Should ebay become freebay?

I’ve been thinking a lot lately how so many of our big internet services like ebay and match are being driven towards extinction. They should be reducing their prices every year. Like walmart they should be passing on their massive efficiencies to their customers in a constant drive to reduce friction.

Instead we see ebay raise fees. How is that benefitting their buyers or sellers? Is it to fund esxciting new services? No. Its to show wall street higher eps, and have a high stock price to go buy other growth properties like skype and

Now I wouldn’t want to have meg whitman’s job. She faces a vicious downward spiral where she has to spend more money to bring people into her marketplace and then charge them more to cover that making her product ever less competitive with the increasing free world. It must suck to have to compete with the free world.

These same economics are being played out for many web 1.0 leaders from to monster. Even craig recently decided to stop competitors like oodle from crawling his marketplace.

It becomes more clear every day however that nobody will succeed fighting against the free world. As we saw in news, if you’re not on google you’re not on the web. if you’re brillaint story on bush isn’t crawled, nobodys gonna know about it. How long until we search for a used car imn the open market and see all for sale, except of course those listed on ebay?

And how can ebay play in this world? My rule of the net is that anything that can be free will be and free will always win.

So what if ebay became freebay? Well, it would no doubt destroy the stock to wipe out 75 % of revs:) but I wonder what would happen if they started cutting prices every year and allowing/inviting the world to take and use and present all their lsitings?

Since all services would have to link back to ebay which is hosting the sales they would get a ton of free traffic letting them spend less on marketing and reduce fees.

Or what if ebay launched its own killer? What if they launched their own marketplace aggregator that crawled every car for sale and allowed free listings?

Ebay obviously gets the power of the free listings model as it has invested about 1 billion buying these companies from to marketplatz and a stak in craig.

In a world where data moves freely, ebay’s business becomes all the value added services, many of which still have network effects. Their ratings could be a separate service like paypal offered to be used with any marketplace.

This also brings up other questions. Maybe 100 billion dollar companies aren’t aligned with net consumers in the long run. The msft model of capitalism that ebay and goog follow is to maximize profit and stock price and then redistribute this massive wealth privatley as chairty from bill, pierre, larry and sergei.

Would they all do better by the world giving back more direclty through their companies? What if msft lowered the price for windows and office every year rather than brutally fighting? This would have given back to our economy but would it have helped them? Why should a monopolist reduce prices? Sure don’t teach that at harvard b school.

Yet it seems like ebay would be better off with a more cooperative relationship with its sellers. Compare to the branding craig gets with free.

By cutting prices as low as possible these companies would own their monopolies more completely because there would be way less room for new competitors. They might also have driven greater penetration or new uses for their services. Clearly the newspapers missed the boat not cutting the prices for their classifieds.

I guess my gut tells me that if ebay doesn’t open up and cut prices now, they’re the next aol, but I probably can’t make a coherent case yet.

One last point and sorry for rambling,these are community created marketplaces. They are co owned by their users. You are wronging them by raising prices when you don’t need to. People love craig because he tries to chrge as little as possible. If he ever went commercial and charged for lots of listings, I suspect he’d be done.
Sent wirelessly via BlackBerry from T-Mobile.

21 thoughts on “Should ebay become freebay?

  1. Hi Mark,
    This is a great post. In keeping with your thesis, EBay would be wise to study the evolution of stock markets in the United States, particularly the last 20 years. Stock exchanges generate comparatively little money from trading fees/commissions and almost all of their money from ancilliary revenues streams, particularly pricing data. Exchanges that failed to lower transaction costs have seen volume rapidly shift to cheaper alternatives. In the grand scheme of things, most of the money made by firms servicing the stock market is made by services such as margin lending, stock loans, and clearing. Ebay should focus on ancillary services such as payment, escrow, insurance, financing, etc. and try to lower transaction costs to as close to zero as possible. Until they do so, they are in real danger of being usurped in the fashion you describe.

  2. Mark,
    Why is this not a classic Innovator’s Dilemma? EBay (and Monster for that matter) own the high end of a particular market, are bogging down in features, and are being eaten from below by much lower-cost, “crappy,” next-generation services. Where’s the mystery?

  3. eBay’s seller community was okay w/ increased fees only so long as their average sale price and/or velocity of completed transactions was increasing faster than the rise in fees. This was/is eBay’s natural monopoly pricing power and the impact of an auction marketplace.
    I’m not close enough to the data, but i’d bet that eBay has experienced decreasing average sales prices and decreasing transaction volume per capita from new and recent members. While at the same time, “Buy it Now” removed some of the auction dynamics and sought to optimize on “inventory turns.” Meanwhile, the emergence of other distribution methods for their power sellers – such as PPC search advertising and shopping guides – gave them new avenues to compare ROI.
    Net result? eBay lost of some the pricing power they held and while it’s still an awesome global marketplace, find themselves at a crossroads – looking for salvation in vertical and horizontal expansion.

