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It’s Going, Going, Gone … On the Internet

It’s Going, Going, Gone … On the Internet

One of the more curious aspects of e-commerce — and the Internet explosion in general — is online auctions.
Auctions on the Internet may be the purest form of capitalism practiced today, with buyers and sellers coming together in a central worldwide marketplace, unencumbered by intermediaries and, to a large extent, outside regulation. It encompasses individuals selling to individuals, businesses selling to individuals and businesses selling to other businesses.
The most popular Internet auction site is eBay (, the 10th most trafficked of all Internet sites, according to Nielsen/NetRatings. Qualitatively, it’s the single best Internet site out there, according to the editors of PC World magazine, who recently evaluated factors such as usefulness, content, ease of use and the “gee-whiz” quotient.
Users who have bought or sold through eBay or other auction sites undoubtedly know what they’re talking about. Online auctions are fun. Unlike most in-person auctions, they typically stretch out over days and end at a specific time. The winner is the person who has the highest bid when the clock strikes. There are tricks to placing winning bids, and other tricks in maximizing the bids placed on items being sold.
The strategizing, ticking clock and winning and losing impart a game-like quality to online auctions. But they’re serious business too. For instance, eBay moves $12 million of merchandise per day.
The business-to-business auction market, exemplified by sites such as FreeMarkets ( and FairMarket (, is doing even better. Businesses using “dynamic pricing” in selling to other businesses are expected to generate $29 billion in sales this year and $60 billion next year, according to the market research group Forrester Research.
Most e-commerce software developers have added auction capabilities to their programs. Some companies have moved their entire sales operation to the online auction model.
The most popular items for sale at online auctions in the past were collectibles, but lately noncollectible items such as computers, office supplies and even heavy machinery have become dominant. Of course, bidders also can vie for the wacky, from taxidermic bats to debris from shipwrecked luxury liners.
Winners usually pay for auctioned items with a personal check, cashier’s check or money order, though many sellers ship only after a personal check has cleared. Most individuals and many businesses auctioning online don’t accept direct credit-card payments because of the transaction fees or the difficulty in obtaining merchant status.
Several online services now let small businesses and even individuals accept credit-card payments. The leader is a dark-horse company called (, with its PayPal service. The company, heavily backed by venture capital, earns revenue through premium services and interest on funds that participants elect to keep in their PayPal accounts.
One benefit of paying through PayPal is its fraud protection. As long as the seller is “verified” by providing bank account information to, the company will reimburse buyers for up to $5,000 of losses per year due to fraud. The eBay site provides fraud insurance too, but only up to $200 per item.
Fraud protection is increasingly necessary in the Wild West of online auctions. The Internet Fraud Complaint Center, a new service run by the National White Collar Crime Center and the FBI (, receives more complaints about online auction fraud than anything else.
One common problem is inaccurate product descriptions. When I recently won an auction for a 1799 silver dollar at eBay, I discovered
after receiving it that it had a plug in it, a result of someone in the past drilling a hole to make jewelry and someone later filling that hole with a silver plug.
The plug, which devalued the coin by two-thirds, wasn’t mentioned in the description by the seller, a coin dealer who couldn’t have missed it. The seller agreed to refund my money — but only after I spelled out these facts.
Two good Web sites where users can arm themselves against online auction fraud are the FTC’s “Internet Auctions: A Guide for Buyers and Sellers,” available with other useful tips (, and (
The latter site is a terrific resource about online auctions in general. It provides tips on successful auction strategies, an auction search engine, auction software and news about the online auction world and discussion groups.
Among the issues explored by is auction addiction. “Addiction” might seem an improbable word here, but only for those who haven’t experienced the curious phenomenon of online auctions. 

— Reid Goldsborough is a syndicated columnist and author of the book Straight Talk About the Information Superhighway. He can be reached at [email protected] or

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