If Auctions are dead, than the idea that I am going to present won't have any impact, but it also doesn't have any downside. If Auctions are not dead, just held captive by the Fixed Price hordes, than by not even considering my idea, eBay will be turning their back on their brand and a very profitable business.
The premise: Auctions are a niche and should be treated like one. Fixed Price is the dominant ecommerce standard and is what eBay should focus on to grow, but they don't have to sacrifice Auctions to do it.
There current strategy will end up sacrificing auctions, because they don't have the balls to make the hard choices. eBay Express failed because of execution, but it wasn't the wrong idea. It wasn't the version of eBay that should have been spun-off.
Here are three reasons why splitting the site up makes sense:
- The site is made up of small sellers and big sellers, auctions and fixed price, Hard to find unique product and commodity product. Management is trying to be all things to all people and that just won't work. Splitting up the site makes room for growth for each separate group.
- The "noise" will abate as soon as they split off eBay Classic. The traditional eBay shopper and buyer will once again feel comfortable at their "new" auction only site and the new convenience shopper won't have to be bothered looking at all those auctions.
- If auctions are dead than you can't hurt them anymore by separating them from eBay.com. But, if they aren't dead you open up room to grow once again.
Adam Nash and I have discussed this and there is a disagreement. I believe that my idea of eBay Classic is much different than the creating eBay Express. Adam, beleives eBay Classic will face some of the same challenges.
So, I've included Adam's reasoning for why eBay Express failed and I will add my 15% in bold as to why that issue will not affect eBay Classic.
- Branding. It was a tough decision. If you don’t use the eBay brand, you lose any possibility of the positive affiliation and traffic that comes with a known consumer parent brand. But, if you use it, you are also stuck with the negative attributes. eBay means auctions to most people. We ended up going with eBay Express because in the end, it was eBay inventory and we expected traffic to flow from the eBay association. It didn’t, and it also didn’t generate any real unaided awareness for us.
eBay Classic on the other hands benefits from the eBay brand. By adding Classic to the name it also sets it apart from the "New eBay" and helps the Fixed Price marketplace separate itself from auctions.
- Traffic, traffic, traffic. One of the unanswered questions was how to drive sufficient traffic to the new site. We had initial stabs at this problem, but eBay was still in a phase where it believed in buying traffic. TV, Catalogs, Email, Paid Search. It doesn’t take an Internet genius to realize that buying traffic is horrendously expensive, and frankly, ineffective. Our biggest course correction post-launch was a crash course on how the rest of the e-commerce world looks at traffic generation. Figuring out how to drive traffic in volumes to the site, and build organic traffic in the long term became our 24×7 focus.
eBay Classic, will not have the same needs to generate traffic. The auction business is already a huge part of eBay Marketplaces so those buyers who want that experience will naturally migrate there. eBay Express was a new experience and required retraining. If eBay Classic is created than eBay.com can become what management wants it to be and the brand will change. All of the organic traffic will still come to eBay.com, those looking for auctions will find them everybody else will just get fixed price items in their search results.
- Inventory and merchandising. It may be hard for most people to believe this, but eBay at the time was incredibly under-developed on many of the retail basics of merchandising, inventory selection, and promotion. Why? Well, because eBay.com isn’t actually a retailer of anything. We realized post-launch that we needed to develop that expertise, quickly, even to the point of understanding sourcing, distribution, and product selection. Having 10 million+ products is great, but it’s no good if you don’t have the right products at the right price.
eBay Classic doesn't demand/require any additional resources or learning, just set it free and it will take care of itself. Management is already committed to the Fixed price marketplace and that is where the resources will be focused. Basically, if you split things up, one can grow organically and be very profitable and Jeff King and his team won't have to try and figure out how to work auctions into the new search.
- International. We designed and built the site, from the ground up, to meet the different needs of the US, UK, and Germany. In fact, I even spent time on concept versions for India, China, and a host of other countries. There were some fundamental disagreements about which model would be most effective, so we built a platform to handle them all. In retrospect, we should have done the US only, and only expanded internationally once we nailed the basics. The distraction, debate, and expense was counter-productive, and in the end, a mistake.
eBay Classic doesn't have that problem, it is already available in most if not all International markets. For those markets that don't have a sizable auction business you may not roll it out, but for many it will be just like in the US -- Split it up and roll it back.
- Expectations. There was so much enthusiasm internally around the various aspects of the project, and it was impossible to contain expectations rationally. The reality is that building a consumer brand and a billion dollars in sales doesn’t happen overnight, and it isn’t cheap. Look at how long Amazon has been stretching to build it’s third party sales efforts. We believed we could cut that time in half, but rationally, that was still a minimum 5+ year effort. In the best of times, that kind of effort requires a company with long term focus and commitment. And as we all know now, 2006+ were not the best of times for eBay.
eBay Classic won't have high expectations, remember auctions are dead; so any growth that comes from eBay Classic will be exciting. It is also already close to a $30 Billion business. Tell me how many companies can say that.
One other thing, that Adam didn't include in his eulogy. If eBay were to spin-off eBay Classic then 90% of the "noise" would end. The traditionalists would have what they want and the big sellers and commodity sellers would have what they want and the complaining would cease.
The "New eBay" could do the things necessary to compete with Amazon while Classic eBay would move along at its own pace, but still be very profitable for the company. Sellers would stop complaining (well okay that might not happen entirely) and everyone could concentrate on improving their business.
Alright, I feel like Don Quixote tilting at windmills, but I'm opening myself up to those of you who think I'm loony. Before you tell me what you think, answer this question. What is the downside to splitting off a business that everybody in the world says is a fad or dying?
Just my 15%