auctions take place at merchant sites, for example, Onsale’s 60-minute “express auctions” and First Auction’s 3-minute “flash auctions.” There are some auctions with lengths up to 90 days, for example, auctions for government surplus items .

Update: eBay, Yahoo!, and Amazon

As online auctions have received increasing amounts of popular attention, two of the biggest consumer brands on the Internet have moved into the listing-agent market to compete with eBay. Yahoo! introduced its person-to-person auction listings in October 1998, and Amazon opened its own auction listings in March 1999. Both companies boasted millions of regular users at their existing sites, and they sought to leverage these user bases to create a large enough auction site to enjoy the same economies of scale already enjoyed by eBay.

A comparison of the three sites is presented below:

Both of the new sites have quickly grown large enough to make the list of the ten largest auction sites on the Internet, but in the meantime eBay’s size has more than doubled (with a continued growth rate of approximately 12% per month). The data presented is of 1999.

Building auction sites is a complex process.

The number of necessary features can be very large. Moreover, B2B auctions must be integrated with the back-end offices and with the legacy systems of participating companies. The various components required are as follows.