A Few Thoughts About eBay’s Decline

Bambi Francisco, the best columnist covering internet stocks, announced some very surprising things this week about eBay’s traffic decline. For nine consecutive months, the internet giant has seen declines in traffic, year over year.

eBay is a great company, empowering millions of people to buy and sell. I love the original vision for eBay and the tremendous impact this company has on our economy. But I know of two serious problems that are likely getting in the way of future growth:

1. Greed. I wonder if eBay has gotten a little greedy and strayed from its founders original intent. Virtually everyone I know who sells on eBay has become increasingly frustrated over the years as eBays fees keep expanding. eBay, with its near monopoly on auctions has been squeezing and squeezing sells for quite some time. Of course, sellers keep looking for alternatives, whether that be launching their own ecommerce site and using Google AdWords to drive traffic, or even switching to Overstock’s new auctions. When Overstock launched its auction service, they were definitely in tune with the negative attitude towards eBay from sellers, and they are capitalizing on it.

In our increasingly open source and information-rich world, business models that are driven by greed are becoming obsolete. It’s harder to have a monopoly these days. The idea of owning customers and therefore being able and willing to keep raising prices until you are extracting unfair sums from customers who have no other choice should be discarded. Consumers have the power in an increasingly knowlege-rich, transparent economy. Companies that ignore customer sentiments for too long will find competition springing up quickly and from unexpected sources and customers fleeing.

2. Too Hard to Use. I am going to sound stupid admitting this, but I have the hardest time buying anything on eBay. I buy from Amazon several times a month, sometimes using 1-Click and sometimes filling a shopping cart with several items. I’ve never had a problem with Amazon. I love it. I go there for all kinds of products. But despite being an avid internet user since 1994, despite having used hundreds of sites and having built many, I struggle to complete a transaction on eBay. I think the main problem is that I have an eBay account and a separate PayPal account. I’m not a big PayPal user, so I struggle to remember my password. I’m confused whenever I get to the payment section. When I “win an auction” or click on “Buy It Now” I just want to pay for the dumb thing with my credit card and have it over with. I don’t want to have to figure out the PayPal thing everytime. Twice I’ve tried to purchase something from eBay in the past year and failed. Why keep trying? I don’t. I just go to Amazon now.And I’m not the only one with this problem. My wife thought she bought something for me for our anniversary on eBay, but it turns out she messed up on the PayPal step, so I didn’t get the Ty Detmer helmet after all.

I’m listening to an Audible book right now called The eBay Phenomenon, published in 2001 I think by the former editor of Upside magazine. (One of the best magazines during the bubble!). It’s a great story of the amazing growth of a truly internet-enabled business.

I want to believe that eBay will get back on a growth trajectory. I liked their investment in Craig’s List. I like their international expansion. But if they don’t solve these two problems and a related one which Bambi pointed out — that all the smartest people are flocking to Google and Yahoo — then I think eBay long term will continue to lose to the more efficient (speaking of the user experience) and less greedy (for the time being) Google and Amazon.

8 Comments

  1. I think it’s good for the users if eBay struggles a little bit. I would hardly say they’re stuggling at this point, but it might be good for buyers and sellers to have some real competition. Why do you think eBay’s interface is so hard to use? Why do they keep jacking up their seller fees? Because they have a virtual monopoly with online auctions, so they don’t have to innovate, they don’t have to provide an easy to use interface because people haven’t had a lot of decent options. If you want to buy something at auction, you had to go with eBay or nothing. I hope Overstock auctions, uBid, Yahoo auctions and some of these other auction sites continue to cut into their monopoly. It’s hard not to be greedy when you own the market.

    Look at what’s happened with search over the past couple years. There’s been some serious consolidation (mostly by Yahoo’s acquisitions), but the big three are putting a lot of resources into innovating and improving their tools. Every week they come out with a cool new search-related feature to try to out-do the other guys.

    Ebay is complacent because they have such a strong hold on the market. As soon as they feel some competitive pressure, they’ll be forced to compete amd when they do, we (the users) will benefit.

  2. I agree that eBay’s user interface is horrible. They have let the thing grow out of control a become a bit of a tangled weed patch.

