Market mechanisms such as web based allocation auctions will fundamentally change
the way that governments and companies sell valuable resources.
Increasing companies and governments are moving away from administered allocation
systems or sealed bid tender systems and embracing the power of dynamic and transparent
web based market mechanisms to maximize revenue and minimize cost of sales.
Allocation auctions platforms are nothing like consumer auction sites like eBay,
as these platforms are used in a high stakes business-business environment. Allocation
auction events are typically valued in the tens or hundreds of millions of dollars.
Or as recently seen at the FCC, an allocation auction was used to allocate spectrum
worth close to $20B.
In addition, unlike price only consumer auctions, allocation auctions tend to be
multi-attribute, meaning that the allocation is not just based on price alone. Typical
non-price factors include: terms of sale or a freight differential between the buyers.
Allocation auctions can be configured to allow bidders the opportunity to express
their bids with a range of conditions. These conditions might relate to the specific
terms of sale for that buyer e.g. payment terms or delivery terms, or premium package
bids that are conditional on getting certain lot or volume combinations. In order
to determine the winning bid combinations and provide near real-time feedback the
auction platform is coupled to a powerful allocation optimization engine that can
sort through and rank the millions of bid permutations that result.
Allocation auctions are increasingly being used by Governments around the world
to allocate scarce public resources such as: frequency spectrum, carbon permits,
forest timber, port access rights and airport landing rights.
Allocation auctions are also being adopted by businesses looking for a new market
based sales channel. In fact, the highly lucrative Google auction system (adwords)
is a customized allocation auction platform with continuous bidding i.e. the auction
never stops.
Apart from the rapid adoption in the media space, companies that sell valuable commodities
such as: iron ore, coal, gas, and wheat are increasingly using allocation auctions
to create web based private electronic markets to supplement traditional sales channels
like bilateral negotiated forward contracts and spot markets.
Well designed allocation auctions are transparent, fair and award the resource to
the buyer(s) that values it the most, meaning they generate the maximum available
revenue in a competitive buying market.
Please visit the tradeslot website to learn more about allocation
auctions.