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eBay's transition from startup to mature business

This column originally ran in ComputorEdge on March 4, 2005
(Issue 2309, All About DVDs)

Of late, eBay just can't win for losing. A lackluster report last quarter had eBay's stock as the hot topic of investment columnists as this year opened – and not in a good way. Undoubtedly as a way of generating more revenue, eBay then announced it was raising fees on items sold in "eBay stores."

That last announcement set of a flurry of angry e-mails to eBay management, as well as among eBay sellers on various messages boards (including eBay's own forums in its Community section).

To eBay's credit, they're letting folks steam and simmer on eBay's forums.

To eBay's shame, the company is sending out press releases announcing lower fees – which is only partially true.

But the larger point in all this brouhaha (and the earlier complaints detailed in this space regarding copyright law and the ability of large corporations to block legal sales of used software) is that the blush is off eBay's bloom: Much as with Microsoft 15 years ago, eBay is no longer the winsome little that could – but a large, powerful company with a near-monopoly over something a lot of folks have grown to rely on.

Dousing the flames

eBay clearly recognizes that it's higher fees are not popular. In early February, the eBay home page's main panel contained a prominent, impossible-to-miss message from the company attempting to assure everyone that only some listings were having their fees raised, and that most auctions would be unaffected.

All eBay members also received an identical e-mail in their eBay Message Center (although who even checks that). And a few days later, Bill Cobb, president of eBay North America, sent out a follow-up note to everyone's Message Center announcing new telephone support (about time!) for all store owners (although not all auction sellers or buyers). But everyone will now get a personal reply to e-mailed questions to eBay – no more automated responses (unless you're reporting a phish e-mail).

All of which indicates that eBay recognizes that their customer support has been abysmal, and that they need to invest some money in hiring more bodies to keep their growing but fickle customer base happy.

An unusual model

eBay is sort of like a TV station in that it has two customer bases. A TV station makes money by selling advertising. But in order to sell advertising, it has to have viewers. So there are two very different demographics that a TV station (or radio station, magazine or newspaper) has to keep happy.

With eBay, they make money when folks list their items for sale. But they won't list their items for sale unless they think they'll sell. So eBay has to keep enough sellers happy in order to continue drawing buyers – a nice little Catch 22 that the company has mostly managed very well.

eBay has a certain strength because, as we discovered during our earlier columns, there isn't really a meaningful competitor to eBay. Yahoo! and both offer auctions, but neither draws enough traffic to them (despite their high traffic in other areas of their sites) to make a listing worthwhile. Items that never even got viewed on those two sites ended up selling on eBay after my fit of pique had passed and greed had resumed its normal place in my emotional pantheon.

The final verdict

Whether eBay's stockholders will be mollified by all of this remains to be seen. Despite the uproar from eBay's selling community, the company hung tough on the price increases – unlike last year when the company reversed a decision to shut down its subsidiary. And while some message posters are claiming that up to 60 percent of eBay sellers have taken their business elsewhere in protest of the price hikes, no such downturn in offerings was apparent when I visited.

Likely, this is all just a rough spot in eBay's continued growth – a sort of corporate adolescence, if you will, as the company comes out of its childhood. Used to being fussed over and coddled, eBay is now being treated like an adult firm and still learning to find its footing.