1. In class, I learned that Google became successful at auctioning advertisement spots by using the bidding method, similar to the way an item on EBay is priced and sold. Additionally, I learned that Google was paid for every click that was made on the advertisement, so there was room to manipulate by clicking multiple times with no intention of purchase.
2. Below is an article on the role of online advertising in ebay.com: http://www.pcworld.com/article/id,138155/article.html
3. EBay’s highly successful business model is providing a place where sellers and buyers can process transactions using online auction, generating revenue for eBay. However, eBay’s direction apparently changed recently when it signed a deal with Yahoo and Google to display exclusively their pay-per-click and PPC text ads featuring external retailers. According to the article, this business of online advertising has doubled eBay’s advertising revenue compared to last year, at the expense of drawing a number of customers away from eBay sellers.
I agree with the author that advertising for external retailers may hurt sellers. Sellers are forced to compete with bigger, more well-known retailers. The venture mainly generates more revenue for eBay and other participants, but not eBay sellers. On the other hand, customers benefit from more options. They are able to compare items on eBay with outside retailers’.
In my opinion, this advertising deal is a short-term strategy because it may eventually lead eBay sellers to abandon eBay due to loss of sales. Furthermore, customer traffic drawn to eBay’s system of bidding are distracted and redirected to other sites. These customers may become loyal to outside retailers and abandon eBay completely. Perhaps, we also cannot overlook that traffic to eBay may drop due to repulsion from over-advertising. Thus, eBay may potentially lose on both advertising revenue and eBay sales commissions. On the other hand, these problems may be averted if eBay is able to manage the type and number of ads that can be displayed on the site.
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Dell and Walmart's advantage over their competition is not due to technology, it's due to management. Do you agree? How does your answer relate to some of the problems that these companies have had recently?
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