The Mystery of the Impression Auctions

There is more than one way to auction impressions. Understanding that difference is something that can best be explained with a simple story. Let's imagine for a moment. You are walking down the street and someone hands you a box. It is heavy, so you hold it with two hands. Surprised that some random person handed you a box in the middle of the street, you stand there for a moment, confused.  You think to yourself "what the..."  and start to play-back in your mind the hand-off that just occurred.

As you focus your thoughts on what just happened, you hear a voice calling out. You can't quite make out what it is saying. You shift your focus to find that voice is actually yelling at you, yelling $51.07. "Wait, what $51.07?" you think to yourself.  And then it dawns on you, that the person right in front of you on the street just offered you $51.07 for the box. So you look down. "What's in this box?" As you look down, you notice that the flaps of the box are closed using one of those self-folding interlocking methods. Still. there is a gap. One big enough for light to shine through so you can see inside.

Inside the box, you see a bunch of stuff. Some things look cheaper and some more expensive. You think to yourself, "Huh, sure, I'll sell this." At this point you are sure that this box was destined for the trash, but you could sell it.  So, you take the $51.07. Before you have a chance to put your money in your pocket it happens again, another box, this time at $95.06.

You're happy, you just got a bunch of cash for something that was about to get tossed out. You turn to make your way back and you realize that right behind you stood an antique store. One that is closing up shop and moving. In fact, today. The movers are bringing boxes out of the store. Suddenly, one of the moving guys hands you another box. And just then, you realize that those boxes were not about to get tossed out.

That is the story of information asymmetry and that is what is happening in many auctions today. What just happened to you on the street was a perfect example that there is a key piece of information missing from the sellers decision, that the buyer has. The people on the street offering money could see where the boxes were coming from. In fact, they also had their own information about what was inside the box. Now, let's compare that to how that closing-down antique store use to sell and auction its wares. Before shutting down, the antique store would post their prices on the merchandise and allow potential customers to come in an inspect it. When they needed to move some inventory, they would hold auctions. The key similarity between both is that the antique store would tell you exactly what you were about to buy and let you inspect it.

In this situation, the antique store is making a transaction based on a good price. The decision here is simpler, it is just "what is this worth?" In the boxes situation, the decision is much more complicated "what is this thing and what is it worth?" If the definitions and sources of that kind of information lack a common and agreed to standard, buying and selling can only be like the boxes situation and never like the the antique store situation. Value and price are very important decisions that need to be made by both buyers and sellers. If those two elements are determined separately, than both sides have a better understanding of transactions and potential transactions.

In  the broader worlds, there are many ways to buy and sell, and many ways to manage risk. The greatest value is created for buyers and sellers when they can choose the  best way for themselves to buy or sell. In some situations one way is superior, in others, another way is . The diversity of methods is a critical part of a healthy and vibrant market.