January 14, 2005
The Global Garage Sale Wants to Live in a Better Neighborhood
By Evan Schuman, eWEEK
Opinion: eBay has done almost everything correctly, so it's to be expected that the Web pioneer will try to boost its margins slightly. It could issue five more price increases and it would likely still be a bargain.
eBay is in a very exclusive club of the early Web innovators who have stuck to their original playbook and been true to what makes the Web powerful. This week's news that eBay is boosting some prices shouldn't be a surprise, nor should the Garage Sale Goddess' right to enhance its margins a bit.
How much has eBay changed everything? Consider this headline in Thursday's edition of the St. Paul Pioneer Press: "Local Girl Scouts Irked by eBay Cookie Sales." Put aside for the moment the fact that it doesn't take a heck of a lot to irk a girl scout. The fact that people are taking girl scout cookies and providing them to the unfortunate souls who do not have parent co-workers has got to be right up there in the list of unintended consequences of eBay.
When I say that eBay has done almost everything right, I'm not just referring to its ability to make $1 billion profit on barely $4.2 billion in revenue. Neither is this limited to its creation of PayPal, which is single-handedly rewriting the rules of payment systems and scaring the magstripes off of Visa, MasterCard and American Express, who were having a hard enough time selling to small online businesses before PayPal started showing the world the right way to do it.
The best recent example that eBay simply gets it happened in late September. After having announced to the world that it was shutting down its Half-com subsidiary, it reversed itself this September. Half-com was fiercely popular, so one might think, so what? It was the right thing, one might say.
One doesn't spend a lot of time hanging out with billion-dollar corporations. The politics is typically such that public decisions are defended for ego purposes, lest the company concede that it's not perfect. eBay's willingness to publicly reverse itself showed a flexibility that is far too rare today.
Many companies casually talk about the power of the Internet, but other than eBay, Amazon and a handful of others, few actually deliver.
Until recently, I could say that eBay has been so true to the Internet vision because it doesn't have brick-and-mortars to distract it and cloud its thinking. But through a wide range of partnerships, it is becoming physical store people, too. The difference? Its culture, heritage and the bulk of its revenue is still grounded in the Internet. When other retailers try to strike a balance, they conclude that they are physical with an Internet afterthought. At eBay, it's very much the opposite.
But as eBay grows and continues its string of acquisitions, the larger company will become less and less pure Internet. It is staying global and focusing on classified advertising (a $152 million buyout of a German classified advertising site and $290 million for a Dutch classified ad operation) and trying to corner the world's online trading markets: $50 million for an Indian auction site, an increased stake in a Korean trading site for $485 million and an additional $37 million for a Korean auction site.
For how long will eBay continue to stay true to its birthright? The day it starts thinking and acting like a brick-and-mortar is the day when its rate increases won't be accepted so willingly.