Auction sites have a social side

Social networking Web sites like Friendster.com and Tickle.com have been a boon to singles looking for a friend or a mate. Now social networking — online tools that encourage site visitors to talk to one another — is being used to ponder big life questions, like "Should I buy that vintage porcelain monkey?"

Salt Lake-based Overstock.com, an online discount retailer, recently started a social networking feature that is designed to build trust among users of its new auction service. Late last month, Buy.com bought the social networking site Metails.com, with plans to sell items that people are buzzing about with their online friends. Analysts said more sites could follow, particularly as the cost of Internet advertising rises.

"I think this makes a lot of sense, especially for smaller sites that don't have the kind of marketing budgets that Amazon or eBay have," said Aaron Kessler, an analyst with Piper Jaffray & Co., an investment firm. "It's a good way to generate customers through word-of-mouth."

On Overstock, customers of the site's new auction channel are invited to create free personal pages, listing their interests and posting photos, among other things. As on Friendster and its ilk, users can search for others with similar interests and invite them into a personal network.

Then when someone bids on an item, they can compare notes on a particular seller or item with others in their network, or see if the seller is a friend of a friend. According to Patrick M. Byrne, Overstock's president, the idea has worked out well, especially with more expensive items like jewelry, where the possibility of fraud is greater.

"Trust is such an issue, (and) that's why social networking would be more powerful there than, say, books," he said.

Overstock's auction service attracted more than 25,000 item listings in its first five weeks, Byrne said, and has generated $6 million in gross merchandise sales.

It is difficult to determine the extent to which social networking is responsible for Overstock's fast start in auctions. Analysts said Overstock had attracted many eBay sellers because its fees are lower than eBay's, which charges a commission of 5 percent to 9.5 percent of the final sales price. Overstock charges about 25 cents for a listing, and between 1 percent and 3.25 percent commission on sales.