  4. What makes me frustrated is that not only has eBay raised their seller fees, Paypal charges me a fee when I recieve funds from a buyer. They get you on the way in AND the way out!

  5. Bill,
    I personally don’t think eBay should ever be Freebay, but I wholeheartedly agree with your ideas to provide financing and insurance. They’re in the perfect position to offer these services, and this could keep fees down. Of course, eBay has it good for now – its huge community makes it near-impossible for new buyers and sellers to go elsewhere. So we shouldn’t expect to see changes anytime soon.

  6. I completely disagree with you that “free” is the way of the future. Servers, customer service people, etc… they all cost money. How will they be financed? Through ads? Really? Every site, every service will stay afloat via ads? Or rich uncles? Riiiiiight πŸ˜‰
    Free is not the future. TRUST is the way of the future. Why don’t I auction off stuff outside of ebay? Because ebay has built up a generally-reliable reputation system, I know my credit card is reasonably safe with them, and so on. Would I trust Yahoo! with my credit card? Yeah. Would I trust yabbadabbarandomco with my credit card or even e-mail address? Probably not.
    People are willing to pay for trust. There’s also inertia. There are zillions of examples (on the Web and otherwise) of people paying money for services that they could get better and cheaper — or even free! — elsewhere, simply because of change barriers or even inertia. Folks are busy, it’s a fact of life.
    So even if the whole walled garden fell down (which I think would be neato but improbable), some companies will scrape or slurp better than others… or, perhaps more specifically, some companies will PRESENT information (via browse, search) more efficiently and pleasantly and provide better customer service than other companies. People will pay for that. Maybe not teens. Maybe not even broke college kids. But millions of others will.
    I repeat, free is not the way of the future. And for that matter, open is not ALWAYS better πŸ˜‰
    P.S. — On a random side note, it’s annoying that you don’t have a straight XML link, Mark. Not everyone subscribes to blogs via Bloglines or the other two services you listed. Sure, I can (and will) strip out the extraneous info, but hey… be nice to us geeks; link to the straight feed, eh? πŸ™‚

  7. Interesting post. Don’t forget however that to the buyer that eBay/Paypal are free. Sellers will come to where buyers are and so long as the economics are fair, eBay’s community can continue to flourish. Just because you make a service free for sellers doesn’t promote buyers to come at all (witness Yahoo auctions and numerous other free auction/shoppping sites, etc).

  8. Interesting post, but don’t forget that to the buyer eBay and Paypal ARE free services. Sellers will go to wherever there are buyers, and so long as the economics are fair and profitable, eBay’s community will continue to flourish. Introducing free services (witness Yahoo Auctions and numerous other free auction/shopping sites) does little to entice massive numbers of buyers to go…

  9. Free ebay is superb idea… how do you thing this free-ebay company will earn from ? Google Adsense?? or its own adsense program.

  10. hiya
    you should try its great i have sold 25+ items in less than a month its a new site only just opened
    PS the best bit is its FREE TO SELL ON THERE SITE AT THE MO!
    The site has only been open a month and is doing really well !!
    they are upgradeing all the time i donot use ebay any more as this site just gets better and better
    ps there are some great bargains on the site have a look around !

  11. Ebay should revert to the auction site it once was that made it such a success. The reserve pricing and excessive shipping charges thousands of sellers charge make ebay just another online store. There are no deals anymore!!

  12. Great thoughts…I have thought along those same lines for many years. As an eBay seller, I have seen the growth of eBay extinguish the exhilaration and “edge” the marketplace once had. Things have changed to a drag on both the sellers and buyers side. Inundated with worthless and menial banter, sifting and searching seem to fill my time browsing. On the sellers end, I must admit, the fees increase and increasing crowdedness of specific markets has forced me to “sharpen my pencil,” innovate and change to the ever-more-often changes and fee structure changes. All in all, I work twice as hard for the same profits.
    Its sad to see eBay taking the steps it has, and I am in agreement, will lead to their eventual demise as we have seen by others. I constantly have my ears perched and would be a most willing participant in new growing eBay-like marketplaces. In fact, I pray for this to happen on a daily basis πŸ˜‰ I have tried Yahoo, and most others that have cropped up, unfortunately with very little success, but hopefully some day things will change.

  13. ebay is 10 times better than this freebay or whateva ya call it. your gtting knowere with this site you might as well quite while your ahead

  14. As a seller on eBay I find the recent changes a bit alarming but no different than challenges that brick and mortar retailers face. I think one of the primary differences for eBay sellers is there just aren’t many alternatives that will get the traffic that a seller wants.
    eBay has become predatory, monopolistic in their pricing structure and before long I think it is going to blow up on them. They really should be looking at selling other services besides the listings of products… perhaps analysis tools and the like based on their massive amounts of information.

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