A High Stakes Internet Gamble?
While many companies struggle with the possibility that an online expansion may reap havoc on revenues before it actually adds anything to the pot, Dovebid has already experienced an impressive net revenue climb.
Jeff Crowe, president and COO of DoveBid, points to the company's net revenues for the year 2000, which add up to more than $80 million. A huge leap from the $12 million figure for 1999, DoveBid's revenues show the very successful effects of a two-stroke strategy: taking the business online while expanding its geographic and category presence through acquisitions.
Founded in 1937 as an industrial auctioneer, DoveBid and its acquired companies offer disposition services for business assets and have sold $5 billion worth of capital assets through 5,000 auctions and liquidations worldwide. The company claims that more Global 2000 companies have chosen DoveBid over any other auctioneer during the last decade.
Going Once, Going Twice
Always a leader in B2B auctions and liquidations, DoveBid raised its stake with an aggressive new business plan in the late '90s. "If we can offer more services across more geographies covering more classes of capital assets than anybody else and we do that well," Crowe says, "then we become the partner of choice for global 2000 corporations who are looking to maximize their value and dispose of capital assets."
DoveBid's new strategy took shape in 1999 when Ross and Kirk Dove developed their idea that there was a way to exploit the Internet to change the structure of the industrial auctioneering business. They began raising venture capital and building a leadership team that could combine domain knowledge with e-commerce expertise. The brothers acquired capital and hired Crowe, who had started and sold a software company, Edify, which adapted its software for e-commerce solutions. "I agreed to join Ross because I saw a very large market opportunity to leverage the Internet for the buying and selling of surplus capital assets," Crowe says.
DoveBid wanted to take existing ways of buying and selling and adapt them to the Internet, as opposed to creating a totally new business model and practice. "We faced a strategic choice, 12, 15 months ago," Crowe says. "Many companies who had come out of the old economy created new dot com spin-offs. We said that doesn't make any sense; we're going to transform the entire company to leverage the Internet. That's what we've done. We spent millions of dollars on technology and marketing, but it's baked into the very fabric of what the company has been up to for the last 12 months. We bet the whole company."
Crowe thinks it was a good bet. "It was a gamble in the sense that we were putting a lot of effort into the technology and marketing associated with that. It was not a gamble in the way many Internet businesses relied on a completely new business model--give it away free and hope you make it up in advertising. The buying and selling of capital assets is an established business. Dove has been at it for a long time. We always knew that people would buy capital assets, the question is, how much would they do it over the Internet, how could we make it work for them in a cost effective way. The gamble was how could you make the Internet work for this business, not could you make this business work."
Greatest Revolution Since the Microphone
Crowe says DoveBid realized that many people who would like to participate in auctions can't afford the time and expense of traveling to attend them. The company wanted to facilitate global participation and encourage individual buyers as well as dealers to bid on assets. Prices for assets may rise when an individual wants to purchase an item, compared to the prices a dealer purchasing a lot for resale would pay.
By presenting Webcasts of live auctions, DoveBid found that the number of bidders, as well as the price for assets, increased. "Web bidders end up outbidding the people on the floor anywhere to the tune of 20 to 90 percent," Crowe says. "We've seen by broadcasting these auctions live over the Internet that we've increased our number of bidders by 40 percent."
The second part of DoveBid's strategy, to increase its geographical and category presence, was accomplished through 14 acquisitions of leading competitors. DoveBid complemented its own strong technology-based categories in Silicon Valley with Midwest manufacturing, machinery and metal-working industry auction companies. DoveBid acquired companies in Detroit, Milwaukee, Chicago and Conn. and established operations in the Netherlands, the United Kingdom, Australia, Singapore, Hong Kong and Thailand.
Crowe thinks this strategy was a success. "The businesses that we are acquiring are privately held companies, and they have to believe that we've got the winning strategy. We're going to be the winning team and they want to be part of that. We've built a lot of momentum in our marketplace because everybody knows that some of the best principals in the marketplace are now part of Dove."
This year, DoveBid's two-stroke strategy has hit the jackpot. "What we have done that is different than everybody else is adapt the Internet to our business model as opposed to creating a totally new business model. We brought the best of the domain expertise in the capital asset world together with knowledge of exploiting the Internet to create the largest industrial auction and appraisal company in the world and built up the largest database of buyers and asset valuations. All of these contribute long-term strength to our business and ultimately enable us to succeed in the business perspective and do a great job for our clients."