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Title: Making Markets
Authors: Ajit Kambel and Eric van Heck
Publisher: Harvard Business School Press
Copyright: 2002
ISBN: 1578516587
Pages: 240
Price: $29.95
Rating: 92%

Making Markets is, at its core, a celebration of the creativity and power that businesses can achieve when they harness the internet.  Yes, the book itself is an extremely solid primer on how to create profitable online auction sites… But really, auctions are just the first wave of an entirely new form of business - the interactive economy, if you will - and Making Markets understands that.  Kambil and Heck realize that putting customers in touch with each other, all across the world, drastically changes existing business models.  This book is an eye-opener that will show you just how much there is to gain from looking at things sideways. 

The book is partially about eBay and Business-to-Business online markets, which is only proper.  But Making Markets aims to give you the tools needed to understand why each type of auction works - what approaches customers tend to take towards each auction, and who makes the money off of each one.  For example, the traditional eBay-style English auction where buyers have three to ten days to bid secretly on an item tends to produce higher prices if it's held quickly - buyers will panic, knowing that their item will be gone soon.  But there are also Dutch auctions, where there's a price that "counts down" over a period of time, and buyers have to decide whether they should bid now and get it for sure, or wait until the next price drop and hope that nobody buys it in the meantime.  In Dutch auctions, quickness is the enemy.  (Turns out that people are much more likely to bid if they have time to wonder whether that next tick will be their undoing.)  Making Markets gives a wealth of information, culled from a variety of sources, on how people bid and what the most effective bid approaches are - all vital information to anyone involved in an online market. 

Likewise, Business-to-Business online markets can save some cash, forcing several competitors to jockey to provide you the cheapest price on commonly used goods and services… But there can be pitfalls.  In one of John Deere's first B2B auctions, a long-time vendor panicked and promised something they could not possibly deliver at a price they could not afford.  Making Markets offers strategies to help old-time vendors cope with the stress of competition, and offers solutions so that you're not always stuck with the lowest bidder. 

But the genius of this book is that it does not stop simply at creating online markets; it talks about the ramifications of eBay, and how certain businesses have to adjust their business models to account for it.  For example, take Cisco, the premiere manufacturer of internet routers: Their sales nose-dived after the internet bubble burst.  Investigation showed that new customers were simply buying used Cisco routers on eBay from bankrupt internet companies.  Rather than throwing their hands up in frustration, Cisco started a program to encourage second-hand users to register their products, thus putting them in contact with a whole line of customers who later bought technical support services from Cisco.   

The book is rife with the strange impacts that the internet has produced: Parker Pen used eBay prices to figure out that their classic 1920s pens were in high demand, and reissued an anniversary line that now sells for a higher price than the original did on eBay.  Predictive markets like the Hollywood Stock Exchange, where people bid and sell "moviestocks" based on how well they think they'll do at the box office, have turned out to be so accurate at predicting box office returns that studios are willing to pay money for the information. 

In the end, Making Markets isn't perfect.  The first few chapters are a tedious haul, amounting to little more than "markets are successful when a lot of people join, and a lot of people join when there's a good selection and secure auctioning processes," and the authors occasionally lapse into buzzwordology.  But the information this book provides is surprisingly detailed, richly useful, and above all, inspiring.  If you're looking to find alternative ways to make money off the internet, you could do a lot worse than to start here.

William Steinmetz, MCSE and A+-certified, worked as a chainwide buyer for Waldenbooks for five years, picking out only the best computer books to send into malls across America.  He currently works as a freelance writer, doing reviews for and editing various websites.  He likes Magic: the Gathering, roleplaying, and other ridiculously geeky activities.