Can Dropping Fees Revitalize eBay?
Date : 29 Jan 2008 Category : Business
Techdirt
Over the past few months, more and more people have been noticing that eBay seems to have stagnated. Sure, it's been making plenty of money and still gets a ton of traffic, but it's not growing as fast as people would like, and there are numerous signs that it's starting to plateau. With Meg Whitman stepping down and John Donahue stepping up to the CEO position, the company has now announced lower fees and "tightened" seller standards to try to cut down on the rampant fraud that has managed to scare off many potential eBay buyers. Amusingly, this lowered fee comes just a day after new research hyped up how much eBay was saving people. The researchers behind the report suggested that, if the economy does go into a real recession, eBay should benefit as people switch to eBay searching for bargains. If that were truly the case, though, then it would seem eBay wouldn't have to be cutting fees.
The real problem may simply be that eBay is too constrained by its own success. It's attempts at branching out with things like Skype and StumbleUpon certainly haven't done much to help eBay, as the eagerly prayed-for synergies turned out to not exist. eBay's own attempts at revitalizing its core business have been equally pointless. So, it seems like something of a desperation play to lower fees, but it's difficult to see it having much of an impact. Certainly, it will make eBay sellers happier, but the transaction fees aren't the barrier eBay is facing in staying relevant. In fact, eBay itself should know this. When Yahoo tried to compete with eBay, it's key selling point was lower transaction costs for sellers, and that didn't do much to attract users.
eBay finds itself in a tough position. If it changes anything in its core business too drastically, it risks alienating those who helped bring the company to its current position. But, not changing will continue the stagnation process and certainly make the hole it needs to dig itself out of that much deeper. In figuring out a new path, it may want to take a few lessons from Amazon, which has been successfully reinventing itself from the inside with its web services offerings, while still striving to keep its core userbase satisfied. Amazon recognized that it could expand into a non-competing business that leveraged its strengths. While some might say that's what eBay tried to do with Skype, that was an acquisition, rather than a ground up offering, and it's still never been clearly explained what synergies there are between the two. In contrast, Amazon's web services offering clearly builds on its experience managing large scale backend operations, as well as its ability to handle a massive number of transactions. eBay probably should be trying to become the "Kinkos" of the web -- a small business's ideal partner -- but has yet to figure out how to do so.
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The real problem may simply be that eBay is too constrained by its own success. It's attempts at branching out with things like Skype and StumbleUpon certainly haven't done much to help eBay, as the eagerly prayed-for synergies turned out to not exist. eBay's own attempts at revitalizing its core business have been equally pointless. So, it seems like something of a desperation play to lower fees, but it's difficult to see it having much of an impact. Certainly, it will make eBay sellers happier, but the transaction fees aren't the barrier eBay is facing in staying relevant. In fact, eBay itself should know this. When Yahoo tried to compete with eBay, it's key selling point was lower transaction costs for sellers, and that didn't do much to attract users.
eBay finds itself in a tough position. If it changes anything in its core business too drastically, it risks alienating those who helped bring the company to its current position. But, not changing will continue the stagnation process and certainly make the hole it needs to dig itself out of that much deeper. In figuring out a new path, it may want to take a few lessons from Amazon, which has been successfully reinventing itself from the inside with its web services offerings, while still striving to keep its core userbase satisfied. Amazon recognized that it could expand into a non-competing business that leveraged its strengths. While some might say that's what eBay tried to do with Skype, that was an acquisition, rather than a ground up offering, and it's still never been clearly explained what synergies there are between the two. In contrast, Amazon's web services offering clearly builds on its experience managing large scale backend operations, as well as its ability to handle a massive number of transactions. eBay probably should be trying to become the "Kinkos" of the web -- a small business's ideal partner -- but has yet to figure out how to do so.
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