Is eBay's 'real' threat Amazon or classifieds (or both?)
I did this interview with Business Week about classifieds today and it got me thinking....
On this blog I've spent a good bit of time comparing eBay vs. Amazon's seller business. I definitely think when it comes to 'practicals' Amazon is taking significant share from eBay and others in ecommerce.
But if you think back to the recessionary period of 2000/2001, eBay was counter cyclical. People used eBay to clean out their garages, attics and turning their old stuff into cash.
Newspapers were losing classified revenue to eBay hand over fist as eBay gave people a much easier way to turn their items into cash. You can call a newspaper, create an ad for some wacky $/word formula, put in your phone number and deal with all that, or upload some picture(s) to eBay, set your terms, run an auction and hope for bid-up (which frequently came in those days). eBay even had a local feature where you could look for items around you. I remember getting my first flat-screen LCD monitor and selling my 21" tube-based monitor for $50 on eBay to a local person that stopped by and got it. I don't think you could do that on eBay today - the local aspects have been dumped over the years.
In the current 08/09 recession, eBay hasn't been countercyclical - Why? I've been somewhat 'blaming' Amazon, but some new data out today sheds a big spot-light on classifieds that have been under the radar for a while, but shouldn't be any longer.
Classified Usage Doubled in last 4 Years
The Pew Internet Project has a report out today that you can find here, that shows that classified sites (mainly craigslist), have doubled in usage between 2005-2009. According to the Pew research, half of the online audience has visited a classified site. On any given day about 10% of the online audience visits a classified site.
This graph shows the dramatic growth in classified usage in the last four years:
Over that timeframe, checkout what happened to the newspaper classified business.
Newspaper classifieds peaked in the late 90's and then they got hit with eBay. Ultimately they recovered - mostly by focusing on the non 'for-sale' classifieds that eBay was chewing away at such as jobs, vehicles, real estate and personals. You can see in the chart that they started to recover by around 2005. Then **WHAM** look at that drop by half from $19b to $9.9b.
What's the impact on eBay?
eBay doesn't break out transactions by seller-type - individual, small business, large-business, etc. so there's no way to know how many of the what I call FSBO (For Sale By Owner) types of sellers and their corresponding GMV have left eBay.
Thinking through some back of the napkin math, if there are 40m unique visitors to craigslist, let's assume half of them are there to buy products and the other half are there for non-product oriented categories.
20m buyers/month at a 10% conversion rate and a $100 ASP yields $2.4b/yr. The ASP on craigslist could be considerably higher if there is a larger % of car sales.
I'd say that a big chunk of that - 80% or so is straight out of eBay's GMV pie or approx $2b/yr. At their $60b/yr GMV run-rate that would be about a 3.5-7% headwind depending on the ASP. If amazon is in the $4b range, you can attribute eBay's 10% y/y decline path in a pretty clear way.
eBay is in a tough spot - Amazon is eating away at selection from the top-end - large and SMB retailers. Craigslist is pulling selection from individuals and the Local element. Buyers follow selection. It will be interesting to see how eBay navigates this strategic dilemm over the next year or so and if they can carve out a spot in the middle or do they need to more aggressively take on Amazon, craigslist, or both?
SeekingAlpha disclosure - I am long Amazon and Google. eBay is a strategic investor in ChannelAdvisor.
Net 2.0's Biggest Blunder: Ebay Bans Digital Download Auctions
At a time when most companies are going "green" and the internet moves steadily toward an increasingly virtualized landscape, Ebay stands stubbornly and decidedly in the pollution filled past.
Itunes booms. Amazon finds success with its own mp3 store and moves into ebook downloads promoting instant delivery and none of the environmental harm caused from manufacturing and shipping product. How does auction powerhouse Ebay react to this sudden demand for instant gratification? By banning digital download auctions from its site altogether.
"I was almost out of business overnight," reports a longtime Ebay user that requested to remain anonymous.
