Amazon.com (Nasdaq: AMZN), one of the world’s leading e-commerce companies, has announced that it will expand its operations to include an online auction service, in addition to its vast offerings of books, music and videos. Unlike other online auction sites, Amazon plans to protect its users against fraud, backing each deal with a $250 (US$) guarantee.
The move will position Amazon to compete head on against Internet-based auction sites like eBay and Bid.com. In a broader sense, Amazon is quickly transforming its identity from an online bookseller into a sprawling e-commerce empire.
Internet Auctions in the Spotlight
Online auctions have emerged as a major growth sector within e-commerce. To a great extent, they represent market competition in its purest sense, allowing for supply and demand to intersect at a price point driven solely by the participants in the transaction. Internet sellers and buyers are flocking to auction sites in droves, thereby propelling online auction sites into the limelight.
Other Online Auction Deals
eBay and AOL
Under the terms of a four-year deal announced on March 25, eBay, a rumored acquisition target of AOL, will pay AOL $75 million (US$) in exchange for promotion on AOL’s network of sites and services.
eBay will be featured on AOL.com, CompuServe, Netscape’s Netcenter, online city guide Digital City, and online communication network ICQ, which includes chat and message services.
AOL, which has 16 million subscribers (not counting CompuServe’s two million), and eBay will create customized, co-branded sites across AOL’s network. The sites will include auction listings, feedback, ratings of sellers, message boards and other select content from eBay.
In other major online auction news, OpenSite Technologies, a producer of online auction software, announced on Monday that it received $24 million in new financing. The company also announced a technology integration deal with CNET, Inc. (Nasdaq: CNET), a participant in OpenSite’s latest round of funding. Last month CNET also acquired AuctionGate Interactive, Inc., an OpenSite customer with an auction site specializing in computer products.
Additionally, Mobilia.com, an online auction site for automobile culture enthusiasts, announced on Monday that it would expand its site and upgrade its auction software to OpenSite Auction 4.0.
Bid.com International Inc. (TSE:BII), a leading online auctioneer site, announced on February 16 that it filed a listing application with the Nasdaq Stock Market, as part of the process to qualify for trading on Nasdaq.
On March 25, chief executive Paul Godin of Bid.com International Inc. (Toronto:BII.TO) firmly dismissed speculation that his Internet auction company would be taken over by larger U.S. rival eBay Inc.
The Amazonian Formula
Amazon.com is the online king of “being in the right place at the right time.” The company’s offering of a huge selection of books online, at a time when competition was virtually non-existent, gave the Internet bookseller unprecedented visibility both online and offline. Unlike other companies, Amazon was not only able to generate a large volume of Internet traffic, but also to “monetize” its visitors.
Once a steady and growing stream of traffic and a formula to generate revenues were established, Amazon began its real expansion. Music and videos were added, then gifts, and now online auctions. Along the way, Amazon also began to emerge as a major investor in other e-commerce sites like Drugstore.com and Pets.com. To round out its e-commerce empire, Amazon also began a strategic cross-marketing alliance with Dell Computers.
To its credit, Amazon has been able to find products which sell best over the Internet, and integrate them into its established system for e-commerce sales, thus time and again, betting on a sure thing.