eBay and the auction auction

On Wednesday eBay reported another quarter of strong sales and earnings growth. But news out of China points to a big challenge facing the great auction empire. Hammered by fierce competition from Chinese auction sites, most notably Taobao.com (run by Yahoo-backed Alibaba), eBay today stopped charging transaction fees, according to the Financial Times. It continues to charge sellers a small listing fee, but the FT notes that the discontinued transaction fees had been much larger:

In China, eBay’s transaction fees were previously charged as a percentage of the value of completed sales, ranging from Rmb10 for a sale worth Rmb500 ($62) to Rmb115 for one worth Rmb20,000. Its listing charges are much lower – a maximum Rmb3 for items with an initial price of Rmb2,000 or more.

In contrast to its retreat on fees in China, eBay on Wednesday announced another substantial fee hike for the U.S. The company’s been able to get away with regular increases in fees here, despite grumbling from sellers, because it’s faced only weak competition. But the emergence of sites like Craigslist and Google Base suggests that eBay will not always be so well shielded from rivals. It seems likely, for instance, that some entrepreneur will get backing to launch a sophisticated auction site supported not by fees but by ads. If that does happen, the incentives for sellers to make a switch will go up substantially – and eBay will have no choice but to respond by sweetening the pot for sellers, as it just did in China. EBay has big advantages, but it may not be able to avoid a bidding war for listings.

Even in China, eBay long claimed that it would be able to maintain its transaction fees. As the FT reports: “EBay China had repeatedly waved aside challenges by Alibaba to scrap its charges, saying in October: ‘Free is not a business model.'” “Free” may not be a business model for eBay, but it may well be a business model for eBay’s competitors. And that’s the problem.

3 thoughts on “eBay and the auction auction

  1. Dick Costolo

    I’ve thought that Google Base was a big threat to eBay here too, but then Bill Burnham’s “unifying theory of search” post synthesized something I’d been thinking about for a while but couldn’t quite articulate. You should be able to simply post your auctions on your own site in a structured way, such that they can be distributed to gBase, cList, eBay, or any thing else. Neat if it happens sometime soon.

  2. Jeff Grant

    AWESOME article and comment guys. I would really like to hear your thoughts on http://www.Ebonza.com once it’s ready. It seems like it may be exactly what you wanted when you said “some entrepreneur will get backing to launch a sophisticated auction site supported not by fees but by ads.”

    Rather than advertising supported there will be a fee applied to successful transactions when using the built-in payment and escrow service. We are also exploring ways to send all ads to other markets like Base, fremont, froogle, etc…

  3. Anonymous

    There is also a new service very similar to craigslist that allows users to create their own local classifieds board based on zip codes.

    Pretty much just like craigslist but no personal ads and anyone can create their own classifieds for their specific community.


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