In the News

"The Great Leap Forward"

An old-line family auction business blazes onto the Web with a simple message for its dotcom competitors: We know our business better than you do.

By Daintry Duffy
Darwin Online, June, 2000

ON A CRISP FALL afternoon in Manhattan two years ago, Ross Dove, chairman and CEO of Dove Brothers Inc., and some business associates were having a drink at the swanky Oak Room in the Plaza and idly watching the nearby television. A short segment touting the success of eBay caught the group's attention, and Dove, a third-generation auctioneer, proceeded to openly mock the reporter's breathless account of the upstart company's wild successes. "I told them I could do something way bigger than that with business assets," recounts Dove. After all, he argued, there's a heck of a lot more value in Hewlett-Packard's attic than in Grandma's. "So," one of his companions asked, "Why haven't you done it?" With a dismissive shrug Dove replied, "I'm just too busy with auctions." His companions laughed uproariously. "Too busy to be a billionaire?!"

On the flight back to his California home, Dove mulled over the conversation in his mind and came to a conclusion: "Boy, did that sound stupid."

For over 65 years, the Dove family has been in the business of giving second life to the excess corporate assets of U.S. companies. Whether a business was going through bankruptcy or a merger, Harry Ross, his son-in-law Millard Dove, or grandsons Ross and Kirk Dove (see "A DoveBid Timeline") have stepped in to handle the disposition of everything from battered, old desks and fancy, ergonomic chairs to typewriters and mainframe computers. In the process, the company has grown from an old-fashioned factory-floor auctioneer to one of the leading onsite and online auctioneers of capital assets, with over $5 billion in auction sales under its belt.

In 1998, Ross Dove decided to back up his Big Apple bar-stool boast. He realized that integrating the Web into the company's business model could significantly increase the value of the auction services to both buyers and sellers. Online pioneers like Yahoo, Amazon and eBay had already succeeded in removing the stodgy and exclusive Sotheby's veneer from the consumer auction business. Ross and his brother Kirk, Dove Brothers' president of auction services and chief auctioneer, were convinced that the newly hip and accessible image of online auctioning would translate just as well to the business-to-business market. Since that decision, the company has changed its name to DoveBid and introduced 24/7 Web auctions, where companies can peddle their wares. The company has also merged the onsite and online auction experience to create live webcast auction events, which allow bidders from Kansas City to Kuala Lumpur to bid on goods as easily and reliably as the folks sweating it out on the auction floor.

Like many businesses, DoveBid has found that the transition from old economy to new economy isn't easy. Ross Dove admits that when he decided to take his company online he was naive. The huge amount of time and money required surprised him, as did the breakneck pace of business on the Internet. "I wish I had known what Web speed was," he notes ruefully. But though the learning curve has been steep, Dove hasn't regretted for a moment taking the leap.

A Brief History
The auction business has changed tremendously since 1937 when Harry Ross founded the company. In the 1940s and 1950s, most of its auctions entailed selling off a company's assets after bankruptcy or foreclosure. Bigger companies, fearful of the negative connotation that these auctions had, avoided using them to liquidate their overstock or outdated assets. Instead, these companies relegated their excess equipment to a factory floor or scrap yard. Smaller companies didn't share the same concerns, but only serving small business clients made it hard for Ross-Dove, as it was called then, to grow the business.

In the 1980s things started to change. Newer technologies like corporate phone systems and mainframe computers were expensive and required frequent upgrades; shoving the outdated equipment into a corner made CFOs turn numerous shades of green. Companies thus began looking to unload excess assets at business-to-business auctions, and Ross-Dove gladly took on the challenge.

Since shifting its focus in the mid-'80s to the bigger fish in the corporate sea, the company has broadened its client base as well as its industry expertise. It now auctions biotech items, semiconductor fabrication machinery and telecommunications equipment as well as assets in 16 other categories. The company has also presided over some of the world's biggest auctions. When high-flying New York City investment firm Drexel Burnham Lambert was felled by the junk bond brouhaha of the late '80s, Ross-Dove hosted what at that time was the world's largest auction of high-rise assets. Close to 10,000 bidders went head-to-head over everything from antique rolltop desks to Michael Milken's coat rack.

The decision to take the company online in 1998-and to do it quickly and decisively-far outweighed any reservations that the brothers had. They realized that going online would require a significant paradigm shift as well as a big investment of capital. But with long-term clients like GE, GTE, Fairchild and Boeing in its camp, the company already had a leg up on would-be competitors as well as a compelling reason to offer Web services to those clients before someone else did.

This Ain't Your Granny's Auction
"Hey buddy, don't you get too slick with me," chides Kirk Dove good naturedly, after a floor bidder asks that a lot be divided in two and then scores a little bargain by taking them both. DoveBid might be selling oscilloscopes and wafer-processing stations, but nobody said that the event couldn't be fun. The key to being a good auctioneer, says Kirk Dove, "is knowing the value of the equipment and then being able to communicate with the audience, because it's supposed to be fun and a lot of people come to the auctions because they like this environment." The introduction on Jan. 26, 2000, of webcast auction events (produced with New York City-based Slingshot Technologies) have kept the good times rolling because now prospective bidders don't have to fly cross-country or drive for half a day to participate.

