2006 March » Unusual Auctions

Who would pay $375,000 to get his name on a library in a town with a population of 2,600 in the middle of Pennsylvania? No one, apparently.

The Womelsdorf Community Library failed to attract its minimum price ($375,000 at first, later lowered) in two eBay auctions. The library got one bid for $325,000, according to the American Library Association.

On the one hand, I am really impressed by the outside-the-box thinking on this one. The Womelsdorf town elders were using their thinking caps. I don’t think we’ve seen an eBay auction for naming rights for a public institution like a library. And who cares if the auction actually met its reserve price. The publicity was worth it. The library had already raised $480,000 locally. The vein of local goodwill apparently had been mined out. Branching out to eBay can be great, free publicity.

On the other hand, the library made many mistakes that are common for infrequent eBay users, as many big sellers are.

Using the auction format for this auction raises all kinds of questions. What if some morally challenged person or company won the auction? Saddam Hussein once gave $170,000 to a church in Detroit. Sure, the library reserved the right to reject “inappropriate” name requests, but that’s a very vague standard. It sounds like they were trying to prevent drunken frat boys from naming the place “The Totally Nude Womelsdorf Community Library.” But I think a court would probably agree that neither Kim Jong-il nor Halliburton are “inappropriate” names. The library probably would have had to live with such a monicker, maybe forever.

The use of a reserve price (for the uninitiated, a secret minimum price) in the first auction seemed particularly inappropriate. You can always set a minimum bid on eBay if you are concerned about being forced to sell too cheaply. This number is shown right in the auction, so everyone knows the price of admission. Libraries are supposed to stand for the free exchange of information, not keep secrets from its patrons. According to this story, the library dropped its reserve price in the second auction and instead set a minimum bid of $300,000. (So why didn’t Mr. $325k swoop in? Better yet, why didn’t the library just give him a “second chance offer“? Maybe because it wasn’t a serious bid.)

The non-binding auction format would have been far more appropriate here:

Time — A non-binding auction can last 90 days. A regular auction lasts a maximum of 10.
Cost — A 90-day non-binding listing would have cost a flat $300. The library would have paid a minimum of — drum roll please — $5,690.56 if it had received its $375,000 reserve, plus 1.5% of everything above $375,000. That includes $50 for setting a high reserve price. On the other hand, since the auctions were unsuccessful, the library now owes only $9.60.
Safety — The library clearly would have had a right to turn away Kim Jong-il in a non-binding auction format. It’s not so clear that it could have done so in a regular auction.
Flexibility — The library would have had a chance to consider all offers without being obligated to take any of them. Perhaps someone would have offered $100,000 to name the reception area if they could not afford $300,000 for the whole shebang.
Transparency — There would have been no need for a secret reserve price in a non-biding auction.
Publicity — The library could have generated just as much publicity with a non-binding auction. Anything unusual sold on eBay attracts attention, regardless of the auction format used. The mainstream media is incredibly unsophisticated when it comes to reporting on eBay, and they do not differentiate among auction formats. On the other hand, the library failed to attract much publicity outside of Pennsylvania and library-oriented publications. An auction like this needs to be coordinated with a public relations campaign. If this thing was on the Today show or even Jay Leno’s “Seen on eBay” bit, the library likely would have made its goal.