June 22, 2003

The eBay Phenomenon

Occasional visits to Medved Quote Tracker's eBay Auction Charts are always instructive, to see how eBay's doing. "Doing," in eBay's case, always equates to "growing", because that, simply, is what eBay does. It just grows. And grows. And grows.

What's especially fascinating is the predicable patterns of eBay's marketplace activity. Every year, without fail, the market quiets down dramatically on Christmas Day. It's eBay's worst day of the year. And yet, the week or two after Christmas are, invariably, eBay's best weeks of the year, thanks to people selling all those junk items they received as gifts all over the world.

But what's even more fascinating is that as eBay's market continues to grow, the Christmas drop-followed-by-spike pattern continues to amplify each year. Just look at what happened in Dec. 2002 versus Jan 2003. Spectacular rubber-banding. You can almost hear the boiiinnnnnnnngggggg as the market pulled back, then snapped forward, then settled back into its steady climb. It's like watching a heartbeat that gets louder each year.

It's an extraordinary chart, and it shows no signs of changing. And yet, it could change. If someone offered a faster/cheaper/better online marketplace, and enough sellers migrated to it, attracted by far-cheaper fees, for instance, it might put a dent in the eBay monopoly. But sellers value buyers more than they do low fees. So eBay keeps growing. (Just imagine if eBay eventually wins over legislators to the point where it can start selling... houses. As in, takes over the MLS that is so coveted, and controlled, by realtors. Don't think it will happen? We'll see. It sure would add a few more $billion to eBay's bottom line.)

Must eBay be the only marketplace we ever see online anymore? Is there room for competition still? Sure, why not? It would be hard as hell, but doable. I suspect a new competitor to eBay would not start from scratch the way eBay did, but rather would be well-funded from the get-go, buying up every niche online marketplace in sight to jump-start itself. For example, it'd probably want to buy GEMM, the Global Electronic Music Marketplace, which continues to chug along, mostly unnoticed by non-record-collectors, but a valuable, vibrant marketplace for music buyers and sellers. It currently claims to offer 16 million CDs, LPs, and 45s from sellers all over the world, and in recent years has expanded into books and videos. And perhaps this woud-be competitor to eBay would partner with newspapers who, through their combined classified ad listings, probably outnumber eBay's listings even in 2003, though I'm not sure.

Probably the most amazing thing for me about eBay, and GEMM, for that matter, is that the user experience on these sites remains so iffy, the quality of the production so uneven, the navigation so confusing, the chances of user success so 50-50, and yet, they continue to grow. Having worked at eBay, it was an eye-opening experience to discover that had we completely fixed the system, made it much more intuitively easy to use, that might have actually hurt the marketplace, by making it too efficient. If sellers have too easy a time listing items for sale, then that would create a glut of items for sale, disturbing the supply/demand balance. Likewise, make it too easy for buyers to find things and buy them, and once again, you diminish supply, drive prices up, and scare off future buyers. And so the site retains a mishmash of styles, with agonizingly slow progress on improving the quality of the fit and finish, and continued unpredictable success on transactions between any one buyer and seller. And yet the growth marches on. Any serious future competitor to eBay is going to have to take all this into consideration. Posted by brian at June 22, 2003 04:45 PM

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