Friday, August 01, 2008

Quick Hits: The Network Effect and eBay!

Wikipedia uses eBay as an example of the "Network Effect":

"Many web sites also feature a network effect. One example is web marketplaces and exchanges, in that the value of the marketplace to a new user is proportional to the number of other users in the market. For example, eBay would not be a particularly useful site if auctions were not competitive. However, as the number of users grows on eBay, auctions grow more competitive, pushing up the prices of bids on items. This makes it more worthwhile to sell on eBay and brings more sellers onto eBay, which drives prices down again as this increases supply, while bringing more people onto eBay because there are more things being sold that people want. Essentially, as the number of users of eBay grows, prices fall and supply increases, and more and more people find the site to be useful." (Bold is mine)

As the bold section states "eBay would not be a particularly useful site if auctions were not competitive." and this is exactly the dynamic we are seeing on eBay today. There are fewer and fewer reasons to participate in the eBay marketplace today and the Network Effect works in both directions.

I contend that the current strategy of eBay management will hasten the reversal of the Network Effect and that hissing sound (slow leak) you hear today will turn into a complete blow-out within 12 months.

Just my 12%


ms.pat said...

Well, I for one, am about done with Ebay. Every once in awhile I go back and try again....nothing! Right now I have a feature plus auction that cost me 9.95 to list. Its two days old and has 7 hits!!!! This is not rare - most of the sellers I know are complaining of the same thing. They are making better sales on Etsy and getting more exposure per listing. Ebay better stand back and take a good close look at itself. It is no longer bringing buyers and sellers together - it way overpriced for the dismal lousy service its providing!

Anonymous said...

It would just take one really good new auction site (with a big name behind it), that has it's act together, and practically every seller on Ebay would be gone. No one feels any loyalty or has any respect left for them. The party's about over.

I wonder if the execs ever think about that?

The_Cynic said...

I have noticed a declining sell through % and when I look into my ebay traffic stats it is down significantly from last year. All the while ebay has dramatically increased the costs and hassles of using their platform. They have made themselves much less attractive as a channel to sell.

For buyers I am sure there are similar disincentives.

I have noticed that the selection of things I concentrate my buying on, has dropped in the last year and the prices are not that much better than what I can find on other sites, leading to fewer sales -- When I buy on ebay there is always a dominate thought in the back of my mind about fraud and my distrust of paypal so I only buy using a Credit Card there. Overall my buying has been reduced.

ms.pat said...

Exactly - right now they are simply conning sellers with these specials. More and more sellers are catching on to this and dropping out. This time last year I would be getting 40 to 50 hits a day with a feature plus auction - even during a special. Now - 7 hits in two days? Not worth a dime let along almost a sawbuck! I hope they have a plan in place for when this conning ceases to be profitable...which should be soon now.

Anonymous said...

We have over 2600 listings in our eBay store and run about 75 listings on 7 day listings (spread over the 7 days) to drive traffic to our store. Our traffic is down about 20% over last year. We had about 8,000 visitors in July compared to over 10,000 in July last year. We use Google's store connector tool and visitors coming from Google are slightly more than from eBay now. We've been on Amazon about a year. We have over 400 items listed there, but very few sales. We're in a niche market in Home and Garden. We have more competitors on eBay, but sell way more than Amazon. We have very few competitors on Amazon. I'd love to see sales pick up at Amazon. It's so much easier. No emails, no customer service issues, no feedback issues. It's a pleasure to do business there. We just need to figure out how to get more traffic. It's about 10% of what we have at eBay.

Tony P. said...

"... that hissing sound ..."

Randy, you're too far to the other side of the bowl, dude! From my precarious position, it's a gigantic SUCKING noise.


Anonymous said...

"... that hissing sound ..."

You left the part out, about when the Circus Fat Lady climbs into the passengers side. (Okay, so maybe the back hatch)

Now, the rim is riding an inch off the ground. IS that Fat Lady.

Ka-Freaking-BOOM !

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