As an Internet marketing tool, the online auction functions just like your regular auction at a brick-and-mortar venue – interested buyers try to outbid each other for products and services that they want. The key difference is that the online auction is conducted on the Internet.

Historically, the online auction has the same roots as the traditional auction in that they are both patterned after the old English auction model. The bidding begins at a low price and rises higher and higher as each successive bid is made. On the other hand, a few Internet marketing practitioners have patterned their online auction site after the Dutch model. Here, many identical items are put up for auction at a single time and multiple bidders win the bid and pay the same price. Treasury bills are one such item that are sold this way..

As an Internet marketing tool, the online auction made its debut in 1995, courtesy of eBay. Its immediate success soon spawned competitors such as Amazon.com and Yahoo. Eventually, Priceline would make add a twist of its own to the Internet marketing scene – it allowed buyers to simply name the price that they wanted to pay for an item and sellers would either accept or reject it.

At present, eBay is the leading online auction site in the world and the model for this Internet marketing tool. Contrary to what some people think, eBay isn't the owner of the products it offers to customers. They are more like middlemen who oversee transactions. Their role in Internet marketing is simply to list and display products, oversee the bids and facilitate payments. That's also how most online auctions operate. They are like the owners of a giant and far-reachng marketplace who simply provide space merchants and collect a commission from all sales.

Online auctions are a proven and effective Internet marketing tool. Here are some of their advantages:

1. No time constraints
If you have a product or service to sell, you can post it on an online auction site any time of the day and any day of the week and leave it there for as long as he wants. Buyers also have the luxury of making their purchases any time they feel like it. They always have enough time to study the items before deciding whether to buy them.

2. No geographical considerations
It doesn't matter where you live, as long as you have Internet access, you can buy or sell on auction sites. The best thing about this is that you don't have to spend a dime to physically attend an auction nor do you have to transport the items you're selling to a central location. This, in turn, makes the prices of goods a little more affordable.

3. There are many bidders and sellers
Given the fact that online auction sites do not have any time or geographical constraints, more people can buy and sell on these sites. This is an advantage for both buyers and sellers. Buyers have more items to choose from while sellers have more potential customers.

Given these significant advantages, it is no wonder why online auction sites are among the most effective and popular Internet marketing tools around.