Can Lycos Outbid eBay?
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by Eliot Walsh 7/14/99
Just what we all need: Another online auction site.
Monday morning, in a dynamic salute to hackneyed
business inspirations, Lycos (NASDAQ: LCOS - Quotes,
News, Boards) launched a couple of auction sites. But
guess what? There are already more than 1,000 auction
sites on the web, the most successful of which are run by
net giants like Yahoo! (NASDAQ: YHOO - Quotes, News,
Boards), Amazon.com (NASDAQ: AMZN - Quotes, News,
Boards), uBid (NASDAQ: UBID - Quotes, News, Boards),
Bid.com (NASDAQ: BIDS - Quotes, News, Boards), and
particularly eBay (NASDAQ: EBAY - Quotes, News,
Boards), which gets 8.2 million unique visitors per month.
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Does another auction site really matter? And given how very
late to market Lycos is, can its new service even really
succeed? And will eBay's recent string of power outages
create an unusual opportunity for an upstart to make rapid
inroads in this market that eBay seemed to be dominating?
Lycos' heady announcement claims that the 'new' sites 'give
users valuable functionality they can't get anywhere else on
the Internet.' The functionality in question consists primarily
of a feature wherein visitors to the sites, called Lycos
Auctions and Tripod Auctions, can browse for bargains not
only from individuals, but also from retailers.
So what? eBay's CEO, Meg Whitman has been actively
cultivating retailers to sell items on her company's site, and
has even introduced a program called PowerSeller to provide
increased support to large vendors. With an average take of
6% on every sale, it makes perfect business sense for an
online auctioneer to accommodate big-ticket sellers.
Lycos has other stand-out features, such as real-time
bidding, and the ability to promote items for sale from both
the auction boards and a user's personal web page, and the
ability of users to control the start, end and duration of their
auctions. But these attractions may not be enough to
compete with the established giants.
At issue for Lycos is whether it will be able to create the
kind of network of dedicated users that has driven eBay's
success. If a potential customer wanted to sell a tchotchke
online, wouldn't he or she logically head to the auction site
where her item would get the most potential exposure?
While Lycos did not release revenue estimates for the new
service, it did assert that one-fifth of all Lycos visitors buy
something from the mother site. So Lycos' strategy has
been to automatically sign-up all of its registered users,
which it claims numbers over 14 million. In addition, in an
effort to attract users, for the next three months it is waiving
the fee it would normally charge sellers.
Still, to many users, none of that will make much of a
difference. We asked New Yorker Lenore Salazar, an online
auction afficionada and eBay devotee, what factors would
entice her to switch to a new site like Lycos.' 'That's easy.
Product,' she answered flatly. 'I just went to Amazon.com
and there weren't enough products,' she said, noting that
other amenities such as user communities were much less
relevant to her choice of sites.
If that's the case, Lycos is, for the moment at least, in
trouble. It is starting out with 8,000 items for sale; eBay had
2,330,433 on Monday, and adds a quarter million new
products every day. She further explained that, for many
customers, the excitement of the bidding process itself was
an important part of the whole auction experience, and that
under populated auctions cannot produce the action eBay
can.
Of course, Lycos' auction site still is, to borrow a phrase
from Ms. Salazar, 'a baby site.' 'eBay will be difficult to
catch,' acknowledges Needham analyst Dalton Chandler,
who maintains a 'hold' rating on Lycos. 'But Lycos has
tremendous traffic between Angelfire.com and Tripod.com,
which is more than Geocities. They have a chance [to
compete with eBay],' he says, 'but I'm certainly not adjusting
my earnings model.' And while he has no estimates for the
auction sites' revenue potential for Lycos, he doesn't regard
the endeavor as a liability. 'We'll just have to wait and see if
it catches on,' he concludes.
Lycos is entering an over-served market with some original
twists on a (by now) unoriginal idea. But successful online
auctions depend on the sellers' belief that his of her product
is being exposed to the greatest possible clientele, while
that clientele must believe it is seeing the widest possible
selection of products. Lycos is therefore at a strong
disadvantage in both respects.
Bottom Line
eBay must experience many more outages over a protracted
period of time before an upstart like Lycos could take a
meaningful bite out of its business.
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