profile looks at online consumer to consumer (C2C) and
business to consumer (B2C) auctions.
Auctions are an area of electronic commerce that has caught
public attention - nothing like the global electronic
flea market for a hidden treasure or a discreet gamble
- and has resulted in some of the more problematical writing
about the 'new economy'.
Journalists and gurus have gushed about "the eBay
phenomenon" - "a step toward the creation of
the first worldwide economic democracy" - or how
you can buy a human kidney or two with just a few keystrokes.
One US academic even enthused that "nowhere is the
impact of the web more evident than in the case of auctions",
complete with cyberlingo about digital communities, disintermediation,
wired democracy and nary a concern about consumer issues
or real market sizes.
contents of this profile
The following pages cover -
- economic studies, national/international regulation
and market analyses for C2C, B2C and B2B auctions in
Australia and overseas. We have highlighted offline
practice to illustrate concerns regarding pricing, credibility
agents - an introduction
to automated bidding and dynamic pricing developments,
from personal shopbots to corporate procurement schemes
self-help - suggestions
for how not to be landed with a lemon in a world where
(supposedly) no one can tell whether you're a dog ...
or a rat.
guides on Consumers,
the Information Economy
and Security look at issues
such as trust, identity, alternative payment schemes.
There is a supplementary note about eBay.
As with much of the 'internet economy', hard statistics
are few and projections are uninhibited.
Various sources have suggested that C2C auctions would
grow from US$1 billion or US$1.5 billion in 1998 to US$2.3
billion in 1999 or US$15.5 billion in 2001, with a population
increasing from 1.5 million users to 17.5 million users
in the same period. Others forecast annual revenue of
US$19.6 billion in 2004 or US$34 billion in 2005. One
of the better overviews is David Lucking-Reiley's 1999
Auctions on the Internet: What's Being Auctioned and
Projections for B2C and B2B auctions feature similar growth
(Forrester consulted the goat entrails to come up with
a figure of US$52.6 billion for B2B auctions in 2002).
Actual turnover seems to be smaller - reflecting the growth
of traditional sectoral or corporate-specific EDI exchanges
- and the profitability of most B2B exchanges has been
disappointing. There is a lucid discussion in Global
Economic Commerce: Theory & Case Studies (Cambridge:
MIT Press 1999) by J Christopher Westland & Theodore Clark.
Most observers date online C2C auctions from 1995, with
initial activity on US private networks such as Prodigy
and America Online followed by growth in line with consumer
adoption of the web. Uptake of C2C is likely to steady
as growth of the overall online population in advanced
Although the first major site was that of OnSale, it was
quickly eclipsed by eBay (sometimes
claimed to have up to 40% of C2C items by number and 60%
by value) - a C2C specialist - and the auction arm of
Yahoo! There is disagreement about the shape and extent
of the industry: some sources suggest that there around
300 sites, others claim that over 1,800 sites are active
across the globe. Traffic appears to be converging on
a cluster of 'pure play' and 'extended' sites such as
Amazon.com, Bid.com and Ubid.com.
The popular image of C2C looks like eBay or an oh-so-tempting
offer for a pair of slightly used kidneys.
An auction is essentially an exchange of information to
determine a price for delivery of goods or services (see
for example the paper
on The Value Propositions of Dynamic Pricing by
Bob Gressens & Chris Brousseau). The goods could be
a bit of plastic to hold candy, an autographed sweat-shirt,
memorabilia or a body part. Jurisdictional disputes about
cross-border auctions of Nazi militaria and literature
have highlighted concerns about the governance
of cyberspace and the regulation of hate
There's been more attention to scams, particularly those
involving purported dealings in body parts. In September
1999 an offer of a human kidney on eBay generated bids
of up to US$5.8 million; bidding for an unborn human baby
reached US$100,000. (US law fortunately forbids such retailing
of organs - your own or your nearest & dearest's -
but we've noted recurrent offers of sperm.)
Problems with management of C2C auctions- or merely the
credulity of some vendors/buyers - are evident in the
claim that an attempt to auction 500 pounds of marijuana
on eBay generated bids of US$10 million.
The economic literature about auctions - particularly
regarding game theory and pricing - is very large and
continues to grow, although much of the writing is quite
Paul Klemperer's 1999 Auction Theory: A Guide To The
is one of the more accessible bibliographical introductions.
There's been surprisingly little scholarly attention to
online consumer auctions; as we note on the following
page much of the economic and marketing research has concentrated
on questions of trust.
Much of the IT literature about bots, dynamic pricing
mechanisms and filters is of a similar opacity if you're
not a specialist. We've highlighted particular works here.
For a concise introduction see Internet Auctions,
a 1999 paper (PDF)
by Manoj Kumar & Stuart Feldman.
For a broader introduction see Ralph Cassady's Auctions
& Auctioneering (Berkeley: Uni of California Press
1967) and Reinventing the Bazaar: A Natural History
of Markets (New York: Norton 2003) by John McMillan
One output from any auction process is information about
participant perceptions of value, ie the range of prices
that an individual consumer (and group of consumers) will
pay for particular goods/services and the range that vendors
will use in offering those goods/services. Offline that
data collection and analysis has resulted in significant
revenue for niche publishers such as Glass' Auto Guide
and Book Auction Records.
Major online auction sites - and, more broadly, any major
online retailer that uses dynamic pricing (eg airlines
selling seats online) - are in a position to collect data
that is of value for their own operation and is of interest
to participants or third parties.
Data mining is likely to be a source of revenue for operators
of the major auction sites, given that they handle millions
of transactions, and for some sites with a narrow range
of offerings that relate to particular demographics, products
In 2003 eBay for example started to sell aggregate pricing
data on commonly sold items, with Intuit using information
to help its customers value items donated to obtain a