"My products were all downloadables, custom graphics and templates I create myself. With the new rules you can still sell your item if you burn it on a CD and ship it traditionally. Regardless, my sales still dropped dramatically and have since never picked back up. Customers don't want to wait for a CD to arrive in the mail and pay shipping. Many don't even understand that it's Ebay forcing me to sell this way."
Many retailers have since moved away from Ebay and set up their own online storefronts.
This is exactly what former Power Seller "studiorecordingtools" did, setting up his own storefront at http://www.studiorecordingtools.com when Ebay decided to ban all digital download sales from its site (this includes sales of mp3s, website templates, sounds for musicians and recording information ebooks such as the ones studiorecordingtools sold, and anything else that can be delivered digitally).
At a time when Itunes expanded their digital download sales by adding videos to their already extensive mp3 catalog, Ebay decided digital downloads were no longer a necessary item to allow for a sale on the site.
"It really made no sense," says former Power Seller studiorecordingtools. "I was paying over a thousand bucks a month in seller's fees and my account was rated higher than 99% for customer satisfaction. I was a Power Seller one day, the next practically told to close up shop. It was a mind blowing decision that I still don't fully understand to this day, they lost a ton of money and their stocks plummetted soon after."
While the glory days of Ebay may be over, many sellers still hold out hope for an improved auction site to emerge from the shadows. Some had hoped it would come by way of Google, but as of yet nothing solid has yet to materialize in this respect.
In the meantime, most sellers have simply set up their own shop: much like StudioRecordingTools.com and it's former Ebay Power Seller.
- Tech Reporter May Thompson
Posted by: digimon | June 03, 2009 at 04:21 AM
ebays retail threat is Amazon, that's why they've been copying them for the past 3 years. The classifieds is about dominating and stemming off future possible threats. But especially for the collectible sellers, ebays freaked by any growing classifieds system because they need the collectible sellers to turn tricks for them drive that traffic to the site. It's nothing more than a Neanderthal chart. Ebays got us all mapped out about where we could possible go and where they want us to go. If we dont go there, then they want to have a cut in where ever else you go. Why you ask questions you already know Scot? LOL. Where's that reply to my email? HUGS
Posted by: fruity | May 30, 2009 at 10:34 PM
Scot,
That chunk of the eBay pie your talking about?
No one took it away. eBay gave it away.
What eBay did is akin to the captain of a cruise ship deciding
halfway to Bermuda that it is much more interesting in Alaska
and turning the ship around.
Might be an interesting trip unfortunately, all the passengers
paid to go to Bermuda. Instead of calling for another ship, the
captain told the passengers to bail and sent up a bright flare
for other ships in the area to pick up the passengers.
And those ships, not wanting to miss an opportunity to expand
their own base did just that!
Seriously, it's a shame because eBay could have been the best
of both worlds. I have no ax to grind with eBay for wanting to
grow. Unfortuately, from the outside looking in, it
appears that the eBay braintrust has taken an either or approach
and that extreme tunnel vision and is slowly sinking their own ship.
I know very few people who have anything good to say about eBay anymore,
from the ex-seller at the post office to the long term investors.
It's quite a sad state of affairs that eBay has brought on itself.
Posted by: speckles | May 25, 2009 at 01:17 PM
Dude, we are on the same page on this one dude. I found a KILLER classified application in our local area, check out this video where I do a quick demo and even compair it to Kiji-whatcha-macall-it that eBay came up with! I am sure you will LOVE THIS dude! http://ow.ly/91Tx
See ya next week!
John (ColderICE)
Posted by: John | May 24, 2009 at 11:32 PM
I have to admit, selling on Craigslist has become much simpler than trying to use Ebay, especially for heavier items you don't want to have to pack and ship. I recently listed something on CL, got a buyer who drove from an hour away, we met in a shopping center and exchanged item for cash. Couldn't have been much simpler than that! No fees, no mess, no chargebacks. They were happy ... I was happy.
So yes, I think CL is eating greatly into Ebay as well as some of the online classified ad sites that focus on particular items. I use one quite a bit called Tack Trader for listing horse related items. Again no fees as long as you use the simple format.
Posted by: Carol | May 23, 2009 at 07:15 AM