Monday, December 18, 2006

eBay 2.0 - Marketing Vehicle

I found an interesting article on Auctionbytes.com this morning. It was another take on what I've been discussing for months: eBay as a Customer Acquisitions tool.

The article is entitled: The Challenge for eBay Sellers and is written by Allison Hartsoe of Internet Business Skills. She does an excellent job of explaining how eBay has changed for the sellers using the concept of software versions. She writes:

Classic eBay, or what I'll call eBay 1.0 was about creating an efficient market to liquidate goods and make money. Back in the late 1990's when the ratio of collectibles (i.e. beanie babies) to consumables (i.e. ink jet cartridges) was 80% to 20% of eBay auctions, this made sense. The collectibles industry lacked the ability to bring the Pez dispenser seller in contact with the Pez dispenser lover. Enter eBay and voila! Prices for hard to find items equalized with demand as sellers found buyers. And sellers made money.

Then in the early 2000's collectibles and consumables switched places. I'll call this eBay 1.5. Gradually, consumables become a larger part of eBay listings until it's 80% consumables and 20% collectibles. But the consumables industry doesn't operate like collectibles. Consumables require reliable suppliers with recurring products and price reductions driven by volume purchases. By manipulating factors outside of eBay, sellers still made some money.

And now we have eBay 2.0. The gap that allowed sellers to make money on eBay has steadily closed. Costs have risen in the form of eBay fees, external tools and competition. Sellers are screaming that they can't make money. Some feel they've hit a revenue ceiling. eBay has responded by purchasing 5x the volume of search terms from Google that they ran last year. They also rolled a completely new platform (Express) to attract a different type of buyer. The challenge for sellers is that no matter how many new buyers eBay brings to the platform, sellers still cannot make money if each product is purchased for the same miniscule net profit.”


She goes on to say that eBay 2.0 is no longer a sales channel but a marketing channel. I know eBay management would disagree with this assessment but they’ve been blind to the dynamics of the site for quite a long time.

EBay 2.0 is a marketing channel and with Sponsored links, Shopping.com, and Classifieds eBay 2.0 will be an entirely different place to do business. In its current form that is not a good thing for sellers. Maybe eBay 2.1 will be the right version.

Read Allison's entire article here.