Setting up an auction room for a live webcast requires minimal change. An auctioneer (usually Ross or Kirk) stands at a podium riffing in the rapid-fire, high-energy cadence unique to the profession. The audience full of hungry bidders anxiously awaits the fall of the gavel. However, there are some slight differences. A picture of each item is still projected on a screen in the front of the room, but that same digital image is simulcast on the Web along with streaming video of the auctioneer. Another screen in front of the room shows a world map that lights up to indicate where all the remote bidders are located and an auction paddle icon to indicate a remote bid.

For auction-goers like Microsemi Corp.'s Linda Kelly, the experience of participating via webcast has proved seamless. Like onsite bidders, she is able to view both the product and the auctioneer and make bids using her telephone keypad. Before each auction, Kelly registers to participate in the webcast. She receives her paddle number and information on how to log on to the DoveBid auction site as well as how to bid via e-mail. Kelly attends the auctions to purchase items for her semiconductor company's 15 worldwide manufacturing plants and has been DoveBid's customer for 20 years. At a February 2000 auction of equipment from Northrop Grumman's science and technology labs in Pittsburgh, Kelly participated from the comfort of her cozy office in Santa Ana, Calif. Kelly had an engineer from a local office go to the auction site during the preview period to check out some equipment she was interested in, saving her the trip. "I mean, who wants to head out to Pennsylvania in the middle of winter?" she asks.

The webcasts have taken off in popularity. According to Kirk Dove, at the first webcast auction for Raytheon Systems, about 25 percent of the bidders participated online. At the third webcast auction, the number crept up to 30 percent. By the Northrop Grumman auction, which was its fifth webcast event, Dove estimated that almost 50 percent of the participants were joining the event via webcast. "I envision that within a year's time the Web audience will dwarf the [onsite audience] because every person that comes here and sees it work is encouraged that they too can bid on the Web," he says. In the next year, DoveBid plans to broadcast 100 to 150 webcast auctions. In the future, it's quite possible that the idea of traveling to a live auction will be as obsolete as some of the equipment being offered there. In fact, Ross Dove expects that auction events could soon be conducted from the comfort of a television studio where all the participants will join via the Web.

The addition of technology, however, has not changed the fundamental strength of DoveBid's business, which is the seasoned shilling of its auctioneers. At the recent Northrop Grumman auction, one lot of miscellaneous equipment was added at the last minute. There was no description of the items or pictures for either the onsite or online participants. But some convincing salesmanship from Kirk Dove did the trick. "Come on folks, it's a chance to make a real mistake here!" he chortled. The lot sold for $300. Of course, the company can afford to unload some things at rock-bottom prices. DoveBid's take for the Northrop Grumman auction, for example, was in the range of hundreds of thousands of dollars.

Not all companies divest themselves of enough equipment to justify a big auction event, so DoveBid also launched DoveBid.com, a 24/7 site where companies with just a few items to sell can put them up for bid. The site was launched Nov. 1, 1999, and currently lists over 400,000 items. A recent check of the site turned up $50,000 worth of sutures, a $3.1 million Submicron step and scan system, and 5,100 rolls of computer tape at just $1 a pop. Sellers pay DoveBid a $10 listing fee (refunded if the item sells) plus5 percent of the winning bid.

Built to Reinvent
Getting the technology right proved to be the hardest part of the company's transformation. Before launching its own webcast, Kirk Dove visited a number of online auction sites and found that some had trouble getting product pictures up online, and worse still, bids from the Internet were not coming through until after the bidding had closed. DoveBid decided that the only way to do it right was to jointly develop its own software. It partnered with Slingshot to create a system that was truly real-time and free of glitches.

Still, the realities of doing business on the Web are harsh, notes Dove. He soon was receiving e-mails from around the world pointing out problems on the site and offering advice on how to improve it. He realized very quickly that a website was not just a static product that you buy; it's a living thing that is in constant transition. The "built to last" mission of his grandfather's era has been replaced with a "built to reinvent" mandate that, according to Dove, requires the company "to never get too in love with our product, because it will change as we do."

Ross Dove's initial expectations regarding the financial and personnel resources necessary for the shift to the Web also drastically changed. "I don't know how many millions [the site] ended up costing," he says, and that was not the only unexpected expenditure. "Our definition of scale quadrupled in size." The one technology person that Dove expected to hire quickly turned into a team of 25, and the two marketing positions grew into a staff of 20.

Strength in Family
DoveBid does not have the B2B capital asset auction space to themselves. Brick-and-mortar competitors have dipped their toes in the online auction waters, but Dove notes that most of them have taken a wait-and-see attitude. It's the more aggressive dotcom competitors like Tradeout.com and iMark.com that are making the strongest push into this market. Dove gives those companies fair warning, however. Knowing what works in the analog world helps to design the digital world, and Dove cautions the dotcoms that the analog guys do "get it." "Having a business and building a website is much easier than having no business and building one," he notes. So far, the analysts seem to agree. "Ross Dove and his family have incredible domain expertise. They know this business, because it's what their family has been doing for over 60 years," says Lara Abrams, a senior analyst with Boston-based Aberdeen Group. "None of the other players can say the same thing." However, even an online company with DoveBid's wealth of experience will be fighting an uphill battle in this fickle and wildly fluctuating stock market. In April of this year DoveBid postponed a planned IPO, citing the rocky market conditions.

If you need further proof of how well brick-and-mortar can translate to click-and-mortar, you need only visit a DoveBid auction to see 75-year-old Millard Dove bang down his gavel on the podium and cry, "Sold on the Web!"