Online auctioneer keeps going, going

Bid4Assets Inc. sells distressed firms' assets

May 19, 2002|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Call it the Sotheby's of the "New Economy."

Bid4Assets Inc. of Silver Spring takes the assets of defunct companies and auctions them off from its Web site. It is the kind of business that surges when the economy deflates and has benefited from the burst of the dot-com bubble.

"The asset sales business is a good business in good times and a great business in not-so-good times," said Rick Zitelman, the company's president and chief executive.

Tim Miller, president of Webmergers.com, a San Francisco-based company that researches Internet businesses, said: "A couple of things are certain: death, taxes and liquidation sales."

Bid4Assets is counting on it.

The company has sold assets of dot-bombs and others. And since its inception, the company has expanded to sell items including financial instruments, property from financial institutions and private sellers, tax-defaulted real estate for sale by municipalities and assets that were forfeited to the U.S. Marshals Service because of criminal activity.

Products for sale on its Web site this month, for instance, run the gamut from motorboats to a timeshare in Mexico to an arena scoreboard that was used for the NCAA Final Four basketball tournament this year.

Online auctions have become widely accepted in the last three or four years, said Steve Butler, a senior analyst who follows online businesses for eMarketer Inc. in New York. DoveBid Inc., for instance, has been in the asset auctioning business for more than 60 years and ventured into online auctions three years ago.

"The incumbents have the advantage of long-lasting relationships, and the upstarts have to come in either with the better technology offering or a more competitive pricing," Butler said.

The advantages of online auctions, analysts said, are that the potential audience is much wider and bidders can participate from all over the world - a lesson Bid4Assets learned in its infancy.

During one of Bid4Assets' first big online auctions two years ago, company workers crowded into a conference room and watched a man from England bid for hours against someone from Australia for the domain name Planetrock.com, recalled Jay French, a company officer. It finally sold for more than $20,000, according to Bid4Assets.

"Your potential audience is unlimited," said Thomas Underwood, an analyst who follows eBay Inc. for Legg Mason Wood Walker Inc. "On the other hand, just being online does not assure lower distribution costs."

One key to the value of an online company vs. a traditional auctioneer, Underwood said, is how much money it can make while giving its customer a better product.

Zitelman said Bid4Assets differentiates itself through its marketing for clients: It runs direct mail campaigns or advertises in trade magazines for them. The company also specializes in certain areas, he said. Going up against eBay, for instance, Bid4Assets features only high-value items while eBay also sells less expensive objects, such as books and clothing.

The company earns money by charging customers a percentage of the sale price and a listing fee to have their property or products posted. The company also does some live auctions at hotels or office buildings, and it can Web cast those auctions over the Internet.

The company was founded in February 1999, when Norman Understein and French were bidding on an office building at an outdoor auction in Baltimore County. It was a bitterly cold afternoon, and the two had to go through the trouble of driving to the bank for a cashier's check and standing outside for two hours, only to lose to another bidder.

"Norman, on the way back, called me from his car and said, `There's got to be a better way,'" Zitelman recalled.

They wanted to find a more efficient, convenient method for auctions. So the next week, Understein and Zitelman - who lived in the same neighborhood when they were young children and have been longtime friends and business partners - formed Bid4Assets.

An ideal forum

The idea was to have a central place where assets from bankrupt companies, ranging from intellectual property to real estate, could be auctioned off. And what better forum than the Internet?

"You could get up in the middle of the night in your pajamas and bid on something," French said.

Neither Zitelman nor Understein was technology-savvy. The two own a handful of businesses together, such as a hotel near Baltimore-Washington International Airport, and they envisioned this to be a business of four or five workers in somebody's basement.

But it was the age of the Internet. Zitelman and Understein brought in management to run the show. The company raised $5 million in venture capital in the first half of 2000, with The Hartford Financial Services Group Inc. of Hartford, Conn., as its lead investor. By June of that year, Bid4Assets had grown to about 30 employees, Zitelman said.

Though Zitelman said they never considered Bid4Assets a pure dot-com, he admits it fell into the era's hype.

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