Amazon.com – 17 June 1999
2
Details. We expect that Sotheby's dealers will use the
Internet to auction off more products than they might have
otherwise, rather than simply migrate their ultra-high-end
objects from in-person auctions to the web (although with
Amazon.com's “Livebid” subsidiary, it is possible to
simulcast). Sotheby's will continue to run its own auction
site, which it announced plans for in January and expects
to begin selling items on this fall. As part of the agreement
with Amazon.com, dealers (or sellers) will have the ability
to choose where they want to list items—Sotheby's site or
sothebys.amazon.com. Items will not be listed in both
places. This choice of location for each listing provides
great incentive for parties to make the new auction site
work and potentially creates a better showroom
environment, depending on the item. Amazon.com is
clearly incented to make it as compelling as possible for
dealers to list the items on the joint site.
Benefits for Amazon.com. The additional listings come at
little incremental cost to Amazon.com and serve as a great
added product feature for its growing customer base. If the
partnership is successful, the Sotheby's dealer inventory
will draw more bidders to the Amazon.com auction site,
which will increase the value of its auction community.
The new auctions should also contribute some high-margin
revenue to Amazon.com (Sotheby's' generated
approximately $500 million in revenue last year).
Investment. Amazon.com will also invest a total of $45
million in Sotheby's. Amazon.com purchased 1 million
shares at $35.44 a share yesterday (and made some money)
and will pay $10 million for three-year warrants that will
allow Amazon.com to buy 1 million shares at $100 per
share.
EBay outage probably helped Amazon.com. After eBay's
site shut down unexpectedly for 22 hours last week, we
expect that at least some of the company's loyal sellers
packed their bags and moved to Amazon.com. Auctions
are all about critical mass, and every little bit helps. We
don't know for sure how Amazon.com's auctions are
doing, but it seems that the bidding action has picked up
some of late, which is obviously a good sign for
Amazon.com.
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