Technology of the Week – Electronic Markets and Auctions: Catawiki and Freelancer.com
Auctions have been prevailing for decades and constitute one of the most appropriate tools to measure the value of unique products. Inventions in information technology have favored a shift of retail markets towards more dynamic pricing mechanisms and engendered a significant and disruptive industry modification, which is the emergence of online auctions. Freelancer.com and Catawiki are two examples of auction platforms that facilitate buyers and sellers with a marketplace where transactions are mediated through bidding mechanisms.
Freelancer.com is an online outsourcing marketplace for freelance services that connects employers to freelancers (B2B) in over 240 countries through a reverse auction model. An employer uploads a description of its desired service (such as design or accounting services), after which freelancers can place a bid in the form of a price they charge to carry out the job. The employer then chooses which freelancer gets the job, based on both the price and the freelancers’ reputations.
Catawiki, headquartered in Assen, the Netherlands, is an online auction house for collectables and exceptional items. The most popular auctions include the sections art, jewelry, stamps, coins, watches and classic cars. With over 31 million objects sold and more than twelve million visitors per month it is currently the fastest growing European auction house.
Business model comparison
Freelancer.com has a very broad market scope (i.e. desired services range from design to legal advice) while Catawiki has a strong focus on the niche of collectables (i.e. exceptional items only). In addition, whereas Freelancer.com is a platform for B2B (freelancer to employer) buying of services, Catawiki has C2C (consumer collector to consumer collector) platform based upon goods (exceptional items). Another important distinction is related to the market mechanism on each platform. Freelancer.com is a reverse auction in which sellers compete, while Catawiki is a regular auction. Further differences regard the revenue models (Catawiki uses commissions only, while Freelancer uses subscriptions and fees for additional services besides its commissions).
At first, both platforms have a large online community of buyers and sellers, which provides Freelancer.com and Catawiki with significant network effects. However, the drawback for both online auction marketplaces is the tremendous dependence on their online community. For both platforms, an opportunity for external growth exists by acquiring smaller competitors, which can potentially lead to an even larger online community, and subsequently, higher network effects. Both Catawiki and Freelancer.com enable the buyer to evaluate the seller in order to guarantee quality control. At Freelancer.com, the integrated rating and review system gives freelancers a huge incentive to a provide good quality service. At Catawiki experts assess the authenticity. On the one hand this can result in an improved quality control, but on the other hand, this increases the fixed costs as Catawiki has to employ experts for this task. Another difference is the commission that the platforms charge compared to their competitors. Freelancer.com charges 13% commission per contract, whereas its two main competitors charge only 10% (Rawson, 2013). Catawiki however, is cheaper than traditional (collectibles) auction houses, 9% compared to 19-25% (Kort, 2014). As the biggest difference between the two platforms we identified their visibility on search engines. While Freelancer.com heavily uses Google’s search engine for marketing reasons and is always in a leading position for Google inquiries, whereas Catawiki is nearly impossible to find on Google when related key words are used.
The influence of internet auctions as a general business model seems to be floundering. In fact, the trend of changing customer preferences towards posted prices and convenience shopping has significantly impacted the demand for online auctions. Auction sites, who were supposed to change the way people shop (Seo, 2013), have to find a solution to their declining share of business and their decline of online auctions, which has commenced last decade, can be expected to continue. Firms like Catawiki or Freelancer.com need to discover innovative solutions in order to remain profitable. Focusing on high-value niche products can be an option, but what is really crucial is to diversify business strategy beyond simple bidding.
Robert Boer (356365)
Dennis Bout (342947)
Henning Kleb (440006)
Hugo Krier (441418)
Jonathan Peene (343244)
Catawiki (2015). Catawiki auctions. Available at: http://www.catawiki.com/ [Accessed: 19 September 2015]
Freelancer.com (2015). About us overview. Available at: http://www.freelancer.com/about [Accessed: 20 September 2015]
Kort, S. (2014). Te koop bij Sotheby’s of Christie’s? Nee, bij Catawiki, NRCQ (25-10-2014). Available at: http://www.nrcq.nl/2014/10/25/te-koop-bij-sothebys-of-christies-nee-bij-catawiki [Accessed: 19 September 2015]
Rawson, X (2013). oDesk vs Elance vs Freelancer and 99designs – Infographic. Available at: http://biz30.timedoctor.com/odesk-vs-elance-vs-freelancer-and-99designs-infographic/ [Accessed: 19 September 2015]
Seo, M. (2013). Online Auctions become more competitive. The Huffington Post (03-11-2013). Available at: http://www.huffingtonpost.com/michael-seo/online-auctions-become-mo_b_2850786.html [Accessed: 17 September 2015]