Page 321 - Electronic Commerce

Chapter 6

LEARNING FROM FAILURES

Auction Universe
One of the most promising early entrants into the general consumer auction business
was Auction Universe. Times Mirror, the parent company of the Los Angeles Times
newspaper, started Auction Universe in 1997 and then sold it in 1998 to a partnership
of eight major newspaper companies (including Times Mirror itself) called Classified
Ventures. These companies were concerned that classified advertising on the Web posed
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a threat to their newspapers’ classified advertising, which is one of the most profitable
elements in the newspaper business. Through their Classified Ventures partnership,
these newspaper companies started their own Web sites for classified ads such as
Apartments.com, Cars.com, and NewHomeNetwork.com. These sites earn revenue by
charging for running ads, selling advertising on their pages, or both. Classified Ventures
believed that the Auction Universe site could become an important and profitable part of
its Web presence.
Auction Universe closed in August 2000, but Classified Ventures’ classified ad sites
continue to operate. The Auction Universe site was modeled on eBay and offered similar
types of auctions and services for buyers and sellers. Some critics believed that the
Auction Universe interface was more intuitive than eBay’s and included a better search
engine; however, the site failed to mount a sustained challenge to eBay’s dominance.
Even with major corporate sponsorship and a $10 million advertising campaign behind
it, Auction Universe was unable to displace the advantage eBay obtained from the lock-in
effect it had on a large number of auction bidders and sellers.

Specialty Consumer Auctions
Rather than struggle to compete with a well-established rival such as eBay in the general
consumer auction market, a number of firms have decided to identify special-interest
market targets and create specialized Web auction sites that meet the needs of those
market segments.
JustBeads.com is one example of an auction site that caters to buyers and sellers who
are geographically dispersed but share highly focused interests. Other specialty consumer
auction sites include Cigarbid.com and Winebid. These sites gain an advantage by
identifying a strong market segment with readily identifiable products that are desired by
people with relatively high levels of disposable income. Cigars and wine meet those
requirements. These specialized consumer auctions occupy profitable niches, which
allows them to coexist successfully with large general consumer sites, such as eBay.

Consumer Reverse Auctions
In the past, a number of companies have created sites that allow site visitors to describe
items or services they want to buy. The site then routes the visitor’s request to a group of
participating merchants who reply to the visitor by e-mail with offers to supply the item at
a particular price. This type of offer is often called a reverse bid. The buyer can then
accept the lowest offer or the offer that best matches the buyer’s criteria. None of these

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