    Amazon seems to have the UI under control a bit better. Although I am not sure I like the recent change in the Amazon UI. Am not sure if I don’t like the change just because it moves me out of my comfort zone, or I don’t like change because the new UI is not as easy to use as the old UI. I actually thought they had done a good job with the UI they had in place. I am sure they will track the numbers and make adjustments as they go.

  3. I received an interesting e-mail about a month ago (and I assume that most eBay members received it) which was basically an apology for poor service in the past. Shortly after that “live help” was added to eBay. It seems that someone is aware of the problems, but the phrase “too little too late” comes to mind. An interesting lecture to watch at some point is one by Patrick Bryne (CEO of Overstock.com) who spoke at BYU about the ability to move into the internet auction territory by not making the same mistakes that eBay did. The lecture can be found at: http://ebiz.byu.edu/video/PatrickByrne/PatrickByrne.wmv

  4. Mike

    It’s now more than a year later and I agree more than ever with your points. Ebay has gotten greedy and the PayPal fees they place on sellers are over the top.

    If you think it’s hard to buy something on eBay, try selling! If you are an occasional seller it takes forever to setup your auctions.

    I think eBay management needs to reconsider some things. Ebay is not invincible. IBM and others have proven that.

  5. Michael Roberts

    Yeah, I’m only an occasional eBay user and I have to go through the entire rigamarole of reestablishing a password, every time. It doesn’t have to be that hard.

    And since they bought PayPal, *those* fees have been going up. I’ve based my business on PayPal — I do technical translation, and for some time it’s been the most effective way to get money between countries. But lately, old-fashioned SWIFT wire transfers are *cheaper*. And that’s just stupid.

  6. You are right that Amazon is far superior in many ways partly because it’s very easy to buy on Amazon. eBay has created an environment of distrust between its sellers and buyers and that’s why I say if there is a who wins, eBay or Amazon, hands down it’s Amazon who wins! The dicotomy between buyers and sellers culminated May 19, 2008 when eBay set forth its “No negative feedback” policy whereby sellers could no longer leave negative feedback for buyers. And worse yet, the neutral feedback counts the same as negative! That’s why I closed listings eBay store May 19, 2008.

    I write this and yet I have a cash back at eBay site. You see, I still love eBay to shop, but I just can’t sell there. The site gives you cash back at eBay and hundreds of online stores (like Petco, Walmart, Target, Borders, Sephora, and more) yet it won’t work yet for Amazon. I’m crossing my fingers that soon it will come to this terrfic site.

    All the best to you surviving eBay sellers!
    M.C. Nygard
    eBay Platinum PowerSeller
    http://www.cashbackatebay.com
    www. mermaidmonkey.com

  7. Really MadAtEbay

    The ebay feedback changes have made it utterly miserable to sell on the site. The Paypal policies and the new leadership at the “feebay” have driven the good used parts guys from the market place. Chargebacks and DSR’s, search results.. I mean- It’s miserable to have a group of auctions close, then have several hundred dollars frozen in disputes, not to mention the overall percentage that Paypal and ebay take- I used to feed my family with the 60+ hours a week I spent with Feebay, now I’m back at the regular job and I LOSE money when I part out a motorcycle on ebay. America- Great Job- As with the mortgage crisis, you seem to have a way of screwing up a good thing, every time.

  8. Kay Cal

    Lets face it Ebay is still a great place for the bargains BUT having said that, it isn’t Ebay that is making it a great place. Sellers are having to practically give stuff away to have traffic on the site. Ebay’s fees are outrageous and you have to pay Paypal as well. There isn’t money to be made by most, except Ebay is taking care of their own. Someday people/sellers will not be able to keep paying these fees and somebody else will be waiting around the corner to take Ebay’s business. They got greedy. It’s an auction site for heaven’s sake.
    They allow buyer’s to abuse seller’s and ruin their feedback. I had perfect feedback and one 21 yr old decided to lie on my feedback to tarnish my long
    standing record. When I wrote to Ebay they didn’t do anything. Your on your own when operating on this site. It’s messed up….that’s all I know. They are losing seller’s left and right.

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