CS155b E Commerce Lecture 13 Feb 27 2001 C2C Internet Commerce continued Massive Scale Commercial Website Operation eBay scale Approximately 20M users Over 500K items added each day Massive strain on website reliability and availability Major issue for high traffic B2C sites too June 1999 Three eBay Crashes eBay service unavailable for prolonged periods of time Revenue loss estimates 3M to 5M Stock price fall 20 Blamed on ISP router failure and SUN OS memory bugs Outsourcing to Exodus since Oct 1999 EXODUS Full Name Exodus Communications Inc Employees 600 Stock Price 16 125 Feb 19 2001 Revenues in 1999 242 100 000 Business Area Internet Hosting Service WHAT EXODUS OFFERS Internet Data Center facilities in major metropolitan areas Connectivity to the Internet through a high speed high availability redundant network infrastructure Services including security technologies Major clients eBay Yahoo Geocities MSN Lycos Macromedia CBS Sports etc BRIEF HISTORY 1994 March 1998 1999 1999 March 2000 83 Founded Went Public Revenue more than 100M Net loss more than 100M Historic Peak of Stock Price STOCK PRICE CHART Price 90 60 30 Jan 99 Jan 00 Jan 01 Year REVENUE CHART Revenue 200M 150M 100M 50M 95 96 97 98 99 Quarter Auction Design in C2C Commerce Why Auctions Hard for typical C2C seller to do market research and set optimal fixed price Auctions allow seller to maximize revenue eBay ascending bid auctions include Starting Price Ending Time Bid Increment Sometimes reservation price Proxy bidding agents eBay Ascending Bid Auctions cont Technically equivalent to 2nd price Vickrey Importance of strategyproofness Buyers like sellers will have little or no information about others valuations of the items so dominantstrategy solution concept is appropriate Truth telling is a dominant strategy helps sellers maximize revenue Seller can choose to use a descending bid structure Dutch Auction Auctions for Unlimited Supply Digital Goods Optimal Fixed Pricing OFP No truthful auction even multi price can beat OFP revenue Competitive OFP revenue No truthful deterministic auction is competitive There exists truthful randomized auctions that are competitive Goldberg Hartline Wright 99 Sale of Monroe Photos and Release From February 22 2001 WSJ Auctioneer eBay Premier and Butterfields of SF eBay acquired Butterfields in 1999 Seller Tom Kelley Studios of Ventura CA Item Five outtakes of Marilyn Monroe s 1949 Red Velvet photo shoot and the negatives and the model s release form Expected price 700K to 1M Implications for Internet Based Business Intellectual Property Rights Questions Inescapable Butterfield s auction catalog Right to use name and likeness for trade and advertising purposes CMG Worldwide which represents Monroe estate Will go after anyone who uses those images in a commercial fashion Potential limits to eBay scope Previous sales of high end photos prints and art have fallen flat Can eBay be more than a hugely successful online flea market
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