We are so used to the success of Internet companies like Google, Facebook and Craigslist that we can forget that they are also subject to the laws of the market.
Thomas Jones has written an entertaining article for the London Review of Books which suggests that eBay may be about to stumble and even fall.
Jones suggests that eBay is an unusual Internet company in that it charges its users for services. Those services may soon be available for free elsewhere:
“MySpace, YouTube and Facebook are all funded by advertising, and Wikipedia by donations; eBay charges its users. With the spread of free social networking sites, not to mention the ubiquitousness of Google, the need for eBay becomes increasingly unclear. Why give eBay its 2.5 per cent cut when you can auction a CD to all the Keane fans on MySpace and Facebook, who can check your integrity on a site like ebuyer-feedback.com? This isn’t yet possible, though surely it soon will be. Last year, for the first time, the number of listings on eBay began to decline. The company was built on the principle of cutting out the middleman; in the process, it has become the middleman. At some point in the not too distant future, its cherished community of online traders may well decide that the time has come to cut it out.”
I doubt that eBay will disappear overnight because it is has such a vast market share. People take time to move on. And anyway, it can adapt, just like Old Media companies did. But it does remind us that a business built on a simple idea can be especially vulnerable when that proposition becomes dated.
Ebay is drastically changing its business model. It no longer want auctions to be its main function….its bread and butter. It wants to go more “retail” in effect – it wants to copy Amazon because Amazon is successful and Ebay is declining. In the wake of this change they have decided to put the entire blame for lack of sales, lack of buyers…squarely on sellers and in particular, small sellers. The effect is a stressful environment where one negative from a buyer – whether deserved or not – can literally put a seller out of business. I believe Ebay planned it this way – what better way to slowly “thin the herd” yet not take the responsibility than to just let buyers do it for you. Most small sellers will tell you they hate ebay – not because they wish to change their business model -that’s their perogative, BUT the sleazy way in which they are doing it! Small sellers need to move on to other sites and take as many of their buyers with them as they can. Its time to build new auction sites – but never again just one – Ebay is a rare monopoly and we must never let that happen again!
http://www.ACEOart.net
The first thing that I studied in economics was the Demand Curve; put simply this states that for most products and services the demand for them will decrease as the price increases. The second thing was that the curve for a monopolist (eg Ebay) was such that the price was higher at all levels of demand (eg numbers of listings). In the long term this cannot go on for ever, in fact we are now seeing a number of credible rivals emerging, eg Ebid. Ebay is unlikely to be a serious rival to Amazon as Amazon has superior IT and logistics systems, and can offer a better business model to companies of all sizes. Paypal is the jewel in Ebay’s crown, but it is joined at the hip with Ebay and really depends on ebay for its success.
So, in a word ‘YES’ Ebay could well be doomed, not because auctions have had their day, but because they will be consumed by their own greed and lack of direction.
“At some point in the not too distant future, its cherished community of online traders may well decide that the time has come to cut it out.”
I think that process has already started. Many of the bigger traders have recently left eBay and are already using free to list sites and other means to attract their traffic.
The international auction site eBid.net, which has been around about as long as eBay, reported a record month in May in terms of items listed and sales realised and the membership there has increased substantially in the last few months. Other free to list sites have also benefitted and the trend is set to continue.
Curiously, recent experience on eBid has proved to me that the collectors are looking elsewhere for the auctions which once would have been in eBay’s domain. Real online auctions are alive and well, just not at eBay Inc.
Granted, eBay will be around for a while yet but I expect the platform will undergo extensive changes in the next year as the new man at the helm steers eBay in the direction he sees as the future.
Whether its course will be in harmony with the future of the online auction industry is debatable but the online auction industry will still thrive without eBay.
As a former seller on eBay, I have to agree with the previous comments, eBay has forgotten it was the small sellers that put it where it is today, by providing a large variety of items which attracted the buyers. Unfortunately ebay’s failure to deal effectively with scammers has now come home to roost. Hence it is thrashing around like a wild man and alienating the very people it needed to survive. It seems to have forgotten that all the sellers that it has lost are now buying elsewhere at places like Ebid.net as well as selling there. Whether it’s decline is now terminal remains to be seen, but if I was a shareholder I would be very very nervous.
“…Why give eBay its 2.5 per cent cut…”??? This figure is way too low. eBay and PayPal make much more than 2.5%. Honestly, maybe the author meant to say 25%?
New (and even Old) eBay Sellers Need to understand that eBay and it’s PayPal unit combined can often make from 10% to 60% of the Sellers Total Profit. A lot of New Sellers don’t do the math ahead of time, and then spend months or a year or two selling on eBay only later to realize that they are not making too much for all the effort involved.
To easily see how much eBay + PayPal are Realistically taking out of Sellers profit, please check out this new free online eBay Profit/Fees Calculator here:
http://pheebay.com/1/?eBayALTERNATIVESPheeCalculator
This calculator can also help eBay Sellers (New and Old) learn how to increase their overall profitability (by showing which items make more profit and which ones to avoid because they make too little profit for the seller).