Great Sites: eBay - InformationWeek

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Great Sites: eBay

When eBay Inc. wants to know how to improve its Web site, it hosts a meeting with some of its most trusted advisers. That's how Jane Edwards, aka "Texas Brit" to the eBay shoppers who bid on her collectible jewelry, got a free trip to San Jose, Calif., in February.

When eBay Inc. wants to know how to improve its Web site, it hosts a meeting with some of its most trusted advisers. That's how Jane Edwards, aka "Texas Brit" to the eBay shoppers who bid on her collectible jewelry, got a free trip to San Jose, Calif., in February.

Edwards flew from her home in Houston to eBay headquarters, courtesy of one of the Web's most lauded creations. The talk then was of tweaking merchandise categories and listing procedures. The participants didn't discuss what's now the site's newest feature: 18,000 storefronts for fixed-priced items to complement its millions of auctions. But Edwards and some of her cohorts had already known it was coming, and in June, weeks before the official launch, she was part of a 30-member pilot group that talked with eBay reps on weekly conference calls.

Though renowned for its sense of community, eBay has suffered criticism that its latest moves, including the storefronts--operated by individuals as well as by the likes of IBM and Hard Rock Cafe--benefit companies at the expense of people such as Edwards, who says she makes about $2,000 a month listing about 500 items, which sell for $6 to $15 apiece on her small storefront. Edwards has complaints: There are glitches in the storefront software, and the site doesn't do enough to nail deadbeat bidders, who cost her about $20 a month. Still, "it's one of the best auction sites out there," she says. "You can tell by the number of people using it and the fact that it's turning a profit."

And then some. On July 19, eBay reported second-quarter net income of $24.6 million, more than three times as much as the year-ago quarter. Net revenue was $180.9 million, an 84% increase over the same period last year. EBay charges each seller a small fee, ranging from 30 cents to $3.30, to list an item, then collects 1.25% to 5% of the final sale price. The number of registered users climbed to 34.1 million in July, from 15.8 million a year before. The international version of eBay, now in 12 countries, represents 14% of net revenue.

Traffic: 34.1 million registered users
2000 Revenue: $431.4 million
Business goals: "To help practically anyone trade practically anything on Earth"
Competitors: Amazon Auctions, MSN Auctions, Yahoo Auctions
Strengths: Has large following; seeks customer feedback about site changes; is profitable
Weaknesses: Receiving some flak for opening storefronts for businesses
On the strength of those figures, eBay is the world's most successful marketplace--a status it achieved without a warehouse full of products or a fleet of delivery vans. "Ebay created a sense of community that replicates and exceeds the quality of community you can get in the real world, and they managed to convert this to an actual business," says Haim Mendelson, a Stanford Business School professor and co-director of its Center for Electronic Business and Commerce.

EBay isn't the only one to offer consumers online auctions. Inc. and Yahoo Inc. are two of the more high-profile competitors, though with nowhere near as many buyers and sellers. In response, during the past 12 months eBay has acquired fixed-price site, added a Buy It Now feature to skip multiday auctions, and launched the storefronts.

Regardless of the storefronts' popularity, eBay isn't neglecting individual sellers, management says. "It's a democratic process in which your next-door neighbor competes side by side with large merchants, and both have equal opportunity to succeed," CEO Meg Whitman recently told financial analysts. "We think of it as enlightened trading. It's a level playing field that holds wonderful potential for all of us."

In the midst of the changes, original parts of the site remain strong, such as the Giving Board, where visitors can solicit donations of school supplies and get advice from other eBay members. In general, keeping customers happy is largely a self-service procedure: Sellers, whose eBay histories are easily accessible, contact winning bidders about payment and shipping arrangements, which eBay has made easier with its relationship with Billpoint, an Internet bill-payment service.

A sense of community still serves as the foundation of eBay's success. "Reputation is a powerful thing," Mendelson says. "When a customer has a reputation on eBay, [he has] standing in the community."

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