June 21, 2007
Double-barreled bidding
An Irvine company makes an e-commerce innovation.
BY JAN NORMAN THE ORANGE COUNTY REGISTER
Mark Molloy was a frustrated eBay bidder.
He described his experience as a continual loop of bid, wait, lose. But if he tried to circumvent that cycle by bidding on a similar item from several sellers simultaneously, darned if he didn’t wind up winning multiple bids.
What do you do with three toasters?
The UC Irvine graduate told his friend and former colleague at Burroughs Corp. (now Unisys) in Irvine, Dave Yonamine, about his business idea to improve on the eBay experience.
The result is Liquid Markets Inc. in Irvine and its auction Web site Darple.com.
EBay defined online auctions and remains the 800-pound gorilla in the arena with 233 million registered users worldwide.
Still, eBay isn’t perfect, and entrepreneurs like Molloy and Yonamine see business opportunity in addressing those imperfections.
The fact that less than 4 percent of the world’s population has registered to use eBay suggests plenty of room for competitors. Some giants, like Yahoo and Amazon, just want a piece of the auction action. Some smaller entrants, like ubid.com, address the problem of counterfeit items by stressing brand names and guarantees, and others target a niche, like bidz.com, which auctions jewelry, art and collectibles.
Darple targets fairness and efficiency with the use of double auctions. (Darple is an acronym for Double Auctions Rapidly Promote Liquidity for Everything.)
EBay representatives did not return phone calls for this story.
Liquid Markets didn’t invent double auctions, which allow buyers to compete against each other for a single item, as in traditional auctions, and also let sellers compete with each other for each buyer. The best-known double auction is the stock market.
Here’s how Darple works. You want to buy a toaster and find five different styles and brands that are acceptable. You bid on all five but specify that you will buy only one of them. As soon as one seller accepts your bid (it can be a different price for each toaster), all your other bids are withdrawn.
Traditional double auctions have required the buyer to bid on identical items, such as Microsoft stock.
Darple’s software, for which the company has sought a patent, allows double auctions on all kinds of items at once.
For example, you want to buy your grandmother a birthday present, but you don’t care whether it’s a blouse, baking pan or book for under $25. You create what Darple calls a bidset for all three. The seller who accepts your bid first determines what Grandma’s gift will be, and your other bids are withdrawn.
Molloy was addressing a personal frustration in creating Darple. But Yonamine, owner of another Irvine company, Upstanding LLC, which creates software for banks and mobile devices, was also intrigued by a proprietary selling system that could revolutionize e-commerce.
Yonamine, whose training is electrical engineering and economics at the University of Hawaii and Stanford, became Liquid Markets’ first outside investor in 2004 and took an active management role in 2006.
“The first generation of auction (Web) sites just took the existing model, like Sotheby’s, and put it online,” Yonamine said. “E-commerce is still in its infancy, and I look at Darple as (its) second generation.”
Yonamine means that Darple’s approach could standardize pricing, not just for consumers but for business-tobusiness selling, the way the stock market does for public company valuations. Other ecommerce models will also evolve online transactions beyond straight selling and auction strategies.
In the auction arena, eBay’s advantage is its size, eBay consultant Gary Ruplinger said in an online article.
“That’s not to say there aren’t any viable options to eBay. The key … is to find niche auction sites … that may not have near the traffic levels that eBay has but are able to be successful because they attract a very targeted audience.”
In proving the double auction concept, Darple has targeted the student textbook niche first.
“Students have a problem with the high cost of textbooks, and they tend to be Internet savvy,” Yonamine said.
Liquid Markets has been marketing on college campuses to get students to buy and sell their textbooks on the site, and the Web site’s home page includes textbook illustrations.
The site charges no fees, another plus over eBay, whose fee increases have rankled sellers. Darple does take a percentage of the sale price.
Yonamine asked Cal State Fullerton business students, who consult with local companies as part of their coursework, to recommend improvements to the Darple site.
He hopes such students will become evangelists this fall at the height of the college textbook buying season.
Other online buyers have praised Darple’s approach.
“I’m impressed with Darple on a couple of levels,” said Harvard sophomore Egen Atkinson, who has bought and sold textbooks on Darple. “I’m impressed with the technology, and also I have reaped the benefits of the site.”
Blogger Latina Renee said, “The fairness of a double auction to buying and selling anything makes the Web site most attractive.”
Now that Darple has proven itself acceptable in hundreds of student transactions since going live in December, it is considering which niche to tackle next. It might go after jewelry or other high-value items, Yonamine said.
Liquid Markets already has a large European investor and will seek other outside investors later this year.
“Our future will depend on how much money we raise and who the investors are,” Yonamine said, acknowledging that venture capitalists often determine which market strategy a company in their portfolio pursues.
In the meantime, Yonamine and Molloy, whose home is in Iowa but who spends much of his time in Orange County, are building Darple based on college student preferences.
“You hear about the rapid success of companies like (video sharing Web site) YouTube.com; I never expected that out of Darple,” Yonamine said. “YouTube has immediate entertainment value. We provide a basic utility that provides long-term value. That part excites me.”